“The Biggest, Most Important 2016 Debate”: Writing The Obituary Of Supply-Side Economics
It’s now shaping up that wages and the condition of the middle class are going to be the dominant issues as we enter this first phase of the 2016 slog. Don’t take it from me, or even from Elizabeth Warren. Speaker John Boehner said as much (well, almost) on the day he opened the new session of Congress.
This is a very big deal, and it’s about more than our usual, tug-of-war politics. Boehner’s mention of wage stagnation was clearly opportunistic, because it’s a current problem that can be hung around the President’s neck. But middle-class wage stagnation is much more than an Obama problem. It’s our main economic reality for 30-plus years now.
The first chart in this article tells the basic story. Since 1979, American workers’ productivity has increased by 80 percent. The income of the top 1 percent has increased 240 percent. And the average American wage, adjusted for inflation, has gone up just a few percentage points, maybe 8 percent. It wasn’t always this way, and it isn’t nearly this bad in other advanced countries. The median wage in the United States today is around $50,000. If wages had kept pace with productivity gains, the median wage would be more than $90,000.
But look: It’s highly serendipitous that the wage problem is something the Republicans can use against Obama (at least for now). That means they’ll talk about it. What they’ll come up with in terms of solutions beyond tax cuts and deregulation is another matter, but the mere fact that they’ll talk about it means that both parties will be talking about it, and when both parties are talking about an issue, that issue tends to rise to the top of the charts.
On paper at least, this is great for Democrats, because wage stagnation is basically a Democratic issue, one that most voters would probably trust the Democrats to do a better job on than Republicans. Although of course, if it comes to be October 2016 and wages are still as flat as they’ve been since the crash, that could be a problem for the Democrats. So what they need to do is frame wages not as a post-crash, Obama-era problem, but instead to make sure Americans know that this is a deep historical problem, and that the moment to address it is right now.
To that end, you should know that this past week was a really good one for progressive economics in Washington (and none of it had anything to do with Warren!). Two major proposals were floated to address these problems. They’re real and meaty. And if events go in the direction I hope they do, their release in mid-January 2015 will be remembered as the moment when the debate turned.
First, on Monday, Democratic Rep. Chris Van Hollen of Maryland put out a report by the Democratic staff of the House Budget Committee called “An Action Plan to Grow the Paychecks of All, Not Just the Wealthy Few.” All right, a bit cumbersome as a title. But give it credit anyway for getting to the point.
“I sat down with our team many months ago,” Van Hollen told me Thursday, “and we began to really tackle what would need to be done to deal with wage stagnation.” The plan is built around nine ideas. The one that’s gotten the most attention because of the obvious “class warfare” angle is the so-called Wall Street tax, a fee of .1 percent on financial market transactions.
But there are much more interesting ideas in the paper. The most notable may be a limit on the amount of deductions corporations can take for executive pay if those executives are keeping wages stagnant or laying off workers. “From 2007 to 2010,” Van Hollen says, “corporations took $66 billion in deductions on executive pay. That’s a huge amount of money. We say here that if you want to take a tax deduction, you’d better be giving your employees a raise.”
Van Hollen unveiled his proposals at the Center for American Progress on Monday. Then, two days later, CAP president Neera Tanden led a press conference unveiling a major new report on inclusive prosperity, under a panel co-chaired by Larry Summers and Ed Balls, the shadow chancellor of the exchequer for the British Labour Party. The CAP plan, which Tanden stressed is international in the scopes of its analyses and proposed fixes (hence Balls’s inclusion), is aimed at the same basic problem Van Hollen is shooting at—the need to raise the incomes of the middle class.
Summers, speaking at the press conference, emphasized an issue he’s been talking up for a long time, a “very substantial” increase in infrastructure investment. “When we can borrow at 1.8 percent in our own currency, and when construction unemployment approaches double digits,” as it is now, Summers said, “that’s the moment when Kennedy Airport should be fixed.”
