Blog postings by CEPR staff and updates on the latest briefings and activities at the Center for Economic and Policy Research.

CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.


Center for American Progress (CAP)

Trump’s Trade Deal and the Road Not Taken

In November 2018, the Trump administration prioritized and signed a revision to the Northern American Free Trade Agreement (NAFTA) that was rebranded as the US-Mexico-Canada Agreement (USMCA). Unfortunately, President Trump’s agreement fails to deliver on strong labor and environmental standards that workers need. Specifically, the revised agreement fails to address climate change in trade and expands monopoly protections for pharmaceutical companies that would keep US drug prices rising. This report describes what a meaningful alternative to NAFTA requires by discussing NAFTA’s economic effects on US workers and proposing recommendations that could be used to rewrite NAFTA that supports the middle class, the environment, and cooperative relationships in all three countries.

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As America grows to be a more diverse society, in many ways, it has also become a far more unequal one. American inequality has fluidly adapted to prevailing federal, state, and local institutions and continues to expose a country that has repeatedly fallen short of amending the systemic disparities among race, class, gender and ethnicity. These disparities have become increasingly more pronounced in the US economy, creating even more inequality and insecurity.

In an economy in which the wealthy benefit and the rest of the country are dramatically left behind, many lower- and middle-class workers struggle to achieve upward economic mobility due in part to flat wages and the rising costs of housing, healthcare, and the overall cost of living. These obstacles limit access to higher incomes and in turn, wealth. As high earners save much more of their income than low-wage workers, they are able to acquire more assets and build wealth — a path that is especially obstructed for black Americans who often earn much less. This is compounded by the fact that for decades, people of color have lagged behind white people by almost every economic indicator due largely to the legacy of slavery, the manifestation of structural racism, and the institutionalized exclusion of people of color from social and economic progress. Black people often face gross, structural barriers in attaining economic prosperity and wealth by way of an ascendant American social structure that has historically worked against them. American society routinely benefits white Americans while also generating adverse outcomes for people of color in the aggregate.

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In this widely read article on President Trump and the Justice Department, the New York Times characterized the Deputy US Attorney for the Southern District of New York (SDNY), Robert Khuzami, in an entirely inaccurate manner. Not only was the characterization factually wrong, meriting a correction on its own, but it also gives readers unwarranted confidence in Khuzami's independence. Indeed, Khuzami’s actual professional history merits serious scrutiny from the Times. 

The February 19, 2019 article stated that, "The inquiry is run by Robert Khuzami, a career prosecutor who took over after Mr. Berman, whom Mr. Trump appointed, recused himself because of a routine conflict of interest." (emphasis added)

The phrase “career prosecutor” conveys to a reader that Khuzami was a nonpolitical appointment who had spent the vast majority of his career in nonpolitical public service jobs prosecuting alleged criminals. Neither meaning is close to accurate, and the distance from truth actually elides the reason why Khuzami’s central role ought to stoke fear rather than generate calm.

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The Honorable Laura Wertheimer
Inspector General
Federal Housing Finance Agency
400 7th Street, SW
Washington, DC 20219

The Honorable Eric M. Thorson
Inspector General
Treasury Department
1500 Pennsylvania Avenue, N.W.
Washington, DC 20220

Dear Inspector General Wertheimer and Inspector General Thorson:

We write to request an investigation into whether officials at the Federal Housing Finance Agency (FHFA) or Office of the Comptroller of the Currency leaked information about the agency’s plans regarding reform to the Government Sponsored Entities (GSEs) with intent to manipulate markets for the benefit of investors in preferred and common shares. Sharing this confidential, market-moving information with the intent of benefiting Fannie Mae and Freddie Mac’s shareholders would represent a breach of securities law.[1]

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By February 18th, someone making $1,000,000 in 2019 will have stopped paying into Social Security for the year. Social Security, which provides retirement, disability, and survivor benefits to countless Americans every year, only taxes the first $132,900 of a salary (up from $128,400 in 2018). If you make more than this cap, that income is not subject to the tax.

Most people in the United States make less than $132,900 per year, so they will pay the 6.2 percent payroll tax every time they get a paycheck in 2019. Those who make over $132,900 get a break on any income above that amount.

