Poor countries need economists because scarcity is still a real problem. Rich countries, on the other hand, do not need economists because abundance is their problem. Yet, in rich countries economists still find work, teach at universities, and influence domestic and international policies. Why is this the case? Why does the US, for example, not see economists in the same way it sees horses—as something that's completely useless. To turn to an economist for ideas about how to manage wealth is much like the USPS turning to horses to deliver mail. A possible answer? People who call themselves economists are not actually who they say they are.
My meaning: The famous Chicago School did not produce a new generation of economists but instead replaced real economists with stock market analysts, portfolio managers, and risk mathematicians/magicians and called these men economists. But in fact, the US has not had real economists doing anything serious for the past 30 years. You can't say a person who designs models that will lower risks on investments is actually an economist, and yet look at who has been running the Federal Reserve since Volker, the last economist. (Wikipedia actually calls Ben Bernanke an American economist, yet his dissertation was about how investors can make a penny into a dime—"Long-Term Commitments, Dynamic Optimization, and the Business Cycle.")
Know what an economist is. He/she is not about maximizing returns on investments. An economist deals with the alleviation of scarcity from a society. And if a society has accomplished this, has nothing but abundance to deal with, then there is no need for economists but instead a system or computer that equitably distributes the wealth for the whole. Indeed, it is this very role or opening that the followers of the Chicago School filled—but instead of managing the wealth for all, they directed it up to the highest classes and produced an imaginary scarcity for the rest.
The laws are stacked against organizing labor, so it doesn't happen too often anymore, but today more than 1,000 Sea-Tac Airport contract workers will announce that they have formed a union, before marching to Alaska Airlines headquarters to demand that the airline instruct its contractors to negotiate with workers. Nearly all of these cabin cleaners, baggage handlers, wheelchair assistants, and skycaps earn less than $10 an hour.
A recent report found that Sea-Tac has the worst working conditions of any major West Coast airport. On average, workers there now earn 40 percent less in inflation adjusted dollars than they did back in 2005 before Alaska contracted out their jobs.
Sea-Tac workers with Menzies, BAGS Inc., Delta Global Services, and AirServe have voted to form unions with SEIU Local 6; workers at ground transportation company GCA have formed a union with Teamsters Local 117.
The Australian economist Steve Keen points out that we are always going on and on about public debt and yet say little or nothing about the much bigger problem of private debt. Public debt did not cause the most recent crash. Private debt did. And yet we are cutting government debt and enforcing cruel austerity programs. Australia’s comedy team The Chaser exposes the utter stupidity of this kind of economic thinking.
Those of you who want the Postal Service to die a quick death might be disappointed after all. Seems the government does not approve of their plan to kill Saturday service:
The Government Accountability Office, a nonpartisan investigative arm of Congress, said in a legal opinion that the post office did not have the authority to make the change without Congressional approval, based on a spending measure passed by Congress last year.
The opinion was issued on the same day the House sent the president a spending measure that also required the post office to maintain Saturday delivery. That measure keeps the government operating through Sept. 30.
Of course, if Congress really wants the Postal Service to keep up with their delivery, they could just retract the unreasonable Congressional mandate that insists the USPS pre-fund health benefits for retirees.
Say what you want about us crazy, market-hating, urban liberals, and our jobs-destroying socialist agenda, but a quick comparison of voting patterns in Washington's 2012 gubernatorial race and county-by-county jobless rates sure does seem to chalk up an economic win for liberalism. It's not a perfect match; there are a couple of outliers. But for the most part there's a fairly strong correlation between unemployment and Republicanism. Huh.
And the unemployment map above actually understates the disparity between red and blue counties. These are January numbers. The February numbers show unemployment falling to 5.9 percent in the Seattle/Bellevue/Everett metro area, while rising two-tenths of a point to 8.7 percent in the rest of the state. (The county-by-county numbers won't be released until next week, so I'm using the previous month's map.)
Seattle goes ahead and does something economically suicidal like mandating paid sick leave, and rather than businesses fleeing the city, both jobs and construction cranes continue to pop up like weeds. Weird.
