Jared Bernstein Archive

For a certain breed of wonk and nerd, it’s not the holiday season until some of CBPP’s best graphs of the year are collected and briefly annotated. This year, Kathleen Bryant and I took a stab at picking some of the figures we thought were most important to document the economic and policy landscape facing economically vulnerable people.

One of the most important and positive trends of the last decade was the decline in share of Americans without health coverage due to the Affordable Care Act. Their numbers fell from about 45 million to 27 million, a gain in coverage for ~18 million people. But this year’s release of the Census Bureau’s health insurance data revealed a troubling reversal of this trend. In 2018 (the data lag one year), the uninsured rate increased for the first time since the ACA’s passage. These findings illustrate the grave consequences of the Trump Administration’s repeated attempts to undermine the ACA over the past several years.

One reason the reversal shown above is of such concern is that health coverage saves lives. Reviewing a recent academic study, Matt Broadus and Aviva Aron-Dine report that the ACA’s Medicaid expansion prevents thousands of premature deaths each year and saved the lives of at least 19,200 adults aged 55 to 64 between 2014 and 2017. Matt and Aviva find that if all states had expanded Medicaid in 2017, the number of lives saved by full expansion would almost equal the number saved by seatbelts. Given such magnitudes, and considering that the federal government pays 90 percent of the costs of the expansion, these findings underscore the cruelty of remaining state resistance to the expansion.

For more, click here.

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Reposted from On the Economy

This morning, the Census Bureau released new data on health insurance coverage, poverty, and middle-class incomes. While the data are for last year, they shine an important light on key aspects of families’ living standards that we don’t get from the more up-to-date macro-indicators, like GDP and unemployment.

As the economic recovery that began over a decade ago persisted through 2018, poverty once again fell, by half-a-percentage point, from 12.3 percent to 11.8 percent. Other results from the report show that anti-poverty and income support programs lifted millions of people out of poverty, including 27 million through Social Security alone. Though the real median household income—the income of the household right in the middle of the income scale—increased slightly less than 1 percent last year, the increase was not statistically significant. Median earnings of full-time men and women workers both rose significantly, by over 3 percent for each (for reasons discussed below, sometimes earnings rise significantly but income does not).

Health coverage, however, significantly deteriorated last year, as the share of the uninsured rose for the first time since 2009, from 7.9 percent to 8.5 percent. In total, 27.5 million lacked coverage in 2018, an increase of 1.9 million over 2017. This result is partially driven by actions of the Trump administration to undermine the Affordable Care Act (note that Medicaid coverage was down by 0.7 percentage points), and in this regard, it should be taken as a powerful signal of the impact of conservative policy on U.S. health coverage.

Taken together, the poverty, income, and health coverage results tell a tale of three powerful forces: the strong economy, effective anti-poverty programs, and the Trump administration’s ongoing attack on affordable health coverage. A strong labor market is an essential asset for working-age families, and the data are clear that poor people respond to the opportunities associated with a labor market closing in on full employment. Anti-poverty programs are lifting millions of economically vulnerable persons, including seniors and children, out of poverty. But while a strong labor market and a responsive safety net help to solve a lot of problems, the history of both U.S. and other countries shows that it takes national health care policy to ensure families have access to affordable coverage. The ACA was and is playing that role, but efforts to undermine its effectiveness are evident in the Census data.

Poverty, Income, Inequality

The Census provides two measures of poverty: the official poverty measure (OPM) and the Supplement Poverty Measure (SPM). The latter is a more accurate metric as it uses an updated and more realistic income threshold to determine poverty status, and it counts important benefits that the OPM leaves out. While the two measures often track each other, year-to-year, that wasn’t the case last year, as the SPM rose an insignificant one-tenth of a percent, from 13.0 to 13.1 percent, while the OPM fell a significant half-a-percent, from 12.3 to 11.8 percent. Because the SPM has a higher income threshold than the OPM, 4.4 million more people were poor by that more accurate measure.

Because it counts anti-poverty policies that the official measure leaves out, one particularly useful characteristic of the SPM data is that it breaks out the millions of people lifted out of poverty by specific anti-poverty programs. For example, refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit lifted about 8 million people out of poverty in 2018; SNAP (food stamps) lifted 3 million more out each, and Social Security was the most powerful poverty reducer, lifting 27 million out of poverty in 2018, 18 million of whom were elderly (65 and older).

Payrolls rose by 130,000 last month and the unemployment rate held at 3.7 percent, close to a 50-year low and the same level as the past 3 months. Still, job growth is cooling (25,000 of this month’s gains were temporary decennial Census workers), as the pace of monthly gains, while still strong enough to support low unemployment, has slowed. Wage growth also stayed parked at about where it has been in recent months, and there’s some evidence that the trade war is taking a toll on factory jobs. However, the job market remains strong, real wages are growing, and consumer spending will continue to be supported by these dynamics.

The slowdown in payrolls

To get a clearer take on the underlying trend in job growth, our monthly smoother shows the average monthly gain over 3, 6, and 12-month periods. This month, however, we add an extra bar to our usual smoother, as we believe it is important to begin to incorporate a recent BLS revision, based on more accurate jobs data, into our assessment of the US job market. This preliminary benchmark revision estimates that employers added 500,000 fewer jobs to US payrolls between April of 2018 and March of 2019 (BLS will officially wedge their final estimate into the payroll data by Feb 2020). The second bar includes the result of this revision, showing that over the past year, payroll growth was likely closer to 150K per month than 175K per month.

To be sure, this is still solid payroll growth at this stage of the expansion and as noted below, in tandem with real wage growth, it’s strong enough job growth to support the recovery and keep unemployment around where it is. However, using the preliminary revised data, the pace of payroll gains has slowed from 1.6% last year to 1.3% this year. Clearly, that’s not a big deceleration, and it’s also not unexpected in a job market closing in on full employment. But it is a slower trend which I expect to persist.