No one is under the illusion that John Boehner and Mitch McConnell are going to rush out and pass these measures. That isn’t the point. The point is to influence the direction of the debate, especially the presidential campaign debate. And that, of course, raises the question of the extent to which a certain former senator and secretary of state will embrace these ideas. Tanden was a longtime Hillary Clinton staffer. The imprimatur of Summers on these progressive ideas should raise Clinton’s comfort level with them. If Clinton runs on half of these ideas, and she’s signaling that she might, she’ll be a more progressive candidate than she was in 2008.
It’s hard to believe that we’ve lived with this kind of wage picture, this kind of raging unfairness, for nearly 40 years. Of course, part of the reason that we have lived with it for 40 years is that the Democratic Party wasn’t always much good at articulating a theory of economic growth that could counter the Republicans’ trickle-down argument. They’re finally finding their voice on this. And so, the real importance of the next election is not the Supreme Court, not climate change, not foreign policy, crucial as all those things are. It’s that it could write the obituary of supply-side economics.
By: Michael Tomasky, The Daily Beast, January 17, 2015
“When Things Go Well”: Republicans Now Take Credit For The Recovery They Sabotaged
This is unlikely to prompt anyone to break out the bubbly in the Oval Office, but last week’s poll numbers are nevertheless good news for President Obama. Since Democrats were thrashed in November’s midterm elections, the president’s approval ratings have been on the upswing.
As he prepares to deliver his sixth State of the Union address on Jan. 20, Obama’s approval has crept up to 47 percent, according to a new survey from Pew Research. That’s up 5 points since December.
Most analysts believe Obama’s recovering fortunes are the result of a much-improved economy — the one gauge that’s reliably important to voters. It’s taken a few years, but average workers are finally beginning to put the Great Recession behind them.
Take note of this now. Keep it in a spare file in your memory bank. Remember that the economy has been advancing for the six years of Obama’s tenure — a frustratingly slow process that is finally bearing fruit. The unemployment rate is now at 5.6 percent, the lowest since 2008. Foreclosures are down to pre-recession levels. The stock market is in historically high territory.
Why do I want you to remember this? In a stunning show of chutzpah, the president’s harshest critics, the hyper-conservatives who’ve done everything they could to wreck his presidency, want to take credit for the recovery they tried to sabotage.
Just take a look at the speech Kentucky Republican Mitch McConnell gave on the day he took the helm of the Senate as the new majority leader.
“After so many years of sluggish growth, we’re finally starting to see some economic data that can provide a glimmer of hope. The uptick appears to coincide with the biggest political change of the Obama administration’s long tenure in Washington: the expectation of a new Republican Congress,” he said.
According to his logic, consumers spent more money and businesses hired more workers starting back in the summer because they expected Republicans to win a majority in Congress. That’s nonsense.
Obama inherited a mess from George W. Bush — a financial crisis brought on by the excesses of Wall Street. President Bush started the bailout, but most of the work was left for the Obama administration. Obama continued the Wall Street bailout, passed a massive stimulus package and rescued the auto industry. Congressional Republicans, meanwhile, fought him every step of the way. That the economy has bounced back anyway is testament to its underlying resiliency.
Perhaps the greatest driver of consumers’ new optimism is the free-fall in gas prices, which haven’t been this low since the Great Recession drove down demand worldwide. Obama didn’t spur the investment in domestic oil drilling, but he has encouraged it, noting that it would help to free us from a dependence on foreign oil.
None of these hard-won gains have come a moment too soon. And, yes, there’s still much work to be done to revive the American middle class. The growing gap between the comfortable and everybody else remains one of the biggest threats to domestic tranquility. Wages are still stagnant.
Obama is well aware of that. In his State of the Union speech, he is expected to announce an ambitious new proposal to provide free access to the nation’s two-year community colleges. It’s an excellent plan.
Education experts say there are about 8 million community college students, and their average annual tuition is around $3,800. To the comfortable classes, that might not seem like much. But it presents a barrier to many working-class students trying to change their circumstances. It’s an investment that the nation can afford to make — and should make.
But like the other proposals the president has made to boost the economy, this one is likely to meet resistance from the Republicans in Congress. They want to take credit when things go well, but they’re only too willing to block a good idea if it comes from Obama.