Starbucks CEO Howard Schultz has become the second prominent Seattle-area business leader to come out in favor of raising the federal minimum wage, if tentatively. "On balance, I am a supporter of the minimum wage going up," Schultz told CNBC yesterday, while also cautioning that some employers might be scared away from adding jobs.
Earlier this month, Costco President and CEO Craig Jelinek gave a more full-throated endorsement: "We support efforts to increase the federal minimum wage," Jelinek said in a press release.
“We pay a starting hourly wage of $11.50 in all states where we do business, and we are still able to keep our overhead costs low. An important reason for the success of Costco’s business model is the attraction and retention of great employees. Instead of minimizing wages, we know it’s a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty."
So what do Schultz and Jelinek know about the minimum wage that other CEOs don't get? Both Starbucks and Costco are headquartered here in Washington, the state with the highest minimum wage in the nation (currently $9.19) thanks to a 1998 initiative that tied the wage to inflation. While Schultz is right that some employers may fear a minimum wage hike, neither Schultz nor Jelinek are afraid of it themselves, thanks in part, presumably, to their own benign experience with a relatively high minimum wage here in Washington State.
Starbucks and Costco are arguably two of the most success retailers in the nation. Costco in particular out-competes Walmart's Sam's Club while paying its typical workers about double. It's an experience with higher wages that CEO's elsewhere might do well to learn from.
"This particular revenue forecast takes a hard problem, and doesn't make it worse," deadpanned state Representative Ross Hunter (D-Medina) just minutes after the release of a March quarterly revenue forecast that is largely unchanged from November. It was an apt summation of the yet-another-budget-battle looming in Olympia.
State revenues are now projected to be up $59 million through the June end of the 2011-2013 budget, but down $19 million from the previous forecast for the 2013-2015 biennium. That gives lawmakers an extra $40 million to play with. Pretty much a rounding error within the context of a $32.5 billion two-year budget, and hardly enough to make a dent in the projected $1.3 billion shortfall (give or take a few billion dollars).
The good news is that the March forecast wasn't as bleak as a lot of lawmakers anticipated; nobody would have been surprised had these numbers come in a few hundred million dollars lower. The better news is that these not-quite-so-bad numbers are buoyed by growing strength in the housing market, auto sales, and employment. These are all indicators that our economic recovery will continue.
The bad news is that this post-Great Recession recovery continues to be atypically sloooooow:
For all the constant Republican chatter about this being a spending problem, state revenue collections aren't projected to return to their 2008 peak until 2014. And that doesn't even account for inflation. Or population growth.
The state revenue forecast is scheduled to come out in a few minutes, and if the groundhog sees his shadow, it means there are two more years of budget crisis. Exciting!
UPDATE: The revenue forecast is mostly flat. So no drama. Some analysis after I've had a chance to analyze it.
Concerning the situation in Cyprus, the Australian economist Steve Keen stated...
So for the sake of capitalism, I hope the Cyprian Parliament votes [down the €10 billion euro bailout that would impose a tax on bank deposits], that public protests and demonstrations stop it, that Putin threatening to “turn off the gas” stops it… Basically, anything is better than letting the EU proceed with this madness.
Well, the Cyprian parliament saved capitalism from itself...
Lawmakers in Cyprus have rejected government plans to impose an unprecedented tax on bank deposits, throwing into doubt a €10 billion euro bailout agreed with the European Union just three days ago.Sooner or later, the rich are going to have to realize that they are not as rich as they think they are, that the money to repay all of these debts does not exist.
Failure to secure emergency loans from the EU would leave Cyprus facing a banking collapse and default.
The bailout, while small compared to the rescue packages for other troubled EU nations like Greece, represents more than half the size of the €18 billion Cyprus economy.
The proposed tax on deposits, unprecedented in a eurozone bailout, led to a run on cash machines in Cyprus over the weekend, sparked big protests outside parliament and shook financial markets Monday.
A new report from Puget Sound Sage finds that Sea-Tac contract workers have by far the worst pay, benefits, and job protections of any major West Coast airport.
And it's not like we can't do anything about it because, markets! The Port of Seattle is a taxpayer-funded public agency tasked with creating jobs and promoting economic development; it could impose higher job standards at Sea-Tac if it wanted to, just like the major California airports have. I mean, it's not like the airlines are going to take their business elsewhere just because they suddenly have to pay the guys fueling their planes a living wage.