If a person made $50,000 in 2019, for example, they’d pay taxes until December 31st — and have an effective tax rate of 6.2 percent. But someone making $1,000,000 in 2019 would stop paying Social Security taxes on February 18th and see a bump in their pay afterwards. This person’s effective tax rate would be just 0.8 percent. The burden of Social Security taxes falls more heavily on those who make less.

Social Security’s finances also depend on the tax cap. Social Security is projected to have a shortfall in the medium term and many argue that the program, despite its importance, needs to be cut today. Part of this shortfall is because more money has been shifted above the $132,900 cap over the last few decades: in 1983, 10 percent of wage income was over the cap; in 2016, over 17 percent was. This change represents a large share of the shortfall.

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February 12 marks the introduction of the Family and Medical Insurance Leave Act (FAMILY Act) into both houses of Congress. The FAMILY Act would create a national paid leave program that would cover working people across the country. It would allow moms and dads paid time off to care for or bond with a new child, partners and spouses time to care for a sick loved one and military caregiving. The Act is respectful of the diversity of modern families and recognizes that the need for family leave can extend beyond the traditional parent-child relationship, for instance, ensuring that a grandparent can take time to care for an ailing grandchild. The Act would provide much needed support to the 83 percent of workers without family leave through their employers and the less than 40 percent that have medical leave through an employer-provided disability insurance program.

Paid leave is widely popular with the public with voters across the country recognizing the need for a national paid family leave program. States and cities helped build momentum for paid leave at the national level through their own successful paid leave programs. Like the FAMILY Act, many of these programs require a small contribution from both the employee and the employer. Opponents to paid leave often claim that these policies are job-killers and impose an undue burden on businesses. Evidence shows, however, that these state and city programs have been very successful without hurting employers.

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As the percentage of workers who can count on a traditional defined-benefit pension is falling rapidly, we have been lowering the Social Security benefits relative to their earnings. This reduction in benefits has not been widely noted because it takes the form of an increase in the age at which workers can receive their full benefits. This had been age 65 for workers who reached age 62 before 2003.

The age for full benefits then rose gradually to age 66 for workers who reached age 62 after 2008. It remained at this age until 2017, at which point it again began to increase, reaching 67 for workers who turn 62 after 2022. This increase in the age for full benefits amounts to roughly a 12 percent reduction in the value of a worker’s Social Security.

There was a further reduction in the 1990s that received little attention because of its technical nature. Benefits are indexed after retirement to the rate of inflation as measured by the Consumer Price Index (CPI).

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This post was last updated on August 9, 2019

Last fall, Democrats ran and won on an anti-corruption platform. The Revolving Door Project (RDP) is committed to ensuring that members of the new majority fulfill their promises to bring accountability to Trump, his powerful allies, and corporate bad actors. Oversight is an incredibly powerful tool that can shine a light on overlooked issues, unearth answers about clandestine misbehavior, and generate consensus around reforms.

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This version reflects edits made on February 28, 2019 to clarify the sequence of leaks, include price movement information for the GSEs’ preferred shares, and include a more comprehensive graphic. For additional context, please also read this letter that we, in conjunction with Public Citizen, submitted to the Inspectors General of the Federal Housing Finance Agency and the Treasury Department requesting that they investigate potential instances of insider trading.

Immediately following President Trump’s election, Fannie Mae and Freddie Mac’s future generated renewed and robust interest. The Government Sponsored Entities’ (GSE) shares rallied on expectations that the Trump administration would take both entities out of conservatorship in a manner that rewarded all shareholders, including hedge-fund speculators. In the intervening two years, however, those expectations faded and shares in the GSEs underwent a slow decline.

That changed December 20th, 2018 when President Trump announced that he would appoint Comptroller of the Currency, Joseph Otting, to serve as Acting Director of the Federal Housing Finance Agency (FHFA). Since that announcement, shares in Fannie Mae common stock had risen 165 percent (as of the market’s close on January 28), with a similar increase in the value of shares in Freddie Mac. Meanwhile the value of Fannie Mae’s preferred stock had increased by 29.5 percent while Freddie’s preferred shares rose by 33.5 percent. Less than two weeks after taking office on January 7, 2019, Otting had already made clear that investors’ confidence has not been misplaced; in a January 17 meeting, Otting told FHFA employees that the administration would release a plan in the coming weeks to take the GSEs out of conservatorship according to two separate leaks to MarketWatch and Politico on January 19 and January 24, respectively.   