By: Cynthia Tucker, The National Memo, January 17, 2015
“It’s The Facts Stupid”: The GOP Should Stop Lying About Obama’s Economy
Friday’s boffo jobs report—the 58th straight month of jobs growth in an expansion that has now entered its 67th month—was only the latest in a long string of positive economic data.
This recovery, which started in July 2009, has been the most politicized, partisan expansion I can recall. Indeed, for the last six years, monthly data like the employment report –as well as new initiatives and proposals to get the economy rolling—have been greeted by critics with apocalyptic declarations. For the last six years, we’ve seen a continuing response from Republicans: Under the set of policies pursued by President Obama (some of them continuations of policies enacted by President Bush) and of Federal Reserve Chairman Ben Bernanke (a Bush appointee) and Federal Reserve Chairman Janet Yellen, the U.S. economic ship is like the Titanic—rudderless in dangerous seas, bound for doom, about to sink.
Let’s review some of the greatest hits. In March 2009, at the depths of the recession, when the stimulus bill passed Michael Boskin, economic adviser to the first President Bush, took to the Wall Street Journal editorial page on March 6, 2009, to proclaim ”Obama’s Radicalism is Killing the Dow.” Were his budget and stimulus plans to be adopted, the U.S. would risk becoming a “European-style social welfare state with its concomitant long-run economic stagnation.” That day, the Dow touched, 6,600. Almost immediately, the markets commenced a raging, historical bull run. The Dow closed Friday at 17,737, an increase of 168 percent from March 2009.
In February, 2011, Rep. Paul Ryan, the former vice presidential candidate, took out after Bernanke, arguing that the Fed’s efforts to support an economy still laboring under the fallout of a financial crisis and a deep recession were poison. Specifically, Ryan assured the public that the Fed’s bond-buying efforts would ignite runaway inflation and tank the dollar. “There is nothing more insidious that a country can do to its citizens than debase its currency.” Whoops. Since then, inflation has been remarkably tame. The consumer price index, the official measure of inflation, actually fell .3 percent in November, and is up a mere 1.3 percent in the previous 12 months—far below the historical norm. And the dollar? Far from depreciating, it has been going gangbusters. The trade-weighted dollar index, which measures the strength of our currency against those of our major economic partners and competitors, has soared 15 percent since early 2011 and now stands at a nine-year high.
As the Bureau of Labor Statistics started pumping out reports that showed the economy adding jobs starting in early 2010, the response was generally to ignore them, or worse. In October, 2012, former General Electric CEO Jack Welch famously tweeted, “Unbelievable jobs numbers…these Chicago guys will do anything..can’t debate so change numbers.” In fact, we now know that the September 2012 jobs report was one of a continuing series—59 straight months and counting—in which the economy has added jobs. More than 10 million in all, more than recouping all the positions lost in the deep recession.
In 2011, candidate Mitt Romney claimed that, were he to be elected, the unemployment rate would fall below 6 percent by the end of his first term in 2016. Last month, under Obama, the rate fell to 5.6 percent, the lowest level since June 2008.
Next we were assured, the botched rollout of Obamacare was certain to manage the twin tasks of tanking the economy as a whole and resulting in a massive loss of insurance. In March 2014, House Speaker John Boehner noted “there are less people today with health insurance than there were before this law went into effect.” In fact, as countless studies and the continuing series of Gallup polls have shown, the percentage of people without health insurance has declined dramatically—from 18 percent in the third quarter of 2013, to 12.9 percent in the final quarter of 2014, a decline of nearly 30 percent. Oh, and in the year since Obamacare formally launched, the U.S. economy has posted solid growth while adding 2.95 million jobs—the best such performance since 1999.
Look. The recovery is nowhere near complete—there are still too many people who want and need jobs but can’t find them. And wages remain stagnant. But the larger narrative that has played out in front of our eyes has defied the one predicted by Republican establishment economists and economic thinkers, and vindicated those who argued America was coming back (like me). The stock market is booming, not tanking; interest rates are muted, not out of control; the deficit is shrinking, not expanding; the economy is adding lots of jobs, not shedding them; the dollar is robust, not weak; inflation is nonexistent, not out of control; energy prices have plummeted, not soared; millions of people have gained health insurance, not lost it.