The trade war

The trade war that the Trump administration has been waging is clearly taking a toll on the global economy. While its impact is greater in countries more exposed to trade, like Germany, than the US, our manufacturers have been hit by these new taxes (tariffs) on their imported inputs and by retaliatory tariffs on their exports. To what extent is this showing up in factory employment, hours, and wages?

Manufacturing employment has slowed since the Trump administration began ramping up tariffs at the beginning of last year. Last month, factory jobs rose just 3K and durable manufacturing employment was unchanged. Thus far this year, the factory sector has added 5.5K jobs per month on average, compared to 22K for all of last year.

The product of manufacturing employment and weekly hours yields the aggregate hour index for the sector, a very good proxy for labor demand. The next figure looks at the year-over-year change in this index for blue collar and for all manufacturing workers. Starting about a year ago, a clear deceleration is evident, and for the non-managers—who comprise about 70 percent of the sector’s employment—total hours worked have outright declined in recent months (relative to a year ago).

Raising the federal minimum wage to $15 per hour by 2025 would lift the pay of 27.3 million workers—17 percent of the workforce—according to a new report from the Congressional Budget Office. It would raise the incomes of poor families by 5 percent and thus reduce the number of people in poverty by 1.3 million. Since these low-end gains would be partially financed out of profits, the increase in the wage floor would reduce inequality.

CBO also estimates that “1.3 million workers who would otherwise be employed would be jobless in an average week in 2025.” Because economists’ estimates of the job-loss effects from minimum wage increase are so wide-ranging—some studies find little-to-no job loss impacts; other find more—CBO estimates that there’s a two-thirds chance that the actual change in employment is between 0 and -3.7 million. Interestingly, -1.3 million is not the midpoint between 0 and -3.7, suggesting the budget office gave a bit more weight to studies finding less evidence of job-loss effects.

Thus spoke Zarathustra the CBO. Should this lead objective policy makers to embrace or eschew the policy to increase the federal minimum wage to $15 in 2025 (assume for this exercise that “objective policy makers” exist)?

I’d give a solid push towards embrace. It’s a progressive policy that’s long been shown to largely hit its goals of boosting the earnings of low-wage workers whose families seriously need the income. Yes, the report warns that some will be hurt by the increase, but the best research suggests their job-loss estimate may be too high. Moreover, even if they’re right, the ratio of helped-to-hurt is 21 (27.3m/1.3m). And given the extent of turnover in the low-wage labor market, many of those 1.3 million workers will eventually find new jobs, jobs which pay a lot better than their old ones.

Full disclosure: I’ve long advocated for minimum wage increases, so my “embrace” won’t surprise those who’ve followed that work. But the reason why I—and, more importantly, progressive institutions like the Economic Policy Institute, CBPP, CAP, and many others—have long advocated for minimum wage increases is that a deep body of uniquely high-quality research finds that prior increases have had their intended effects of raising low-wage workers’ incomes without leading to significant job loss.

Raising the federal minimum wage to $15 per hour by 2025 would lift the pay of 27.3 million workers—17 percent of the workforce—according to a new report from the Congressional Budget Office. It would raise the incomes of poor families by 5 percent and thus reduce the number of people in poverty by 1.3 million. Since these low-end gains would be partially financed out of profits, the increase in the wage floor would reduce inequality.

CBO also estimates that “1.3 million workers who would otherwise be employed would be jobless in an average week in 2025.” Because economists’ estimates of the job-loss effects from minimum wage increase are so wide-ranging—some studies find little-to-no job loss impacts; other find more—CBO estimates that there’s a two-thirds chance that the actual change in employment is between 0 and -3.7 million. Interestingly, -1.3 million is not the midpoint between 0 and -3.7, suggesting the budget office gave a bit more weight to studies finding less evidence of job-loss effects.

Thus spoke Zarathustra the CBO. Should this lead objective policy makers to embrace or eschew the policy to increase the federal minimum wage to $15 in 2025 (assume for this exercise that “objective policy makers” exist)?

I’d give a solid push towards embrace. It’s a progressive policy that’s long been shown to largely hit its goals of boosting the earnings of low-wage workers whose families seriously need the income. Yes, the report warns that some will be hurt by the increase, but the best research suggests their job-loss estimate may be too high. Moreover, even if they’re right, the ratio of helped-to-hurt is 21 (27.3m/1.3m). And given the extent of turnover in the low-wage labor market, many of those 1.3 million workers will eventually find new jobs, jobs which pay a lot better than their old ones.

Full disclosure: I’ve long advocated for minimum wage increases, so my “embrace” won’t surprise those who’ve followed that work. But the reason why I—and, more importantly, progressive institutions like the Economic Policy Institute, CBPP, CAP, and many others—have long advocated for minimum wage increases is that a deep body of uniquely high-quality research finds that prior increases have had their intended effects of raising low-wage workers’ incomes without leading to significant job loss.

[This jobs report is an important one in terms of assessing the impact of headwinds on the job market, but because it’s sort of a holiday, I’ll just offer up a truncated, bullet-point report. As always, thanks to Kathleen Bryant, who got up early on vacation to help me out!]

Toplines:

–Payrolls rose 224,000 last month, well above expectations for ~165K. Though we never want to over-weight one month of noisy data, that’s an important number, suggesting that building economic headwinds haven’t dented job creation much yet at all.

–Our monthly smoother shows average monthly job gains over 3, 6, and 12-month windows. Even including May’s weak 72K (revised) gain, the average over both the past 3 and 6 months has been around 170K jobs/month. That’s a slight downshift from the 12-month average but still a very solid number, one that should handily support the ongoing expansion.

