Mark WeisbrotThe Guardian Unlimited, 29 de junho, 2013Em inglês

It would be wrong to place too much emphasis on short-term movements in stock prices. As a practical matter they can be moved by almost anything, in either direction. Nonetheless, some folks were anxious to note a plunge in stock prices while President Obama was giving his speech on global warming as evidence that the President really meant business. For example, Andrew Revkin told readers:

"But if you doubt the reality of this shift [away from coal], just look at the news coverage from Monday of the drop in the price of shares in coal companies ahead of the speech. This headline in Street Insider says it all: 'Coal Stocks Routed as Pres. Obama Preps to Tackle Carbon Emissions.'"

Being a curious sort, I checked the price of the coal stocks listed and noticed that most had largely recovered by the end of the day, although they were down for the week. Here's what the picture looks like for the 5 coal companies mentioned in the referenced article.

Source: StreetInsider.com.

Mark WeisbrotAl Jazeera English, June 28, 2013

The median wage in 2012 (about $16.28/hr) was only 5.7 percent higher (in real, inflation adjusted dollars) than it had been in 1973. Part of this is explained by a 3.5 percent drop in the downturn, but the bigger story was the three prior decades of paltry wage growth.

The culprits in this story are legion and include--over the long haul--a collapse in private sector union density, a meager (in value and scope) minimum wage, workers-be-damned trade policy, and job growth crowded into low-wage service occupations.  But a big part of the story is simply slack in the labor market.  Over the past generation, the only respite from unrelenting downward pressure on wages came during a brief spell of full employment in the late 1990s.  Those years saw wage gains across the board, closely resembling the shared prosperity of the 1947-1973 era.  But on either side of that boom, when high rates of unemployment were the norm, wages (especially for those at the median and below) fell steadily.

We can see the importance of full employment at work in the relationship between wage growth and unemployment in the states across the boom of the late 1990s and across the last business cycle.  The graph below plots the change in real wages for two seven year periods: from 1996-2002 and from 2006-2012 (the latter running from the year before the recession to the most recent available annual data) against each state’s unemployment rate at the midpoint of the period (1999 and 2009).

In the late 1990s, state unemployment rates clustered around that national rate of just over 4 percent, and only three states suffered unemployment rates over 6 percent.  Workers at most deciles, accordingly, enjoyed robust wage growth.  Full employment was especially important for workers at the bottom of the wage distribution.  Wage growth—and the relationship between full employment and wage growth—was strongest at the 10th decile and weakest at the 90th.

Who can blame them? The vast majority of people across the political spectrum oppose their plans to cut these programs. Furthermore, improved budget projections (partly because of cuts that are very bad news) have drastically reduced both current deficit projections and projections for longer term deficits. Finally, one of their main props for the urgency of deficit reduction turned out to be nothing more than a Harvard Excel spreadsheet error.

No, things have not gone well for those wishing to ax Social Security and Medicare, but they are not about to give up. And with the money and access to the media they enjoy, why should they?

Hence we have Jon Cowan and Jim Kessler from Third Way giving the Washington Post's house view in a column headlined, "the left needs to get real on Medicare, Social Security and the deficit." The proximate cause for Cowan and Kessler's ire is a column by Neera Tanden and Michael Linden from the Center for American Progress which argued that we should focus on fixing the economy's current problems by improving infrastructure and creating jobs. 

To their great credit, Tanden and Linden reversed their earlier concern with deficit reduction based on the evidence. The deficit has shrunk by more than had been projected and the downturn has been longer and deeper than they had expected. Faced with new facts, Tanden and Linden proposed different policies. This makes deficit dead-enders like Cowan and Kessler very unhappy. 

Let's see what they have to say.

Actually their main trick is pretty simple and right up front. They use the old whack them with a really big number trick. Cowan and Kessler tell us that in 2030 we are projected to have a deficit of $1.6 trillion. Got that, $1.6 TRILLION!!!!!! Yeah, that is lots of money and we're supposed to be really really scared.

Mark WeisbrotThe Guardian Unlimited, June 27, 2013Em Português

Dozens of actors, directors, authors, former whistle-blowers, musicians, journalists, and activists have signed onto a letter addressed to President Correa urging him to grant political asylum to Edward Snowden. As Popwrapped! has noted, the many famous s

June 27, 2013

As we noted yesterday, there has been a chorus from policymakers, media outlets, and others urging a cutting of U.S. trade preferences for Ecuador if the Ecuadorean government grants Edward Snowden political asylum – despite that one of the main goals of the Andean Trade Promotion and Drug Eradication Act (ATPDEA) is to reduce coca cultivation. As the Wall Street Journal reported today, Senate Foreign Relations Committee Chair Robert Menendez issued a stern and patronizing warning to Ecuador:

"Our government will not reward countries for bad behavior," said Mr. Menendez in a news release. If Ecuador grants Mr. Snowden asylum, Mr. Menendez said he would lead the effort to cut Ecuador's duty-free access to the U.S. market. "I urge President [Rafael] Correa to do the right thing by the United States and Ecuador, and deny Snowden's request for asylum."