But we don't pay these workers a living wage. Instead, we've allowed this contracting regime to push these workers and their families deeper into poverty, with the obvious negative impact on the communities surrounding the airport.
It's really kinda shameful.
When I first heard the story about the Cypriot bank bailout on the radio this weekend, I thought the reporters must've gotten it backwards. But no, in an alleged attempt to forestall a bank run, Cyprus has agreed to tax bank deposits:
In the early hours of Saturday morning, after 10 hours of talks, finance ministers from euro area countries, the International Monetary Fund and the European Central Bank agreed on terms that include a one-time tax of 9.9 percent on Cypriot bank deposits of more than 100,000 euros, and a tax of 6.75 percent on smaller deposits, European Union officials said.
Jesus. That's just plain stupid. Forget about the blunt immorality of taxing bank depositors in order to bail out bankers, this deal sends a signal to depositors in struggling economies throughout the European Union to quickly pull their money out of the bank before they too lose a big chunk of their life savings:
Moody’s Investors Service warned that the decision to impose losses on depositors was “a significant departure from past instances of support” by European officials. It “signals euro area policymakers’ willingness to risk triggering wider financial market disruptions in pursuit of other policy goals,” Moody’s said in a note.
Analysts at DBS in Singapore wrote that financial markets were worried that the plan to force ordinary depositors to share the cost of the bailout “may send the wrong message on the safety of bank deposits in other E.U. nations, just when light appeared to be emerging at the end of the long tunnel for the peripheral nations.”
This policy is pretty much the exact opposite of what one might do if one wanted to avoid a bank run. I mean, maintaining faith in the banking system is the whole purpose of our FDIC, which insures bank deposits up to $250,000 per account. But if European officials are going to confiscate a portion of the accounts of small depositors in Cyprus, why shouldn't depositors in Greece, Italy, Spain, Portugal, Ireland and elsewhere fear the same?
I'm beginning to think that the IMF and the ECB are just fucking with people now.
Stagnant Wealth for Younger Generations
In 2010, the average person of 20 to 28 had a net worth of $37,223, just slightly more than the average person of 20 to 28 in 1983. In contrast, the average person of 56 to 64 in 2010 had more than twice the wealth that someone the same age would have had 30 years ago.
Happily, Seattle has been there, done that:
Across the country, cities are showing a renewed interest in taking over the electricity business from private utilities, reflecting intensifying concerns about climate change, responses to power disruptions and a desire to pump more renewable energy into the grid.
... [G]overnment-owned utilities, most of them formed 50 to 100 years ago, are nonprofit entities that do not answer to shareholders. They have access to tax-exempt financing for their projects, they do not pay federal income tax and they tend to pay their executives salaries that are on par with government levels, rather than higher corporate rates.
That financial structure can help municipal utilities supply cheaper electricity.
Seattle City Light isn't perfect, but it provides residents and businesses with some of the lowest, most stable rates in the nation, with more than 96 percent of its power generated with zero greenhouse gas emissions. It's hard to overstate the huge economic advantage city-owned City Light has bestowed on Seattle: "Electrical power represents the main energy cost for most businesses," notes the pro-business Washington Roundtable.
It's enough to make even some hardcore capitalists endorse the collective ownership of the means of production.
Taking care of old people. CNN has the story:
The fastest growing job in America pays poorly. Meet home health care aides.
These nearly 2 million (mostly minorities and women) workers do everything from prepare meals and clean homes, to bathe and change bedpans for elderly and disabled patients.
As Baby Boomers age, this job is expected to explode, growing 70% between 2010 and 2020, according to the Labor Department. That makes it the single fastest growing job in the United States, according to their forecasts.
The Philadelphia City Council voted 17-0 yesterday to tweak the city's "living wage law" so that it applies to employees of small contractors (five employees or more) at the Philadelphia International Airport. The law requires companies that have contracts with the city to pay their workers at least one and a half times minimum wage, as well as to provide paid sick leave.
Despite the unanimous vote, not all council members were convinced of the wisdom: "I don't think the way to go continuously is to turn low-wage jobs into better and better paid jobs because you are going to lose more and more low-paid jobs that way," said council member David Oh, making one of the stupidest arguments ever against raising wages.