–The unemployment rate ticked up to 3.7% (a statistically insignificant change, btw), but that was mostly due to more people coming into the labor force–the participation rate nudged up 0.1 ppts to 62.9%.

–That’s all good news, but the evolving wage story is less so. As the figures below reveal, our 6-mos rolling average of yr/yr nominal wage growth shows the trend (versus the noisier monthly values) is stalled or even trailing off a bit. This too, is an important finding, suggesting that a) there’s still “room-to-run” in this expansion as labor supply doesn’t appear to be tapped out, b) even with unemployment near 50-yer lows, too many workers still lack the bargaining clout they need.

As you know if you’ve looked at any morning paper, the Trump administration has proposed an escalating tariff on all imports from Mexico, starting at 5 percent on June 10th and rising by five percentage points each month until it reaches 25 percent. The tariffs are intended to force Mexico to take actions to reduce the flow of migrants into the U.S. Trump said the tariffs will remain in place until Mexico “substantially stops the illegal inflow of aliens coming through its territory.”

Here’s a Q&A on this proposed action. Initially, it may not look like a big deal for us (much more so for Mexico). But if it doesn’t fizzle quickly, and I don’t think it will, it could turn out to be important along various dimensions.

Q: Isn’t this is an unusual use of tariffs?

A: It is. The majority of tariff cases stem from countries arguing about trade, as is the case with China. Country A objects to country B “dumping” a specific export (“rubber tires, grade c”) at below cost in order to corner market share and Country A imposes a “countervailing duty” to level the playing field. Or, as with China, we object to their trade practices (though I’ve argued this attack is somewhat overblown).

Yes, tariffs have been used as a geopolitical tactic, to protect what Hamilton called “infant industries,” and to support the buildup of domestic industries to achieve import substitution (tariffs were also the main source of government revenue in early America). But I’m not aware of a case where tariffs have been used to block immigration.

Q: Ok, it’s an unusual idea. But is it a bad idea?

A: Yes, for two broad reasons. First, I have the same objection to this tariff as to any other sweeping tariff (versus the more targeted “dumping” example above): by disrupting broad trade flows and indiscriminately raising costs on swatch of industries and consumers, it is a blunt policy tool that may have been useful in Hamilton’s day but is no longer so. Trump envisions widespread import substitution, but his vision is atavistic. Trade flows and inter-country commerce is too far advanced to be wholly rewired. I don’t think the globalization omelet can be unscrambled but even if it could, the victory would be a Pyrrhic one on all sides of the borders.

We’re especially integrated with Mexico. The WSJ reports that “about two-thirds of U.S.-Mexico trade is between factories owned by the same company.” Those are largely auto manufacturers, as we import $93 billion in cars and parts from Mexico (as a share of our imports, that’s 5x our China share), computers, food, and hundreds more goods. According to Goldman Sachs researchers, 44 percent of our air conditioners and 35 percent of our TVs are imported from Mexico. After China, Mexico was our largest source of imports last year (we imported $350 billion from them last year, and exported $265 billion).

Second, it is a well-documented fact that unauthorized immigration from the Mexico has declined in recent years. What’s gone up is asylum seekers from Central American countries torn by violence and gangs. In this regard, the “crisis” at the border is of the Trump administration’s own making. Suppose this tariff got Mexico to do more to shut its southern border to asylum seekers. On legal, humanitarian grounds, that should be no one’s definition of success.

A few folks have asked me about my friend Michael Strain’s recent Bloomberg piece where he argues against wage stagnation (it’s “more wrong than right”). It’s an old argument but one worth having, and Michael makes some important points and misses some big ones too (5, to be precise).

Larry Mishel and I counter a much shorter-term version of Michael’s case here but similar issues pertain. Certainly, the evidence he presents doesn’t change the basic wage story that I and many others carry around in our heads.

I think Michael’s most germane point is that nobody defines “stagnation.” If you think stagnation means real wages for low-wage workers have never gone up in the past four decades, you’re wrong. The figure below, from a recent piece I published (one I’ll get back to re a key point Michael misses), shows real wages for low and moderate wage workers stagnated through the 1970s, 80s, and 2000s.

But, in periods of very tight labor markets—the latter 1990s and now—they grew at a decent clip. This is key insight #1about real wage growth for too many workers. It’s not that they’ve never grown. It’s that their growth periods in recent decades have been few and far between. And it’s largely dependent of achieving persistent full employment, a condition that’s also been too rare in recent years (see this exciting new paper on precisely this point!).

Key insight #2 is that, sure, switching to a slower-growing deflator leads to faster wage growth and there are good arguments for various choices (see Mishel/Bivens’ cautions re Michael’s choice of using the PCE for wages). But it doesn’t wipe out long periods of stagnation. Here’s the real 20th percentile wage (2018 $’s) using both the CPI-RS (used in the figure above) and the PCE. Just like the above figure: periods of growth, but longer periods of stagnation.

In a hearing last week, an exchange between Rep. Katie Porter (D-CA) and JPMorgan’s CEO Jamie Dimon caught my eye. Dimon was touting the bank’s new minimum wage of $16.50, increasing to $18 in high-cost areas, for entry level workers. That’s a decent minimum wage, above the $15 that most progressive plans call for (and those proposals typically include a phase-in of numerous years). According to recent EPI analysis, $16.50 is well north of the national 40^thpercentile wage of just under $15.

To be clear, I’m not suggesting the highly profitable bank—market cap about $380 billion; Dimon made over $30 million last year—is fairly compensating its entry-level workers (Dimon says such workers tend to just out of high school). My point is an empirical one: given the nation’s wage structure, its (ridiculously low) federal minimum wage of $7.25, and the weak bargaining clout of low-wage workers, especially those without a college degree, a minimum/entry-level wage of $16.50 is actually pretty high.

