Category: From Jared Bernstein

New Census data show that low-income people are responding as they always do to tight labor markets…by working!

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

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%).

Source: CBPP analysis.

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

When it comes to trade-induced job loss, “don’t worry, be happy!”

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

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.”

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A nice wage pop in January should be welcomed, not feared!

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

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.

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Tax Roundup: Lies, Lies, and More Lies

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

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.

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If the Trump administration wants to do something useful, should progressives still oppose them?

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

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.”

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Bird Flu, FTAs, and How Some Rules of the Road are Better than Others

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

Chad Bown of the Peterson Institute sends me a link to a piece of his showing, he argues, a benefit we get from “free-trade” agreements (FTAs) that’s under-appreciated in a national debate that’s turned extremely hostile to FTAs. It’s about last year’s bird flu outbreak, and he makes the case that “a global trade framework kept this situation from becoming far worse.”

While our chicken exports declined due to the outbreak, Bown argues that they fell less than they would have absent FTAs. The trade deals set up a framework wherein scientists could assure our trading partners that certain regions of the US were unaffected by the bird flu and thus exports from those areas were safe. That led to a more geographically discriminate ban, and, Brown claims, boosted exports relative to a situation with no FTAs, wherein trading partners could just ban all US poultry exports.

“If a country can make the scientific case that a particular disease outbreak has been contained to a geographic region and limited set of products, then partners’ trade bans should not target unaffected products from other regions of the country.”

His evidence is a figure showing that poultry exports fell a lot more in non-FTA countries than in FTA countries. That’s certainly indicative of something but it’s hard to know what. It could be that we have better communication ties with our trading partners regardless of the trade deals. That’s certainly what Bown’s TPP evidence suggests. Remember, the TPP hasn’t been passed and is thus not implemented, so how could it be yielding these benefits? Perhaps this evidence shows that we should negotiate trade agreements, not ratify them!

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Context Alert: Only 6% of Those with Health Coverage Get it Through the “Individual” Market

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

Every morning these days I’m greeted by front-page articles explaining how Obamacare is seriously broken as private insurers are abandoning the exchanges. No question, that’s an important problem for the individual, or “non-group” market, though one with many good solutions (I’ll provide links in a moment).

But anyone who makes this point should also be required to make this other point: only 6 percent of health care coverage is provided through the non-group market. About half of those with coverage get it through their employers, another third through public sources, leaving about 10 percent without coverage, down from 13 percent a few years ago (see figure below from the Kaiser Family Foundation; these data are for 2014; the uninsured rate fell another point in 2015).

Source: Kaiser Family Foundation

Neither the Post nor the Journal made this point, and my concern is that its omission leads too many readers to assume that the thinning of providers in the individual market is a fatal flaw as opposed to a manageable problem amenable to fixes.

To be very clear, a 6 percent problem is still a problem, and Obamacare has led to an increase in that corner of the market. But absent the correct context re its minority share, these articles provide the health law’s opponents opportunities for over-heated rhetoric, claiming, for example, that we’re seeing “the latest piece of evidence that Obamacare is a failed law built on false promises.”

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If We Refuse to Go After BIG Tax Avoiders, Then We Have No Standing to Stop Others From Doing So.

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

Imagine you live on a nice street with nice neighbors, but there’s a problem. Your teenage son recklessly speeds along the street, knocking down garbage cans and leaving skid marks on the well-kept lawns. The neighbors hold their tongues, expecting you to intervene and discipline the boy, at least insisting he obey the speed limits if not taking away his keys. But you’re unable to control him and finally, frustrated with your fecklessness, the neighbors take matters into their own hands and sic the authorities on him.

Do you thank them for taking the tough love parenting steps you should have already taken? Or do you castigate them for disciplining your darling, misunderstood boy?

If you’re the US Treasury and members of Congress from both parties, you do the latter.

I’m talking about Apple, Ireland, and the European Union, of course. The EU’s tax authorities are accusing Ireland of providing special tax breaks to subsidiaries of the US multinational tech company. Such alleged state subsidies are considered anti-competitive by the EU, which is thus demanding that Ireland claw back $14.5 billion in ten years’ worth of upaid taxes.

That’s a lot of overturned garbage cans. By allowing Apple to classify much of its profits booked abroad as “stateless”—Ed Kleinbard’s apt term for profits that are detached from where they’re earned and dispatched to where they’re untaxed—Ireland has, according the European Commission, “allowed the company to pay annual tax rates of between 0.005% and 1% on its European profits for over a decade to 2014, by designating only a tiny portion of its profit as taxable in Ireland.”