But what really struck me about the plight of low-paid workers at Philadelphia International Airport are the parallels to the plight of of low-paid workers at Sea-Tac, both of which have seen wages fall in both real and actual dollars at the hands of contractors:
Cheryl Friedman, who works as a wheelchair attendant and security officer at the airport, would be getting a raise if Mayor Michael Nutter decided to sign the bill into law.
"When I started 12 years ago, I was making $10 an hour. Now it's down to $7.25 for wheelchairs, $9 an hour on security," she said. "It's difficult for me to live on this low income. I have 15 grandkids and six sons."
That's very similar to what happened at Sea-Tac after Alaska Airlines contracted out its baggage handling. Alaska workers who made an average $13.41 an hour in 2005 were hired back by Menzies Aviation for only $8.75 an hour. Seven years later, Sea-Tac contract workers were averaging only $9.70 an hour, the lowest hourly wage of any major West Coast airport.
Adjusted for inflation that's a nearly 40 percent decline in real wages.
But, you know, hooray for the free market!
Bolstered by a healthier private sector, the United States economy gained 236,000 jobs in February, well above what had been expected, while the unemployment rate fell to 7.7 percent, its lowest level since December 2008.
The gains were broad-based, with sectors ranging from manufacturing to business services turning in healthy results. Construction was especially strong, adding 48,000 jobs, a sign that the recovery in the housing market is beginning to translate into new jobs.
Regardless of whether you believe the economy is actually recovering, you can be sure that had Mitt Romney won the election, the media narrative would be about how Romney's win restored confidence to the economy, and crediting these confidence fairies with recent stock market gains and the stronger than expected jobs report.
Currently, earned income in excess of $113,700 is entirely exempt from the 6.2 percent payroll tax that funds Social Security benefits (employers pay a matching 6.2 percent). 5.2 percent of working Americans make more than $113,700 a year. Simply by eliminating the payroll tax earnings cap — and thus ending this regressive exemption for the top 5.2 percent of earners — would, according to the Congressional Budget Office, solve the financial crisis facing the Social Security system.
So why don’t we talk about raising or eliminating the cap – a measure that has strong popular, though not elite, support?
Huh. Well, that's an easy question to answer: Because our government is dominated by a stupid and/or selfish ruling elite.
The recovery is even in the air:
The amount of heat-trapping carbon dioxide in the air jumped dramatically in 2012, making it very unlikely that global warming can be limited to another 2 degrees as many global leaders have hoped, new federal figures show.
Scientists say the rise in CO2 reflects the world's economy revving up and burning more fossil fuels, especially in China.
State and local funding for public universities and colleges fell 7 percent to $81.2 billion in 2012 from a year earlier, driving up a measure of tuition to record levels, according to an annual survey.The one thing Obama has failed to slow down in any way are the processes of neoliberalization, which were initiated in the mid 70s and all come down to transferring socially generated wealth from the public to the private sector. These processes have continued despite the death of neoliberal ideology. When we speak of the end of neoliberalism, we always mean as an ideology—those who work hard succeed; those who fail are just lazy; the system is fair and rewards the most rational, self-interested actors; the rich are job creators; blacks are poor because they have a culture of poverty; whites are rich because they have a Christian work ethic; so on and so on. But the rise in tuition costs is an attack on white middle-class wealth. Neoliberalism spares no group beneath the rich. And what is its ultimate goal as a class project? To detach wealth from democracy.
States and local governments have been cutting support for higher education since the recession that ended more than three years ago even as enrollment has grown. Colleges have been forced to raise prices, with net tuition revenue per student reaching an all-time high of $5,189 last year, the State Higher Education Executive Officers said in a report released today.
“These one-year decreases in funding and increases in student costs are unprecedented over my forty-year career in higher education,” said Paul Lingenfelter, president of the group, based in Boulder, Colorado.
In fighting even the suggestion of proposing a conversation about talking about the possibility of suggesting an income tax in Washington State, opponents like to point to the huge economic advantages our current tax structure allegedly gives us. No income tax means more "job creators" will be attracted to our state, we are told, and more job creators means more jobs, higher incomes, and higher economic growth.
Except, that's total bullshit.