Rep. Porter, however, pointed out that in pretty much any part of America you choose, a single mom with one child can’t make ends meet on that wage. She’s unquestionably correct, as she demonstrated after the hearing in this tweet (full disclosure: I’ve met Rep. Porter; she’s all that and a big bag of chips; whip-smart, data-driven…one of those new members with just the right recipe of heart, brain, conviction, analytics, etc…).

You can read more about their exchange here, but it led me to ask why is the US wage structure so insufficient and what can we do about it? It’s a question that all of us should have at the top of our minds when listening to the proposals from those who would lead the nation.

What can we do about this mismatch between earnings and needs?

One answer is to work on two tracks, near term and long term. In the near term, we need robust wage supports in the form of fully refundable tax credits (i.e., you get the credit whether or not you owe any taxes), along with other work supports, including child care, health care, and housing.

Over the longer haul we must correct structural imbalances that have, over at least the last 40 years, reduced the bargaining clout for workers relative to employers. The power shift is a function of many forces, including the decline of unions and collective bargaining, but it also relates to the way we’ve handled globalization, the rise of hands-off economics, specifically the notion that progressive interventions are anti-growth (a line of thought that’s led to supply-side policies like cutting taxes for the rich and benefits for the poor), austere fiscal policy, and the many other aspects of what is often labeled the “rigged economy.”

I remember when foreign ownership of U.S. government debt amounted to very little, as shown on the left end of the figure below (the share of total publicly held debt owned by foreigners).

I next remember that this share was growing rapidly, closing in on half about a decade ago. What I didn’t know was that the share has been falling back a bit. In fact, it’s about 10 percentage points off of its peak.

I discovered this because I went to look at the data as part of the broader conversation I’ve been engaged in regarding the lack of attention to and concern about our growing fiscal imbalances, an unusual dynamic what with the economy closing in on full employment.

In the course of that conversation, some have raised the concern that because a significant share of our debt is held be foreign investors, we face risks that were not invoked in earlier decades.

There’s the “sudden stop” scenario that’s been deeply damaging to emerging economies, when foreign inflows quickly shut down, slamming the currency and forcing painful interest rate hikes.

There’s a less pressing but still concerning risk that foreign investors’ demand for US debt would fall at a time like the present, when the Treasury needs to borrow aggressively to finance our obligations in the face of large tax cuts and deficit spending. That scenario could lead to “crowd out,” as public debt competes with private debt for scarce funds, pushing up yields.

At the very least, it leads to more national income leaking out in debt service than when those shares in the figure were lower.

How serious are these concerns?

One of the particularly frustrating, fact-free aspects of the conservative push to add (or ramp up) work requirements in anti-poverty programs like Medicaid or SNAP is that low-income people who can do so are already working hard. Moreover, as the job market tightens, they respond to tightening conditions.

Using the new Census data, Kathleen Bryant and I, with help from Raheem Chaudhry, used the 2017 microdata (the data on which the poverty and income numbers are based) to compare the employment rates of low-income single mothers (with incomes below twice the poverty threshold) with prime-age (25-54), non-poor adults. We found that between 2010 and 2017, the employment rates of the low-income single moms increased by 5.4 percentage points (67.7% to 73.2%), while those of non-poor adults increased by just 1.2 percentage points (87.8% to 89%).

It’s true that the single moms, by dint of their lower employment rate levels, have more room to grow, but the prime-age adults are not obviously hitting a ceiling on their rates.

At any rate, we believe this shows that a large and growing majority of low-income moms are already trying to both raise their kids and support their families through work, and that they’re actively taking advantage of the tight labor market. Adding work requirements will just give them one more needless, bureaucratic barrier to leap over, likely reducing their ability to maintain their benefits, even as they’re playing by the rules. Forgive me if I cynically suspect that such hassle-induced benefit losses are the point.

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Reposted from On the Economy

Productivity and wages: They’re connected, of course, but the extent of the connection requires nuanced analysis of wages at different percentiles and movements in labor’s share of national income.

There’s an interesting dichotomy here in how economists and people think about productivity and wages. For many economists, it’s the determinant of wage growth. For many people, it’s irrelevant, in that powerful forces divert productivity growth from paychecks to profits. The truth, especially once you get away from averages, lies in-between. Productivity matters a great deal, but it is not by itself sufficient to drive broadly shared prosperity.

Employment rates also matter a lot: They take the elevator down in recessions and the stairs up in recoveries. They also may carry some info about the arrival of next recession. Plus, their recent movements reveal the disproportionate benefits of full employment to the least advantaged.

Are politicians no longer listening to economists? You wish. In fact, they’re listening to the wrong ones telling them what they want to hear.

Now, a quick note on current events.

As regards the tanking of the Turkish lira, the business press is largely concerned with the contagion question: to what extent will Turkey’s problems spillover into European and American economies? The consensus is “not much,” based on Turkey’s size and financial markets’ limited exposure to Turkish debt, much of which is dollar-denominated, meaning it becomes more expensive to service when the Turkish currency depreciates.

That’s probably right, and Turkey has uniquely weak fundamentals among emerging market economies: “current account deficit of 6.3% of GDP, Corporate foreign exchange debt is 35% of GDP, inflation rate of 16%.” But the situation bears close watching, of course, and the strengthening dollar has important implications for the trade war, i.e., it pushes in the opposite direction of the tariffs (tariffs make imports more expensive; the stronger dollar makes them less expensive).

But another interesting aspect of the Turkish meltdown is how much Trump and Erdogan have in common. In one sense, that’s not surprising, as the strongman, faux populist playbook is pretty straightforward, and history is replete with examples.