Virtually everything GOP critics have told us would follow from the policies put in place has not come to pass. You would think that this would occasion a few mea culpas, some rethinking, an admission of poor prognostication. But, alas, it continues. Rep. Paul Ryan is now warning in a column that Obamacare “is weighing down our economy and discouraging hiring” and will ultimately “collapse under its own weight.”
I shouldn’t say nothing has changed. Efforts to deny economic gains have been increasingly difficult to carry off the longer the expansion continues. And so we’re now seeing a slight shift in narrative. Rather than argue that the economy and everything associated with it is in the crapper, Republicans are conceding that things might be looking up. But it’s only because the GOP won control of the House and Senate in November. “After so many years of sluggish growth, we’re finally starting to see some economic data that can provide a glimmer of hope,” Majority Leader Mitch McConnell said last week. “the uptick appears to coincide with the biggest political change of the Obama Administration’s long tenure in Washington: the expectation of a new Republican Congress.”
By: Daniel Gross, The Daily Beast, January 12, 2014
“Time For The Laugh Track!”: Republicans Have A Veto-Proof Math Problem
Behold Washington’s new math.
The first anti-Obamacare bill of the new Congress, the Save American Workers Act of 2015, was written to undo the part of the law that defines “full employment” as holding a job for as little as 30 hours per week. It passed, and on the way, it became even more partisan in color than the 2014 version of the bill. In the last Congress, 18 Democrats voted with every Republican to pass the bill, but Thursday only 12 did, including all but one of the 2014 supporters (not Georgia Rep. Sanford Bishop) and two new Blue Dogs (Florida Rep. Gwen Graham, Nebraska Rep. Brad Ashford).
By turning on the bill, the Democrats made clear that they would sustain the veto already promised by President Obama, and, yes, they have the votes to do so. If every member of the 114th House of Representatives shows up for a vote, 48 Democrats need to join every Republican to override a veto. Three times this week, when the GOP brought forward bills to approve the Keystone pipeline and delay part of the Volcker Rule, the Democrats denied them all but a handful of votes.
Just as interesting as the Republican math problem were the arguments Democrats used to hold back their votes. In its veto message, the White House said the 30-hour work week bill “would significantly increase the deficit” and cited 2014 numbers from the Congressional Budget Office to say it would “increase the budget deficit by $45.7 billion over the 2015 to 2024 period.” In the Senate yesterday, in a conversation with reporters, Illinois Senator Dick Durbin repeatedly mocked Republicans for offering changes to the ACA without offering up the mechanisms to pay for them.
“I’m just not going to buy the premise Republicans now want to sell, that deficits don’t count,” Durbin said. “Since they’re in the majority, they’re going to use dynamic scoring—time for the laugh track!—they’re going to use dynamic scoring to prove that they can cut any tax without an impact on the deficit. That doesn’t work. That’s why we’ve stopped short of repealing the medical device tax, because the payfor has never been explained.”
Of course, the Democrats had a terrible election—no news there—and in the process they watched Republicans leap ahead of them in voter trust on key issues. Republicans pulled into a tie on health care, which had always been a Democratic advantage, and they built huge leads on taxes, the economy, and the deficit. Yet in the months after the election, they watched President Obama’s approval rating tick up, and saw a dynamite series of jobs reports followed by 5 percent GDP growth in the final quarter.
Democrats paid attention to new Majority Leader Mitch McConnell’s maiden speech, and how “the [economic] uptick appears to coincide with the biggest political change of the Obama administration’s long tenure in Washington: the expectation of a new Republican Congress.” To counter that claim, Democrats in Congress want to reframe the GOP’s bills as deficit-busters, and make sure Republicans get none of Barack Obama’s credit if the economy continues to improve.
By: Dave Weigel, Bloomberg Politics, January 9, 2015
“America, We’re In Big Trouble!”: A ‘Governing Majority’ That Doesn’t Know How To Govern
Incoming Senate Majority Leader Mitch McConnell (R-Ky.) said the other day that he hopes the Republican-led Congress can prove to the electorate that his party can be a responsible “governing majority.” And on the surface, that’s a perfectly worthwhile goal.
