Labor Day Reading

September 1st, 2014 at 9:56 am

Some great articles worth a look on labor, unions, wages, and more:

EJ Dionne on an exemplary employer and the workers who went to bat for him.

Jon Cohn interviews one of the deepest thinkers I know on labor issues: Rich Yeselson.

An important look at the problem of “wage theft” in the NYT.

Bob Kuttner on some recent wins for workers.

A strong NYT editorial with good ideas as to useful policies to address the deficits in labor’s bargaining power that I discuss here.

What else? Add you own links in comments.

Stan’s Plan: Show Me the Money!

August 29th, 2014 at 1:51 pm

Stan Collender is one of my favorite budget wonks, and I don’t say that lightly. His work has a long history of clarity and common sense and I believe we share the same concerns that the direction of fiscal policy in recent years threatens to leave our government without the resources it needs to meet the challenges we face.

So it was with nervous curiosity that I read this post of his advocating the abolition of the corporate tax, as this is something I’ve been worrying about a lot lately. What with the recent inversion dust-up, this idea to kill the corporate tax and replace it with something better is getting more play. Problem is, as with Stan’s plan, that “something better” tends not to withstand scrutiny.

Stan’s idea, though very clever in one respect (note how he pits the spending-side lobbyists against the tax-side lobbyists), faces the classic “show me the money” problem: he argues that we can pay for revenue we lose from scrapping the corporate tax by cutting all the spending in the budget that supports corporations. Giveth to corporations with one hand, by ending the tax on their income. But taketh away with the other, by cutting all the spending in the budget that flows their way.

The problem is that the hand that gives holds way more money than the one that takes. The magnitude of the revenue loss couldn’t possibly be made up with the spending cuts because there just isn’t enough spending there to make up the more than $300 billion or so that you’d lose on an annual basis from ending the corporate tax.

Don’t get me wrong: no question that we waste a lot of money subsidizing businesses that don’t need the help. Agriculture subsidies are a good example. As Elsa would say sing, “let ‘em go!” But they amount to maybe $4 billion a year. How about getting rid of the Export-Import bank, as many on both sides of the aisle are calling for (though I’m not quite there)? That actually goes the wrong way: the bank contributes about $1 billion to the budget each year. The Small Business Administration? Um…under a billion. The US Trade Rep? About $50 million…with an “m.”

To be fair to Stan, he might reasonably argue that if you add up all those cats and dogs, or “rats and mice” as my Kiwi friend more aptly puts it, you’ve got some real money. To be fair to me, the man with the plan (named Stan) should do that. The stakes are high here and I wouldn’t go around arguing we could offset the loss of over $300 billion a year without being sure I could make it up elsewhere.

In lieu of that, we have the Cato Institute’s 2012 estimate of “corporate welfare” in the budget. They get to $100 billion a year, which is a fair bit of rodents, though still just a third of the needed take. But Cato has some questionable entries in the ledger. Some of what they call corporate welfare goes to individuals, not businesses. They list the FHA guaranteed loan program as a $16 billion cost, when, like the Ex-Im bank, this program actually contributes to the budget. Then there’s R&D, including support for research at NIH. I can see where Cato wants to lose all of that, but I don’t and I’m not sure Stan does either.

Suffice it to say that Cato’s $100 billion is an upper bound, and it’s still way short.

One way to fix Stan’s plan is to reverse his sequencing. Don’t get rid of the corporate rate and then try to scrape together the payfors, but make all the cuts you can and then adjust the rate downwards accordingly.

But I wouldn’t go there either. Let’s say we could cut a lot of this waste—and Stan is absolutely solid in that aspiration. Why spend it on cutting the corporate tax rate? Yes, that part of the code needs serious work, but the corps themselves are doing better than ever, with historically high profitability. From where I sit, the folks who could use help in this economy are precisely not the ones who own shares in corporations. It’s the ones on the other end of the income scale, those who depend on their paychecks; those who would benefit from a stronger safety net or more investment in their upward mobility. Heck, if nothing else I’d at least use these savings to replace some of the mindless sequestration cuts (I’ll bet Stan would like that too!).

If I could cut a bunch of corporate waste, that’s where I’d spend the money. Not on a corporate tax cut!

Musical Interlude: Sonny and Brownie

August 29th, 2014 at 1:17 pm

I avoid superlatives, so trust me when I tell you that Sonny Terry and Brownie McGhee are the greatest blues duo ever. I mean, these guys are just pure music, and if their blues don’t thoroughly soothe your soul then get yourself down to the ER posthaste as your soul needs medical attention.

I recently rediscovered their album of spirituals, Just a Closer Walk With Thee. Problem is, I can’t find links to hardly any of the tunes. Now, unlike the current budget deficit (2.9% of GDP this year as per new CBO report), this is a deficit that greatly concerns me. Come on, America–every crap pop song is a click away, and yet I can’t hear Sonny and Brownie’s “What a Beautiful City”?!

This link provides snippets of the tunes from the CD; here’s a live version of one of the songs, though they take it to a secular place. And here are a couple more.

“You can’t hide, ain’t no need of tryin’
You can’t hide cause you don’t know how.
God’s got your number…knows where you live!
Death’s got a warrant for you…”

 

An Awfully Bleak Poll

August 28th, 2014 at 8:27 pm

Clearly, there are a lot of people who feel that the economic recovery–over five years old by now, at least by the official count–isn’t reaching them. That’s a central result from a pretty gloomy poll out today from Rutgers University.

I put some thoughts and data together over at PostEverything, showing the gaps between real GDP growth, corporate profitability, the stock market, and middle-class household incomes. As you see, the disconnect kinda jumps out attcha.

exp_indicators

Sources: BEA, Standard and Poors, Sentier Research.

As noted in the WaPo piece, I was struck by this poll result:

poll_hyst

 

You never want to read too much into one poll, but OTEers will recall that this comports with recent economic findings that show precisely this phenomenon: the Great Recession did in fact do very significant damage to growth rates across the globe. One study by Larry Ball that I wrote up a few weeks ago found that the loss of potential output in the U.S. amounted to $7,500 per household.

As I’ve noted elsewhere, I think some of the damage can be repaired, but it will takes numerous years at full employment if that is to happen.