In the latest solid report on the conditions in the US labor market, payrolls grew by 213,000 in June, and labor force participation ticked up two-tenths, as more people were pulled into the improving labor market. This led to a two-tenths tick-up in the unemployment rate to 4 percent (really, 30 basis points up, from 3.75% to 4.05%). Wage growth stayed at 2.7 percent, the same pace as last month, and the average since last December. It is also worth noting that inflation is now growing at about the same rate as wages, so, in one of the less impressive aspects of the current job market recovery, real hourly pay is flat.

As the economic expansion that began in June of 2009 enters its tenth year, the enduring recovery has moved the job market closer to full employment. However, the key message from this report, is that despite many economic estimates to the contrary, there still appears to be room-to-run. That is, various indicators suggest we’re closing in on full employment, but not quite there yet. These indicators include:

–Average job gains of about 200,000 per month over the past year (see JB’s official jobs-day smoother which averages monthly payroll gains over different intervals). The historical pattern is for the pace of job gains to slow more than it has when we’re getting to full capacity in the labor market.

–Though wage growth has clearly ticked up a bit—it has moved from 2 percent, to 2.5, to now, 2.7 percent—it has not picked up as much as we’d expect at full employment. Our current low productivity growth regime is a constraining factor, and we’re certainly hearing a lot from employers about labor shortages. But before we take that age-old complaint, we need to see more wage pressure. Employers almost always complain about labor shortages, yet the data suggests they’ve been quite reluctant to raise pay to get and keep the workers they need.

The Republicans’ “Jobs Gap” is a meaningless measure that reveals nothing about the job market. It can, and is, easily manipulated to show any outcome you like.

On the other hand, the facts about the current labor market are as follows.

–The long-term trend of job growth remains solid, unemployment is low, and, contrary to claims related to the “jobs gap,” employment among working-age people is growing relative to their population.

–Anecdotes suggest that some particularly hot labor markets are helping workers overcome steep labor market barriers, like criminal records. Conversely, some groups of workers face skill or health deficits, the absence of necessary work supports, or live in places that have not yet been reached by strong labor demand.

–Even as the job market continues to tighten, wage growth has been relatively sluggish. Since late 2016, real earnings for middle-wage workers has been flat.

The phony jobs gap measure 

The Republicans “Jobs Gap” measure consists of two disparate series—the labor force participation rate (LFPR) and job openings—with very different scales and no substantive meaning. The commentary around the measure suggests its advocates think the jobs gap shows that people are not taking advantage of labor market opportunities, but the actual data belie that claim.

The LFPR is the percentage of the 16+ population that’s employed or unemployed (i.e., in the labor force), and job openings are millions of jobs. Importantly, the 16+ population includes persons of retirement age, an increasing share of the U.S. population, as well as teenagers in high school and young adults in college, so it is not a useful measure for the purpose it is intended (I show better measures below). Labor economists have long expected the overall LFPR to grow less quickly as the baby boomers age out of the labor force.

But the immediate problem with the “jobs gap” is that there’s no meaningful way to present these two series on one graph. In fact, by tweaking their different scales in ways that make no more or less sense than the Republicans’ version, you can get a gap of any size you like or no gap at all!

Here’s the Republicans’ version.

The teachers provide us with a teaching moment, over at WaPo. Their actions pose a stark reminder of the essential need for a strong, organized movement to push back on the forces promoting inequality, non-representative government, trickle down tax policy, and more.

CBO released their updated “baseline,” or estimate of the US gov’t’s fiscal outlook. If you like red ink, you’re in biz. Instead of deficits between 3 and 4% of GDP over the next few years, we’re looking at deficits of 4-5%.

As I’ve written in many places, when you’re closing in on full employment, you want your deficit/GDP to come down and your debt/GDP to stabilize and then fall. It’s not that I worry about “crowd out” so much–public borrowing hasn’t crowded out private borrowing for a long time, as evidenced by low, stable interest rates (rates are climbing off the mat a bit now, as I’d expect at this stage of the expansion).

It’s a) there’s a recession out there somewhere are we lack the perceived fiscal space to deal with it, and b) the larger point that this is all part and parcel of the strategy to starve the Treasury of revenues so as to force entitlement cuts.

Which brings me to this oped by a group of former Democratic chairs of the president’s CEA. It’s a perfectly reasonable call for a balanced approach to meeting our fiscal challenges, and, again, consistent with my view that as we close in on full employment, the deficit should move toward primary balance (another way of saying debt/GDP stabilization).

But two things from this piece, which is a critical response to an earlier oped by a “group of distinguished economists from the Hoover Institution.”

First, I didn’t realize that the Hoover’ites argued that the “entitlements are the sole cause of the problem, while the budget-busting tax bill that was passed last year is described as a ‘good first step.’”

This puts them in direct violation of the Bernstein Rule: if you supported the tax cut, you can’t complain about the deficit.

I’ve long hoped, probably naïvely, that one of the benefits of team Trump’s promotion of generally ineffective (or worse) solutions to the downsides of trade could engender a debate about better ideas. Of course, the debate will also generate some really bad arguments, like this one from economist Donald Boudreaux in this AM’s NYT.

Boudreaux argues that trade (and, implicitly, anything else) can’t be a problem for jobs because the US economy creates and destroys tons of jobs all the time. The nub of his case comes down to:

“…estimates of jobs destroyed by trade sound big, but they’re actually tiny. Relative to overall routine job destruction and creation — “job churn” — the number of American jobs destroyed by trade is minuscule.

In January alone, the number of American workers who were laid off or dismissed from their jobs was 1.8 million. The number of workers who quit their jobs that month was 3.3 million. Adding in workers who left their jobs for other reasons, such as retirement and disability, the number of job separations in January was 5.4 million. But there were 5.6 million hires in January, too. Those numbers are typical of most months.

Awareness of job churn should calm Americans’ fears about imports [good luck with that–JB]…Compared with the number of total annual job losses…job losses from trade shrink into insignificance.”