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

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House Ways and Means Committee Chairman Richard Neal (D-MA) has been criticized by many, including us, for his failure to pursue Trump’s tax returns in a timely manner. In an article in the Berkshire Eagle with the friendly title, “Neal lays groundwork on push for Trump tax returns,” Neal gave his constituents his side of the story.

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On January 16th, Rep. Maxine Waters (D–CA), the new chair of the House Financial Services Committee, laid out an extensive agenda in a speech at the Center for American Progress. Greeted by a crowded room of supporters, press, and curious activists, Waters was received warmly as she took her place behind the podium. Before delving into her agenda, Waters offered consolation to the several hundred thousand federal workers currently working without pay or placed on unpaid leave due to the longest government shutdown in US history. Her comforting words fell short of veiling her skepticism toward Trump and his administration, which seemed to echo the emotions and fuel the eagerness for accountability of everyone under her voice.

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In an opinion piece in the Washington Post, Andrew Yarrow writes that progressives “seem to assiduously avoid” men’s problems. As examples of men’s problems that progressives avoid, Yarrow points to trends in men’s labor force participation, real median income, poverty, and health.

What Yarrow does not mention is that multi-issue think tanks on the left, such as CEPR, the Economic Policy Institute (EPI), and the Roosevelt Institute, have plenty to say about these problems and have proposed dozens of policies that would help address them. For example, EPI’s detailed policy agenda includes a long list to build worker power, create good jobs, restore full employment, expand access to health care and quality education, and manage globalization for the benefit of workers. There is little question that such an agenda would increase men’s employment, earnings and education, improve their health, and reduce their isolation. Of course, it also would do these same things for women, but that’s obviously a feature, not a bug.

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This version reflects updates and additions made on March 20, 2019.

Shortly after taking office, Richard Neal, the chair of the House Committee on Ways and Means and the one Democrat with the power to obtain Trump’s tax returns, announced his intention to slow-walk the process of requesting the President’s returns. As we wrote at the American Prospect in January, Neal should have requested Trump’s tax returns right away and after that easy part of the committee’s job was over, proceeded to more complex oversight. (alas, Neal has not yet taken our advice)

This oversight should be undertaken with the goal of not only educating the public about problems but also starting a conversation within civil society and among potential future presidents about ways new laws and better executive branch appointees can begin to fix what ails us as a society.

Given Neal’s difficulty taking the initiative, we have decided to provide his Committee with a proposed draft agenda. We hope that Neal takes note, reverses course and charges ahead on oversight.

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You have likely not heard of Joseph Otting, as he has generated comparatively little attention amidst the circus that is President Trump’s executive branch. However, he is a deeply problematic official who has quietly amassed power in critical agencies that receive far too little attention given their impact on the economy and housing.

Amazingly, Otting seems to be using these agencies to act upon resentments he developed as a “controversial,” at best, banking executive, making him a perfect representative of why we are concerned by the revolving door problem in our federal government.

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The Blue Wave brings a different perspective to this Congress. It’s an opportunity to generate compelling policy proposals while holding the Administration accountable.

While this is not a comprehensive agenda, CEPR is pleased to share its domestic policy priorities with the change makers of the 116th Congress. These policies reflect the groundbreaking, rigorous research that CEPR uses to benefit workers and their families and to improve economic equity, corporate governance, government oversight, economic performance.

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Update, February 8, 2019:

On February 7, the bankruptcy judge overseeing the Sears Holdings case accepted Eddie Lampert’s $5.2 billion bid and allowed him and his ESL hedge fund to buy back the department store chain they had driven into bankruptcy. Nearly 200,000 jobs have been lost at Sears and Kmart since Lampert and ESL acquired the chains in a leveraged buyout in 2005.

Lampert and ESL have shown little interest and less aptitude for turning around the fortunes of what had once been the largest retail chain in the US. Their actions in selling off Sears’ prime real estate (to a real estate company that is also under their control) for the benefit of ESL’s investors suggests that their goal is making money for the fund, not turning the remaining 425 Sears stores into a profitable enterprise. Lampert and his hedge fund investors profited as Sears closed stores, laid off workers, and spiraled into bankruptcy. Can they be trusted to focus on turning Sears into a successful retailer, capable of meeting customers’ expectations and providing secure employment for the chain’s remaining employees? Or, will they continue their pattern of slowly liquidating Sears’ stores and pocketing as much as they can from stripping its remaining assets?