According to a new report from the Institute on Taxation and Economic Policy (ITEP), the economies of the nine states without a personal income tax (Washington included) have actually underperformed both the economies of the nine states with the highest income tax rates, and the 41 income tax states as a whole. Over the past decade real per capita GDP growth was only 5.2 percent in the non-income-tax states, compared 8.2 percent in the nine highest taxed states. Real median household income also fell further in the non-income-tax states, while unemployments were largely uniform across all three groups.
Washington actually did better than average on both per capita GDP and median income growth (while slightly worse on unemployment), but given the aggregate performance of the non-income-tax states it is impossible to argue that our lack of an income tax had anything to do with it. Unless you're an idiot. Or a liar.
The point is, there is zero evidence that our highly regressive sales-tax-dependent tax structure gives us any economic advantage whatsoever. So there.
This story about the White House, Congress, and their showdown over the sequester/mandatory spending cuts was already mentioned in today's Morning News. But it's worth reading the whole thing for its artful political theater from the auteurs at the White House.
It opens with the Secretary of Transportation—former Republican congressman—making a surprise cameo in the White House briefing room to warn that if the GOP pushes its budget cuts, the "Federal Aviation Administration would have no alternative but to furlough thousands of employees" and close over 100 air-traffic control towers. Meaning: longer lines, flight delays, and even crappier air travel.
Don't trot out a mewling Democrat to warn Americans about worsening health care or social services or other poor-people problems. Send a Republican to hit 'em where the rich and the middle-class live—in the airport! Clever.
And this detail, towards the end of the story, is a gorgeous bit of gamesmanship.
Roger Dow, president and chief executive of the U.S. Travel Association, said the threat of long security lines and flight delays could make travel “the face” of the sequester cuts.
The association has launched a mobile messaging campaign, urging travelers to text the word “DELAYED” to 877-877. In response, they will be connected with their local member of Congress.
Imagine all the bored, irritated people already idling in airports. Now imagine more of them. Some genius Democrat saw those people as an untapped political resource, wasted energy that could be working for the White House while they wait.
Just give them a way to simultanteously channel their irritation, kill some time, and feel like they're doing something useful and civic—by bitching to members of Congress about how Republican budget cuts have made their lives less, not more, efficient.
Though neoliberalism has lost its legitimacy, its program is not dead. It now operates like something that's dead and yet still moving, still acting, still doing terrible things. Remapping the Debate:
Looking at the size of the federal workforce without taking population size into account is very misleading. Yes, 110 workers are more than 100, but if those 110 workers are serving 5,000 citizens instead of 1,000 citizens, the effective size of government employment has declined. Putting employment numbers in context is particularly important because of the common assumption that the federal workforce is much larger than it was a few decades ago. In fact, the contextualized picture shows that executive branch civilian employment is substantially down as compared with its peak in 1978. This data viz updates one we originally published in 2011.David Harvey marks the coup against Allende's government in Chile in 1973 as the birth of neoliberalism, as the point at which its policies are properly implemented. 1978, the peak of governmental employment in the US, is a year or two before neoliberalism takes power in the UK and the US. Since that time, anything to do with social welfare has been steadily gutted from the state. Even after the crash of 2008, the attack on the social has not stopped. Obama has merely restored Keynesianism sans its social democratic promises. This is where things stand today.
Where has all the volatility gone? Why has the market become so stable for so long? It's all such a mystery...
The labor market is healing faster for immigrants than for U.S.-born workers as the growing economy favors those at the low and high ends of the pay scale.
Joblessness among those born outside the U.S. averaged 8.1 percent in 2012, down from 9.7 percent three years earlier, according to Labor Department data released to Bloomberg. In the same period, the rate among those born in the country fell to 8.1 percent from 9.2 percent.
Working immigrants, who are more likely than native-born Americans to either lack a high school diploma or to hold an advanced degree, have gained from a decades-long divergence in the labor market that has swelled demand for jobs paying above- and below-average wages. Amid this dynamic, the battle over comprehensive changes in immigration law is coming to the forefront in Congress.
Upon reading this, it was impossible not to recall the Hedleys ...
I wonder if this:
Wal-Mart shares are tanking after the company's executives called February sales a "total disaster." ... "Where are all the customers? And where’s their money?”