Lots of people think unions are pretty much kaput, but that’s not so, especially in the public sector, where union membership has been a bit north of one-third of the public-sector workforce, and remarkably steady, since the late 1970s (private sector coverage, by contrast, is 6.5%; see figure). That’s why the Janus case being argued at the Supreme Court today is so vitally important. Its outcome will either strengthen or weaken public sector unions, and if the result is the latter, it will have political repercussions far beyond the voice of workers in their workplaces.

The Janus case is about whether public sector unions can require “agency fees.” Such fees, also called “fair share” fees, are paid to the union to cover the cost of bargaining on behalf of all workers in the bargaining unit, not just union members. Absent such fees, there is a clear “free rider” problem wherein those benefiting from collective bargaining activities on their behalf pay no costs to cover the union’s work. In that sense, Janus is kind of the public-sector corollary of the misnamed state “right-to-work” laws about which I’ve written elsewhere.

The named plaintiff, Mark Janus, is an Illinois social worker covered under a collective bargaining agreement negotiated by the public workers’ union AFSCME (American Federation of State, County and Municipal Employees). He’s not an AFSCME member, but he’s required to pay a fee to cover the cost of his representation. Note that such fees can only be used for this purpose, and not for, say, political activities by the union.

Payrolls rose 200,000 last month, the unemployment rate held steady at 4.1% and wage growth popped up to 2.9%, it’s the fastest year-over-year growth rate since mid-2009. In other words, here’s yet another strong jobs report.

Our jobs-day smoother averages out some of the monthly noise in the payroll data by taking averages over 3, 6, and 12-month periods. As shown below, payrolls are up a strong 192,000, on average, over the past three months, a very nice job-growth pace at this point in the expansion. In fact, the slight acceleration in the figure suggests there may be more room-to-run in this economy than we previously thought, which—co-inky-dink!—happens to be the punchline of a new paper from our Full Employment Project.

As CNBC anchor Becky Quick pointed out this morning during their segment in which I joined, we may be entering that phase of the cycle where good news on Main St. is bad news on Wall St. That is, accelerating wage growth may lead the Federal Reserve to tighten faster, slowing overall growth more than currently expected. That certainly was the market reaction this morning, as the 10-year bond yield spiked on the report, suggesting concerns about future inflation and a more aggressive rate-hike schedule at the Fed.

However, as I note below, there are excellent reasons to embrace and welcome, not fear, faster wage growth.

First, here’s a rough typology of the lies upon which the sales job for the Republicans’ wasteful, regressive tax cut is based.

1. The tax cut won’t help the rich. 1a. It won’t help Trump.
2. The tax cut will generate enough growth to pay for itself. 2a. Sec’y Mnuchin’s now going beyond this, claiming that it will raise more revenue than it loses. (Here’s what I think’s going on there.)
3. Most of the benefits of the tax cut will go to the middle class.

Lies, lies, lies. And while it’s early days, and much could change, My impression is that a lot of people outside of DC Republicans aren’t buying them. The media and the Twitterverse is especially lit up with lies #1 and #2. In fact, here’s the NYT doing some calculations on lie 1b (“Trump could save more than $1 billion under his new tax plan”; that’s mostly due to eliminating the estate tax).

Also, on #1, see the Tax Policy Center’s take on the benefits to the wealthy:

• The top 1 percent of households (those with incomes above $730,000) would get about 53 percent of the framework’s net tax cuts, or roughly $130,000 a year on average.
• The top 0.1 percent of households (those with incomes above $3.4 million) would get roughly 30 percent of the framework’s net tax cuts, or about $720,000 a year, on average.

This analysis also applies to the reduction in the tax rate (from about 40 to 25 percent) for business pass-through income, which the R’s are trying to sell as helping small businesses. In fact, 86 percent of pass-throughs are already taxed at 25 percent or less. Chuck Marr reports that “79 percent of the benefit of this tax cut would flow to filers with incomes above $1 million.  The 400 households with the highest incomes would receive an average tax cut of $5.5 million from this provision alone.”

Re #3, since most of the cuts go to the top, there’s not much left to trickle down to the middle class, but the tax cutters are making a big deal out of how their plan to double the standard deduction (or, to increase the zero tax bracket) will help lower income families. And, no question, some will benefit from that.

This will be brief, because a note about how the political debate is misleading isn’t exactly breaking news or even, admittedly, that interesting. So, I’d consider it a personal favor if you’ll allow me to vent for a moment.

It’s just that the extent to which we’re being lied to right now seems, to me at least, uniquely over the top. The transparency of the BS is just so obvious, especially on Cassidy-Graham, the just-as-bad-as-all-the-others repeal and replace bill that may get a vote in the Senate next week.

Same with the tax “plan.” Even though there is no real plan yet, what we’ve seen so far is mostly tax cuts for wealthy businesses and corporations, the cost of which will get loaded onto the deficit. Yet its proponents are selling it as a pro-growth package that lifts the working class.

My CBPP colleagues have been hammering on how C-G is just as much a wolf as past R repeal bills, despite its sheep’s clothing. It cuts health care spending on ACA functions by over $200 billion, 2020-26, and much more in later years (a new study by the health analysis firm Avalere comes up with similar numbers; see their table below) and that doesn’t count cuts to the traditional Medicaid program, which under C-G is no longer guaranteed to expand to meet the health needs of low-income recipients. Under C-G: “Faced with a recession…states would have to either dramatically increase their own spending on health care or, as is far more likely, deny help to people losing their jobs and their health insurance.”

A solid report, showing gains across the spectrum. But inequality’s up too, and median earnings, not so much…

My data dive in the WaPo underscores the clearly favorable results in the report, but here are a few other factoids to consider:

–While this isn’t the best data for inequality analysis, for reasons I note in the WaPo, my piece points out the relative difference between gains at the 10th and 95th percentile. That observation is correct, but the 10th %’ile is a bit of a negative outlier. Better to look at a more stable statistic, the average real income gain for the bottom fifth, up 2.6% last year, compared to a 5.6% gain among the richest 5% of households. The bottom half gained last year, but not as much as the top.

