The Federal Reserve Board, along with most economists, has been closely tracking the rate of increase in the average hourly wage reported by the Bureau of Labor Statistics in its monthly employment report. This series has shown a modest uptick in growth over the last two years. While the current pace (2.5 percent over the last year) is only slightly above the Fed’s 2.0 percent inflation target, it actually overstates the extent to which workers are benefiting from the recovery.

While wage growth has accelerated modestly from its pace earlier in the recovery, the rate of growth in benefits, most importantly healthcare, has slowed. As a result, there has been almost no change in the rate of growth in total compensation.

It would be nice if the Washington Post tried to hire more reporters and fewer mind readers. In a piece explaining that presumptive Republican presidential nominee Donald Trump opposes the privatization of Medicare and Social Security championed by House Speaker Paul Ryan, the Post told readers:

"First, Medicare: Many Republicans think the expensive federal system that guarantees unlimited health-care coverage to those 65 and older threatens to bankrupt the nation without spending cuts or significantly higher taxes" (emphasis added).

Reporters don't know what Republican politicians think, they just know what they say. It would be best if the Post tried to restrict itself to reporting on the latter. As far as the substance, the Post is once again trying to push a story with no basis in reality that implies future generations will be worse off than today's workers and retirees due to the cost of Social Security and Medicare. To advance this view it uncritically presents the account of Representative David Schweikert, a proponent of privatizing Medicare.

"'I don’t care about my grandkids,' Rep. David Schweikert (R-Ariz.) recalled one voter saying at a town-hall meeting, after Schweikert had explained that entitlements needed to be cut so debt would not overwhelm future generations. 'I want every dime,' the man said."

In fact, all the economic projections from official sources, like the Congressional Budget Office (CBO) and the Social Security Trustees, show that on average this person's grandkids will be hugely richer than the voter to whom Rep. Schweikert referred. The main threat to their living standards is the continuation of the policies that have been redistributing income upwards over the last thirty five years, such as high unemployment, trade policies that protect doctors, lawyers, and other highly paid professionals while deliberately exposing less educated workers to competition, and stronger and longer patent and copyright protections. Most Republicans strongly support these policies, which should make a reporter question whether the well-being of our grandchildren could be the real reason they support privatizing Medicare.

In a recent article aptly titled, “The Global Growth Funk,” Nouriel Roubini does what he does best: makes the case that the global economy is going to hell in a handbasket, and there is little that can be done about it. This is how he earned the nickname

May 2016, Eileen Appelbaum and Rosemary Batt

Mark WeisbrotThe Nation, May 10, 2016

This is the fourth in a series of profiles of the members of the Federal Reserve Board’s Open Market Committee [FOMC]. The profiles will focus on their writings, public statements, and voting records as members of the FOMC.

Since assuming office in April 2008, St. Louis Federal Reserve Bank President James Bullard has generally been considered of the more hawkish members of the FOMC. However, his speeches, interviews, and lone dissenting FOMC vote since 2013 show that he is quite moderate. If there is a central theme to Bullard’s views on monetary policy, it’s that he favors inflation targeting. But unlike many who view the Fed’s 2 percent target as a ceiling – that is, inflation is not supposed to surpass 2 percent – Bullard clearly views it as a legitimate target, such that 1 percent inflation is just as problematic as 3 percent inflation. This means that when Bullard anticipated less-than-two-percent inflation, he generally favored monetary stimulus; when he anticipated over-two-percent inflation, he favored tightening.

In 2010, Bullard warned that the U.S. might be on the verge of a Japan-like deflationary spiral, and came out in favor of quantitative easing as a remedy.^[1,2] His support for quantitative easing was full-throated – Bullard stated that quantitative easing (QE) “offers the best tool to avoid such an outcome” (pg. 339).^[1] The New York Times noted that only three out of ten FOMC members at the time had expressed such strong worries about deflation:

“Of 10 current members on the committee, two are openly concerned about inflationary risks; three, now including Mr. Bullard, are somewhat worried about deflation; and five centrists, including Mr. Bernanke, have not expressed a firm leaning either way.

“Mr. Bullard, in a conference call with reporters on Thursday, said that if any new ‘negative shocks’ roiled the economy, the Fed should alter its position that interest rates would remain exceptionally low for ‘an extended period,’ or resume buying long-term Treasury securities to stimulate the economy.”^[2]

Dean Baker
Truthout, May 9, 2016

I see Greg Mankiw used his NYT column to tell folks that politicians are spinning tales when they say the economy is rigged. I would say that economists spin tales when they tell you it is not. (Mankiw and I just ran through this argument on a panel in Boston last week.) Let's quickly run through the main points.

First, the overall level of employment is a political decision. We would have many more people employed today if the deficit hawks had not seized control of fiscal policy back in 2011 and turned the dial toward austerity. The beneficiaries of higher employment are disproportionately those at the middle and bottom of the income distribution: people with less education and African Americans and Hispanics. So the politicians pushing austerity decided that millions of people at the middle and bottom would not have jobs.

Furthermore, in a weaker labor market, it is harder for those at the middle and bottom to get pay increases. So the shift to austerity also meant that tens of millions of workers would have to work for lower pay. Read all about it in my book with Jared Bernstein (free, and worth it).  

The second way in which it is rigged is our trade policy. First there is the size of the trade deficit. This is the result of policy choices. Instead of forcing our trading partners to respect Bill Gates copyrights and Pfizer's patents, we could have insisted they raise the value of their currency to move towards more balanced trade. But Bill Gates and Pfizer have more power in setting trade policy than ordinary workers.

May 6, 2016