But it’s been quite a few years since GOP policymakers actually tried to govern effectively, and there’s reason to believe the party no longer remembers how. This week, for example, Republican lawmakers will get right to work, pushing the Keystone oil pipeline and a measure to redefine a full-time worker under the Affordable Care Act. Jonathan Weisman had a good piece on the latter.
The House will take up legislation on Wednesday, the first major bill of the 114th Congress, that would change the definition of a full-time worker under the health law from one who works 30 hours a week to one who works 40 hours. A vote is scheduled for Thursday.
Weisman’s report did a nice job noting that even conservatives seem to realize this is a bad idea, with National Review’s Yuval Levin arguing over the weekend that the legislation “seems likely to be worse than doing nothing.”
Republicans, at some level, must understand this. Indeed, they pushed this exact same idea 11 months ago – in a bill they called the “Save American Workers Act” – and it was deemed ridiculous at the time.
An analysis of the bill, released Tuesday by the nonpartisan Congressional Budget Office and Joint Committee on Taxation, found that it would cause 1 million people to lose their employer-based insurance coverage. The report projected that more than 500,000 of them would end up getting coverage through Medicaid, the Children’s Health Care Program or the Obamacare exchanges. The rest, CBO and JCT said, would become uninsured.
The legislation would also lower the amount the federal government collects in penalties from businesses who don’t abide by the employer mandate. As a result, the report found, the deficit would go up by $74 billion over 10 years.
Jonathan Cohn explained a while back, “The Congressional Budget Office just taught the Republican Party a lesson. Governing is hard…. [T]hat’s the reality Obamacare’s critics are never willing to confront. They’re great at attacking Obamacare. But they’re lousy at coming up with alternatives that look better by comparison. There’s a reason for that. The downsides of Obamacare are real, but, in many cases, they make possible the upsides. Take away the former and the latter go away, too.”
Faced with this knowledge, the new, massive House Republican majority has effectively declared, “Well, let’s just pass it anyway.”
And what about Keystone? I’ll dig into this in more detail when the vote draws closer, but for now, I’m reminded of President Obama’s comments at his year-end press conference a few weeks ago:
“At issue in Keystone is not American oil. It is Canadian oil that is drawn out of tar sands in Canada. That oil currently is being shipped out through rail or trucks, and it would save Canadian oil companies and the Canadian oil industry an enormous amount of money if they could simply pipe it all the way through the United States down to the Gulf. Once that oil gets to the Gulf, it is then entering into the world market, and it would be sold all around the world.
“So there’s no – I won’t say ‘no’ – there is very little impact, nominal impact, on U.S. gas prices – what the average American consumer cares about – by having this pipeline come through. And sometimes the way this gets sold is, ‘Let’s get this oil and it’s going to come here.’ And the implication is, is that’s going to lower gas prices here in the United States. It’s not. There’s a global oil market. It’s very good for Canadian oil companies and it’s good for the Canadian oil industry, but it’s not going to be a huge benefit to U.S. consumers. It’s not even going to be a nominal benefit to U.S. consumers.
“Now, the construction of the pipeline itself will create probably a couple thousand jobs. Those are temporary jobs until the construction actually happens. There’s probably some additional jobs that can be created in the refining process down in the Gulf. Those aren’t completely insignificant – it’s just like any other project. But when you consider what we could be doing if we were rebuilding our roads and bridges around the country – something that Congress could authorize – we could probably create hundreds of thousands of jobs, or a million jobs. So if that’s the argument, there are a lot more direct ways to create well-paying Americans construction jobs.”
Again, the Republican Congress knows all of this. They know gas prices have already plummeted and that Keystone won’t push them any lower. They know that the project would create a few dozen permanent U.S. jobs. They know this is all about Canadian oil.
But this new “governing majority,” eager to prove how capable they are, have once again effectively declared, “Let’s pass it anyway” – whether it actually makes sense or not.
Republican lawmakers have had months – and by some measures, years – to come up with a policy agenda they’d implement once they controlled all of Congress. This, alas, is what they’ve come up with.
By: Steve Benen, The Maddow Blog, January 6, 2014
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