The Sears saga is far from over. Stay tuned for what is sure to be the next episode in the Sears version of the Perils of Pauline.

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

The Brookings Institution

How to Adjust to Automation

Automation is likely to exacerbate existing deficiencies in the government approach to worker development and training. Current policies tend to target young people at the beginning of their working lives, leaving many older workers unable to upgrade their skills in the face of shifting labor market demands. The author calls for substantial reorientation in approaches to (and subsidization of) training throughout workers’ lives and points to the disruptive potential of automation and the likelihood of future recession as reasons for urgency.

Who Makes the Rules in the New Gilded Age?

The author makes a robust comparison between the digital information age of today and the Gilded Age that took place a few decades after the Civil War. Both then and now, the rules governing new technology were made by an elite few for their own benefit, resulting in societal instability and inequality. The comparison yields several takeaways for the reassertion of the public interest and the preservation of democracy.

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On January 3, Democrats in the House of Representatives will vote to install Nancy Pelosi as Speaker of the House. The intelligence and street smarts on display as Representative Pelosi went toe-to-toe with President Trump over the border wall reinforces the importance of this choice. No less consequential will be the votes that day on the rules that govern how the House conducts business. Two rules in particular that govern taxation and spending will determine how vigorously Democrats are able to pursue the bold agenda that gave them a 40-seat majority in the House.

On taxation, the Democratic leadership has already made clear that it will scrap a Republican rule that would make it difficult to raise taxes – a rule the Republicans were quick to waive when Trump’s tax cuts for the wealthy raised taxes on some middle-class families. The Democrats had considered leaving this rule in place for the bottom 80 percent of families. To see how this rule would have needlessly tied their hands, consider the following real-life example.

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It is accepted that the Organization of the Petroleum Exporting Countries (OPEC) is a cartel that restrains oil production and keeps prices higher than they would otherwise be. Indeed, this is the premise behind the “OPEC Accountability Act of 2018” in the US Senate. This bill would address high and rising oil prices by trying to break OPEC. US pressure on OPEC — particularly on friendly governments such as Saudi Arabia that are seen as leaders in the organization — to “open the spigots” is not new. Nor is the control of oil exports by producing countries for political purposes. However, the environmental impact of high oil prices is only lightly considered.

There is little debate that motor vehicle industry changes to increase fuel efficiency were a historic and significant environmental advance. When OPEC action has led to increased prices, the quantity of oil in demand has fallen. This was starkly demonstrated when the Organization of Arab Petroleum Exporting Countries (OAPEC) — founded in 1968 — flexed its price-making muscles in the 1970s. Production cuts and an embargo against sale of oil to several countries raised the spot price of West Texas Intermediate (WTI) crude from $3.56 per barrel in mid-1973 to $4.31 later in the year to $10.11 in January. By the time President Jimmy Carter famously suggested we all turn down our thermostats, the price of WTI crude had reached $14.85 per barrel. The price finally peaked in mid-1980 at $39.50 — a 1000 percent increase in seven years. The price of gasoline more than tripled. In response, we got the Department of Energy, the Chevy Citation, and more fuel-efficient Japanese and German automobile imports.

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CEPR regularly publishes a curated collection of original research from academic institutions and nonprofits on the state of the US labor market. The compilation is part of our ongoing effort to promote informed debate on the most important economic and social issues that affect people's lives.

The Brookings Institution

Learning from Opportunity Zones: How To Improve Place-Based Policies

Congress’ 2017 tax bill sought to funnel investment to economically distressed neighborhoods by creating Opportunity Zones. However, broad criteria for inclusion gave state decision makers considerable latitude in their selection processes. Some of the designated areas appear to be truly disadvantaged, but many are not. While the program’s design already constrains its benefits for impoverished residents, lackluster geographic targeting further limits its potential.

Work Requirements and Safety Net Programs

This analysis adds to the growing body of evidence that suggests that the subset of SNAP and Medicaid participants targeted for work requirements is vanishing. Meanwhile, the proposed work requirements would disproportionately burden those who are already working or who are legitimately unable to work.

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