–It’s also true that incomes shares going to the middle and low income households are at all time lows, as the figure reveals. (See note in WaPo piece, however, re the impact of the 2013 survey change on comparisons like this. I think it’s a legit comparison, and it comports with other, better inequality data–where better means inclusive of more data sources, including taxes, more transfers, and capital gains–showing even more growth in inequality.)

–The lack of change in real median earnings for full-time, full-year workers last year is worth noodling over a bit. It surely reflects a composition effect as lower-paid were drawn into the sample last year, pulling down the median (see here for how this works). But even considering that reality, look at this series for men since 1960:

So, I’m driving around doing errands this past weekend when I hear former Secretary of Commerce Carlos Gutierrez (in GW Bush’s cabinet) interviewed about renegotiating NAFTA. He’s a big booster of the trade deal and wanted to make the point that any job loss in manufacturing was a result of faster productivity growth, not imbalanced trade. His evidence was as follows (my bold):

One of the things I go back to very often is our manufacturing as a percent of GDP. Our manufacturing output is pretty stable, pretty flat. If you go back 10, 15 years, it’s between 12 and 14 percent. But our manufacturing workforce has been declining steadily. So we’re producing the same output with fewer people. What that tells me is that technology is more of a threat to American jobs than trade.

Stable manufacturing output share of GDP?! I practically dropped the dry cleaning!

The first figure shows that, in fact, manufacturing’s share of output (blue line) has been falling since I was born in the mid-1950s. It was 11.7% in 2016, 13% in 2006, and 13.9% in the 2001. OK, that’s roughly between 12 and 14 percent, but it ain’t stable. It’s falling, and pretty steadily. In fact, Louis Uchitelle just published an important book on this long-term trend.*

Readers know I’ve been deeply engaged in the healthcare debate, and highly critical of the efforts thus far to repeal and replace, demean and deface, disgust and disgrace, etc.

But I haven’t weighed in on up to the minute changes in part because they’re changing fast and because the journalists who follow this are doing a good job of tracking developments in the Senate.

In sum, Senate R’s have failed to pass any of the repeal and/or replace bills they’ve come up with so far. At this point, McConnell looks to be counting on getting to 50 votes with “skinny repeal,” which gets rid of the individual and employer mandates, along with a tax on medical devices.

At one level, this is high strategery. His play is to get to conference, i.e., once both chambers have passed bills, the R’s convene a committee that tries to agree on a plan that R majorities in both houses will support. There’s no requirement that what comes out of conference looks like what went in, and that means they’re most likely to go right back to the full, draconian repeal-and-replace cuts that would lead to tens of millions losing coverage.

Would Senate “moderates” who’ve blocked these bills thus far backtrack and vote for stuff they’ve heretofore opposed, like huge cuts to Medicaid or ending coverage of pre-existing conditions, maternal care, mental health, substance abuse treatment, etc.? They might, but it’s worth remembering that the debate on the conference bill is constrained, no amendments are allowed, and leadership will be in full arm-twisting mode.

The figure below, from Senate Budget Committee staffer Bobby Kogan, shows four different estimates of projected budget deficits as shares of GDP:

–The lowest line is the administration’s own estimate, showing how if you buy their numbers–and if you do, I’ve got a bridge to sell you–the budget balances by 2027.

–The next line up is from today’s CBO release of their analysis of President’s budget. Note that CBO must adhere to claims that tax cuts will be paid for, even if there’s no credible plan to do so.

–The next line is CBO’s baseline, or the path they believe the deficit will follow if we stick to current law.

–The top line is the most important. It’s the deficit as a share of GDP under the far more credible assumption that team Trump fails to pay for their tax cuts (using Tax Policy Center static estimates of the cost of their tax cuts, with interest costs added; ftr, TPC’s dynamic score line looks the same).

There’s a robust debate to be had as to why the NYT published this op-ed on the alleged economic benefits of trickle-down tax cuts, as virtually every paragraph touts an alternative fact. It is the opinion page, I guess, and the authors advise (or at least advised) the president, so I can see why it’s there. But it does require debunking, so thanks NYT, for some make work.

Here’s much of the article’s text, followed by my comments in italics:

In the aftermath of the health care blowup, President Trump and the Republicans need a legislative victory. Tax reform probably should have gone first, but now is the time to move it forward with urgency.

By tax reform, as they admit below, the authors mean tax cuts. This is no such urgency at all. If anything, based on simple demographics alone, we’re going to need more, not less, revenue. This is a typical ploy in this space: create an emergency that can only be solved by tax cuts on the wealthy. If you listen carefully, you hear their fear that their tactics aren’t working, and the tax debate has gotten gummed up. That’s music to my ears, but cacophony to theirs.

Unfortunately, the White House seems all over the map on the subject. One day there is a trial balloon for a value-added tax. The next, the idea of a carbon tax or a reciprocal tax. And now we are hearing the curve ball of a payroll tax cut. Steve Mnuchin, the Treasury secretary, has thrown cold water on the idea of any tax bill meeting the August deadline.

One sure lesson from the health care setback is the old admonition “Keep it simple, stupid.” The Republicans tried to fix the trillion-dollar health insurance market instead of keeping the focus on repealing Obamacare.

I take their point re the lurching of the White House on taxes, which really is remarkable and reveals the lack of not just any planning or coalition building, but even a clear sense of what they want to do on taxes. The idea that “keeping the focus on repealing Obamacare” would work, however, makes no sense, and reveals that the authors’ magical thinking extends beyond tax cuts to health care. Republican voters don’t want Obamacare to be replaced with nothing. They want more health care at less cost, which was what Trump promised them.