But now the Ecuadorean government has ruined Congress’ fun by giving up the ATPDEA benefits before Senator Menendez et al had a chance to take them away. The move is not merely symbolic. Before the whole Snowden issue came up the government of Ecuador and its embassy in the U.S. launched a large campaign to emphasize the importance of the ATPDEA, with events around Washington and ads like this one in the D.C. Metro:

 

In my last post I wrote about how dumb it was for our Secretary of State to try and threaten other countries, especially those as big and independent as Russia and China, into rendering Edward Snowden. Apparently some of the geniuses in the White House an

June 2013, Janelle Jones and John Schmitt

Thomas Edsall has a lengthy blogpost on a new measure of income developed by Cornell University Professor and AEI fellow Richard Burkhauser. Burkhauser's measure reverses the widely reported finding that inequality has increased substantially over the last three decades.

While Edsall went to great lengths to include extensive comments from other economists (including me) on Burkhauser's methodology and concluded himself that Burkhauser's methodology doesn't measure up, readers may still be led to believe that there is more ambiguity on this issue than is actually the case. This is because Burkhauser's measure is so peculiar and counter-intuitive, that it is unlikely that many readers would understand what he has in fact done.

Burkhauser does address a legitimate question -- the treatment of capital gains. Usually economists calculate inequality by both taking income without counting realized capital gains (sales of stock, houses, or businesses) and also including the gains. The latter will generally show higher degrees of inequality since wealthy people are likely to have realized capital gains, whereas middle and lower income people are not.

This approach does pose a problem since the decision to sell an asset is an arbitrary one and does not necessarily reflect when the gain actually took place. Also, a lower capital gains tax rate will encourage people to sell their assets more frequently, which by itself would lead to larger reported income. So a methodology that includes realized capital gains is problematic.

However Burkhauser's response, to include unrealized gains, makes no sense in a serious measure of income. The reason is that asset prices (especially stock, but in recent years housing as well) are hugely volatile. For people who have substantial assets, the movement in these prices in any given year will often swamp their other income. Gary Burtless and I both made this point in our comments.

An implication of Burkhauser's methodology is that our measure of inequality would depend hugely on the exact year we picked for our analysis. In his study, the base year for most of his analysis is 1989, a year in which the S&P 500 rose by more than 27 percent. This hugely increased the earnings of the top quintile in his base year. As a result, the change from 1989 forward would be guaranteed to be small. By contrast, if Burkhauser had chosen 1987, when the S&P fell more than 6 percent, he would have a much lower base. This would make the growth in income for the top quintile appear much larger.

To see this, imagine the average income, not counting capital gains, for the top quintile is $200,000 in both 1987 and 1989. Suppose they own $1 million in stock on average. In Burkhauser's methodology their income in 1989 is $470,000. Their income in 1987 is $140,000. (Number corrected, thanks Yoram.) We would be telling a very different story about the growth of income inequality over the next two decades if we opted to choose 1987 as our base year rather than the year picked by Burkhauser. (The year 1989 is often chosen as a base year because it is a business cycle peak. That makes sense in a measure that is primarily reflecting earnings growth which tends to peak at the peak of the cycle. It makes no sense when taking a measure that is moved primarily by capital gains.)

There could be an argument for taking unrealized capital gains averaged over a longer period, which is not the methodology that Burkhauser chose. By this methodology we would average the capital gains for households over the period being investigated and add the annual amount to their income. This would be a considerably more defensible methodlogy, but it still would give very misleading results because of the housing bubble.

While many are celebrating the Supreme Court’s decision granting marriage equality to same sex couples, some have been quick to highlight the potential budgetary costs of this decision. In particular, opponents of the court’s ruling are warning the public that it will lead to much higher costs for Social Security.

Before anyone rushes to push through a constitutional amendment, it would be worth trying to get an idea of the potential costs to Social Security resulting from this decision. Essentially the decision says that same sex couples have the right to be married and enjoy the same benefits and protection that Social Security provides to heterosexual couples.

There would be some issues involving children of spouses of disabled workers or workers who have an early death, but the bulk of the impact will be from spouses in same sex couples who will be entitled to a higher retirement benefit as a result of marriage. This takes two forms. First, in retirement a spouse is entitled to half of their married partner’s benefit if this would be larger than the benefit they would receive based on their own work history. Second, after a spouse dies, a retiree is entitled to the higher of either their own benefit or their spouses. By virtue of the fact that same sex couples will now be able to have the same rights in marriage as heterosexual couples, both of these channels will lead to higher benefit payouts.

Of course in the vast majority of cases, the wage-based benefit of the lower earning spouse will be more than half of the benefit of the higher earning spouse. The reason is that the benefit structure is very progressive. Suppose that a higher earning spouse had an average lifetime indexed-earnings of $100,000 in 2013 dollars.[1] Under the current benefit formula this worker would be entitled to $2,500 a month or $30,000 a year, if he or she waited until age 66 to start collecting benefits.

In order for a worker’s wages to qualify them for at least half of this benefit or $1,250 a month, they would need average earnings of just $29,750 a year (@ $15 an hour for a full-year worker), less than one-third of their high earning spouse’s wages. While there continue to be large gaps between male and female earnings, the gaps are likely to be smaller between the earnings of two men or two women in a same sex marriage. Therefore it is likely that in the case of most same sex couples, the lower earning spouse will have a wage-based benefit that is at least half as high as that of the higher earning spouse. In the cases where this is not true, the bump up to half of the spouses benefit is likely to be small.

In 2010, just months after Haiti was struck by a devastating earthquake, the United States passed legislation allocating $651 million to USAID to support relief and reconstruction efforts. Three years later, just 31 percent of these funds have been spent

Dean Baker
The Exchange (Yahoo! Finance), June 26, 2013
En Español