Has anything to do with this...?
Incomes rose more than 11 percent for the top 1 percent of earners during the economic recovery, but not at all for everybody else, according to new data.
The numbers, produced by Emmanuel Saez, an economist at the University of California, Berkeley, show overall income growing by just 1.7 percent over the period. But there was a wide gap between the top 1 percent, whose earnings rose by 11.2 percent, and the other 99 percent, whose earnings declined by 0.4 percent.
A simple question to bank regulators: Have you ever brought a Wall Street bank to trial for breaking the law? Do banks always just settle? Doesn't this encourage banks to break the law because the cost of settling is much lower than the profits gained from breaking the law?
This month's Prison Legal News has a very good profile of a for-profit prison firm in Louisiana—how it came to be, who runs it (a money-minded preacher is part of the story), and how raking in the money interferes with criminal justice. (The link is a pdf, FYI.)
Unique circumstances have combined to make northern Louisiana a prime location for private prisons, as Louisiana sheriffs can profit by letting a private company build and operate facilities that house both local prisoners and prisoners from other jurisdictions. Meanwhile, other parish prisons – especially those in the densely-populated southern part of the state – and Louisiana’s state prisons are severely overcrowded and provide a steady stream of prisoners to fill the for-profit facilities in the north.
Currently, over half of the state's approximately 40,000 prisoners are incarcerated in local parish prisons, which are operated by sheriffs or a private company. It costs the state an average of $55 per day to house a prisoner in a state facility. Yet the state pays sheriffs a mere $24.39 per diem to house state prisoners in parish prisons...
Warden Alan Cupp of the Richland Parish Detention Center (RPDC) in Mangham, Louisiana, a town with a non-prisoner population of 672, calls the approximately 800 beds in his jail his "honey holes." When they are full the honey flows nicely—in a good year, the facility generates $700,000 in revenue.
It's not like that $55 a day the state spends on prisoners is for deluxe accommodations with all the frills. So how do sheriffs/businessmen make so much money on housing prisoners for less than half that—so much money that they call the jail beds "honey holes"?
One of the biggest surprises in President Obama's State of the Union Address was his call to raise the minimum wage to $9.00 an hour, and then index it to inflation, just like we do here in Washington State. Caught off guard, Republicans and their surrogates have been pushed onto the defensive, for example, this piece in the Wall Street Journal suggesting a hike in the Earned Income Tax Credit (EITC) instead:
If Mr. Obama is dead set on using the government to boost wages, the EITC is the place to start, as the evidence suggests that minimum wage increases have no appreciable impact on poverty.
The EITC was created in 1975 by President Ford as a small wage supplement for low-income families. Subsequent presidents of both parties (including President Obama in 2009) have expanded the tax credit, and 24 states even offer a credit of their own as a percentage of the federal credit.
Republicans have supported this tax credit because eligibility is based on working and earning income. Democrats hail the EITC because it's refundable, meaning that a low-wage family without any tax liability nevertheless can file a tax return and get a check from the government. In a state such as New York, a single parent raising two children on the minimum wage would see their annual wage of $15,080 jump to $21,886 with the EITC, for an effective hourly wage of $10.52.
Except for the part about the minimum wage having "no appreciable impact on poverty," everything the WSJ says is true. And I'm all for a substantial hike in the EITC. If all that the working poor get out of Obama's minimum wage proposal is bipartisan support for hiking the EITC, well, that's a victory in itself.
But... this effort to pitch the EITC as an alternative to a livable minimum wage makes one thing perfectly clear: The EITC is not a tax subsidy for low-wage workers; it's a tax subsidy for low-wage employers. Hiking the EITC instead of the minimum wage enables businesses to pay their workers poverty wages while taxpayers pick up the difference. Either improves the living standards of these workers. But let's not pretend the EITC isn't a tool for depressing wages.
And that's not just me hypothesizing. Earlier today I got an email from the Orwellian named anti-union faux-think tank The Center for Union Facts, warning that "unions benefit from minimum wage hikes":
Go to this page at nytimes.com. Choose the full-screen mode. Samuel James's photos of the bootleg-fuel industry in the Niger Delta are disturbingly gorgeous.