First, over at WaPo, check out my latest summary of the CBO score of the Republican’s just downright nasty, greedy “health care plan.”

Next, I agreed with David Leonhardt’s useful bit of history here, wherein he deconstructs the corner into which Republicans have painted themselves:

How did the party’s leaders put themselves in this position? The short answer is that they began believing their own hype and set out to solve a problem that doesn’t exist.

I agree, but I also think there’s something more prosaic going on here, and that is that it’s just way easier not to govern. That’s especially the case with health care, of which the politics are just wholly unforgiving.

Given today’s political dynamics, it is so much easier to be in permanent campaign mode, stoking your base, throwing endless spitballs at the folks trying to legislate. Moreover, these are precisely the things contemporary Republicans are good at: endless spin, endless shade throwing, fact-free opposition research, and very effectively–much more so than Democrats–applying those tools to getting elected.

You see the problem, however. Once you get so good at these techniques that the voters you’ve hoodwinked put you in power, you have to govern. That requires policy chops, real facts, and political compromise, all of which go in exactly the opposite direction of what got you into power in the first place.

I love my morning Budget Tracker update from Congressional Quarterly almost as much as I love my morning coffee. It provides that quick, efficient dive into the daily budget weeds that wonks like me crave (sorry, it’s behind a paywall).

So I was disheartened to see them fall into this trap that I’ve been pretty keyed up about of late (my bold):

Republican lawmakers made clear Wednesday that any efforts to overhaul entitlement programs like Social Security and Medicare are now on the legislative back burner.

Readers are somehow required to know that “overhaul” means “cut.” This being the Budget Tracker, most readers probably know the translation, but this is not the time for squishy, ambiguous language.

I’m not sure when that time will come, but until then, people writing about these issues need to call it like it is.

***

This was reposted from On the Economy.

Happy new year and welcome to the Center on Budget and Policy Priorities top graphs of 2016 special! I’ll be your host, joined later by musical guest…whoops, sorry. What with the urgency of the moment, there’s no space for a band this year. So let’s jump into the facts and figures (and to be clear–and fair to my CBPP colleagues–this is but a small sample of our best stuff; take my advice and, if you haven’t already, bookmark our site and visit it often; current threats have us shifting into overdrive).

This year’s theme is a somber one: the fragility of the gains we’ve made.

First, the GOP appears poised to engage in a War on Poverty Programs. In order to help finance their highly regressive tax cuts, they’re likely to target programs like Medicaid and SNAP (food stamps), e.g., by turning them into block grants to states. This robs these programs of their vital countercyclical impact, like that shown in the figure below. Back in 2010, as the Great Recession was pummeling low-income households, the safety net did what it’s designed to do: catch people when the market fails.

What’s that? You’re skeptical that block grants would truly undermine the effectiveness of our anti-poverty programs. Well, observe this next figure, showing the growing failure of cash assistance to reach needy families since it was turned into a block grant back in the mid-1990s.

My colleague Ben Spielberg made this neat scatterplot today in reference to a claim by Labor Secretary designee Andrew Puzder. Puzder claimed that a “government mandated restaurant recession” was caused by rising premiums in the Obamacare exchanges. The idea is that consumers, after paying for health coverage, didn’t have enough left to go out to eat.

If so, we should see restaurant employment falling – or, at least, growing more slowly – in states where Obamacare premiums rose. But, as the scatterplot reveals, there’s little correlation at all between these two variables (and what there is goes the wrong way for Puzder’s case).

There are lots of reasons for that non-correlation, not least of which is that the vast majority of Americans do not get coverage through the exchanges–only 7% obtain coverage through the non-group market. See this Scheiber/Strom piece in the NYT for more details.

As I said therein: “We see different goals between a business owner trying to hold down costs and a national policy maker who ought to be focused on making sure that the benefits of growth are fairly and broadly shared. For a guy like Puzder, suppressing labor costs is a good day at work. For the labor secretary, that’s not the goal.”

***

This was reposted from On the Economy.

The question I pose above came out of this piece I posted in today’s WaPo on confusion in the Trump camp about trade deals and trade deficits:

To hear President-elect Trump tell it, ripping up, repealing or renegotiating international trade deals will bring back lost factory jobs and restore the glory days of the American working class. Wilbur Ross, Trump’s nominee to run the Commerce Department, plans to work with his new boss to release America from “the bondage” of “bad trade agreements.”

Conversely, to President Obama, the for-now defunct Trans-Pacific Partnership trade agreement would have boosted America’s growth, raised living, environmental and labor standards in the 11 other signatory countries, and blocked China from dominating the global stage.

They can’t both be right, and the record shows that neither are. Those hoping that American industry will rise again if and when the president-elect whacks deals like the North American or Korea trade deals will be profoundly disappointed. Neither does the failure of the TPP pave the way for the rise of our new Chinese overlords.

The problem with this hyper-elevation of trade deals is that it conflates the deals with the trade. The real problem, as I’ll explain, is the persistent and economically large trade deficits that the United States has run with our trading partners since the mid-1970s, which at this point have little to do with trade deals.

If the Trump administration seriously intends to help the displaced manufacturing workers and communities that were instrumental in the president-elect’s upset victory, it will need to shift its line of attack from trade deals to the trade deficit.

I think it would be good economic policy, and probably good politics–though truth be told, I really have no idea anymore about what’s good politics–to help workers, families, and communities hurt by the downsides of globalization. For years, elites from all sides of the aisle have basically ignored these people’s loss of high value-added work, assuring them that globalization is always and everywhere a force for good, at least as long as the winners win enough such that they can compensate the losers.

Whether or not they do so–i.e., compensate the losers–well, that’s “outside the model.”