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Some Points You May Have Missed on Trump’s Ill-advised Tax Plan

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

As you’ve probably seen, Donald Trump talked mostly tax policy yesterday in a big speech in Detroit. He’s amending his original tax plan, which I guess he no longer thinks is as awesome and amazing as when he first introduced it. Here are a few points which, amidst all the hoopla, you might not have picked up on.

Interestingly, the plan is pure, old-fashioned, supply-side, trickle-down orthodoxy. How that squares with Trump’s play for disaffected working class voters hurt by globalization is left as an exercise for the reader (because I don’t get it). Believe me, those voters benefit not one cent from eliminating the estate tax. I assume his motives are a) a sop to the top 1% who fund such campaigns, b) a way to shrink gov’t by starving it of revenues, and c) a signal to the Ryan wing of the party that “despite all the cray-cray, I’m really with you re the parts you care most about (eg, a and b).”

–He claims to close one loophole but opens up a much bigger one. This, to me, is a big deal that’s easy to miss. I’m talking about the Trump plan for a 15% tax rate on “pass-through” income.

His updated plan sets the top income tax rate at 33% but creates “a much lower rate than 33 percent for a substantial number of very-high-income households by allowing people to pay a new low rate of 15 percent on “pass-through” income (business income claimed on individual tax returns).  More than two-thirds of all pass-through business income flows to the top 1 percent of tax filers (see figure).”

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I’m Not the Only One Seeking a New Path Forward on Trade

Jared Bernstein

Jared Bernstein Senior Fellow, Center on Budget and Policy Priorities

I’m Not the Only One Seeking a New Path Forward on Trade

In his oped out today, Larry Summers lands where I do in various recent posts. What he calls the “revolt against global integration” can lead to regressive Trumpian protectionism or to a new, more inclusive approach to expanded trade.

Larry lays out the benefits of expanded trade both in terms of consumer benefits and “economic integration as a force for peace and prosperity.” But, after suggesting people don’t always adequately recognize these upsides, he notes

The core of the revolt against global integration…is not ignorance. It is a sense — unfortunately not wholly unwarranted — that it is a project being carried out by elites for elites, with little consideration for the interests of ordinary people. They see the globalization agenda as being set by large companies that successfully play one country against another. They read the revelations in the Panama Papers and conclude that globalization offers a fortunate few opportunities to avoid taxes and regulations that are not available to everyone else. And they see the kind of disintegration that accompanies global integration as local communities suffer when major employers lose out to foreign competitors.

OK, maybe that’s a bit begrudging, but it’s essentially the same thing I’ve been saying for awhile now: many people believe their own well-being, along with that of their families and communities, are neither represented nor enhanced by the process by which we are expanding trade. And the politicians are listening to them.

In my work, I’ve associated this with the inadequately representative and non-transparent “free-trade agreement” (FTA) process, which, as Summers suggests, is too dominated by elite stakeholders here and abroad.

The question then becomes how can we move forward in a positive direction? How can we best tap the benefits of globalization in a more inclusive manner?

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Union Matters

A Just, Inclusive and Sustainable Economy

From the AFL-CIO

This week, labor leaders from across the country descended on New Orleans to map out the path ahead for our movement. From trade and public education to equal pay and paid leave to back pay for federal contract workers and bargaining power for all, the AFL-CIO Executive Council tackled the issues that will define working people’s fight for economic justice in 2019 and beyond.

Sending waves through Washington yesterday, the Executive Council’s most notable decision was its announcement that, “if the administration insists on a premature vote on the new NAFTA in its current form, we will have no choice but to oppose it.” Here are a few highlights from the statement:

  • Trade policy must be judged by whether it leads to a just, inclusive and sustainable economy....By that measure, the North American Free Trade Agreement (NAFTA), which has driven the outsourcing of so many good jobs, has been a catastrophic failure. More than 850,000 U.S. jobs were shipped overseas under NAFTA between 1993 and 2013.
  • By design, NAFTA distorted power relationships in favor of global employers over workers, weakened worker bargaining power and encouraged the de-industrialization of the U.S. economy.
  • After a quarter-century of this race to the bottom, workers in all three NAFTA countries find it more difficult to form unions and negotiate collective bargaining agreements.
  • The NAFTA renegotiation requires strong labor rights provisions and strong enforcement provisions that as of today are not yet in the agreement.
  • The current effort by the business community to pass the new NAFTA is premature, and if it continues, we will be forced to mobilize to defeat it, just as we mobilized to kill the Trans-Pacific Partnership.

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New NAFTA Must Create an Economy for All

New NAFTA Must Create an Economy for All