(This post originally appeared on my Patreon page.)

Bill Niskanen was the rarest of all creatures, an honest libertarian. He actually believed in libertarian ideas, rather than just using them as an excuse for policies to redistribute income upward.

He headed the Cato Institute for more than two decades, from 1985 until 2008. While CATO generally took conservative views, it also followed Niskanen’s principled libertarianism. This meant the institute was anti-imperialist. Niskanen argued that we needed a defense budget to protect the United States, not to police the world. Cato regularly called for sharper declines in military spending than almost all the liberal think tanks in DC.

He also was a strong opponent of the Iraq War. I remember in the months leading up to the war, bumping into him at various events. Bill would point to the various Republican foreign policy experts (not those in the Bush administration) who had publicly warned of the dangers of the war.

He would ask me “where are the Democrats?” While I could point to then fringe figures, like Bernie Sanders, the fact was that most of the Democratic leadership had fallen in line in support of the war. (Nancy Pelosi was a notable exception.) Bill’s opposition to the war angered many prominent Republicans, including Cato donors.

Anyhow, when I was on a panel with him, it was usually to discuss economic issues. I always appreciated his honesty. I remember, back in the 1990s, debating replacing the progressive income tax with a flat tax, which was a popular idea among Republicans at the time. Most of the flat tax proponents would come up with absurd stories about everyone would pay less, and we would end up with just as much revenue.

Once with Bill, I got to go first, and said something to the effect of “a flat tax is about having the middle class pay more so that the rich can pay less.” Bill responded by saying that this is essentially right, but went on to explain how this would be a good thing, because it would lead to a more efficient tax system, and therefore more growth, and make everyone better off. Bill believed this, so he didn’t have to lie.

February 28, 2019

Social networks and the development of platform technologies have drastically transformed the way people live, work, and spend their money. The use of information and communication technologies has become an important aspect of jobs in occupations ranging from medical assistants to fast food operators, lawyers, steel workers, and others employed in traditional employment relations. The growth and popularity of online and app-based platforms like Uber, GrubHub, and TaskRabbit have raised the profile of the gig economy* and created the impression that employer-less work and gig jobs are a pervasive aspect of modern employment. A lack of consistent, rigorous data on twenty-first-century employment relations allowed speculation about the role of independent contractors, and especially gig workers, to dominate conversations about the future of work.

February 28, 2019 (GDP Byte)

The humanitarian crisis will get rapidly worse if the most recent sanctions continue.

February 27, 2019, Dean Baker

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.

February 2019, Eileen Appelbaum, Arne Kalleberg, and Hye Jin Rho

February 25, 2019, Eileen Appelbaum

Dean Baker
Truthout, February 25, 2019

Justin Talbot-Zorn, Ben Beachy and Rhiana Gunn-Wright
The Guardian, February 25, 2019

(This post first appeared on my Patreon page.)

It’s not uncommon to read new stories that quite explicitly identify economic mismanagement. For example, news reports on the hyperinflation in Zimbabwe routinely (and correctly) attribute the cause to the poor economic management by its leaders. We will see similar attributions of mismanagement to a wide range of developing countries.

One place we will never see the term mismanagement, or any equivalent term, applied is in reference to the austerity imposed on the eurozone countries by the European Commission, acting largely at the direction of the German government. In fact, major news outlets, like The New York Times, seem to go out of their way to deny the incredible harm done to eurozone economies and to the lives of tens of millions of people in these countries, as a result of needless austerity.

A decade ago it would at least have been an arguable point as to whether austerity, meaning budget cuts, in the wake of the Great Recession, was reasonable policy. There was some research suggesting that the boost to confidence from lower budget deficits could spur enough investment and consumption to offset the impact on demand of reductions in government spending.

However, since then we have far more evidence on the impact of deficit reduction in the context of an economy coming out of recession. There have been numerous studies, most importantly several from the International Monetary Fund’s research department, which show that lower deficits in this context slow growth and raise unemployment.

Furthermore, they show that periods of high unemployment have a lasting impact as a result of workers losing skills and companies and governments foregoing investment in a downturn that they would have undertaken if the economy were closer to its potential level of output. This means that insistence on deficit reduction not only led to one-time drops in output and employment but could reduce potential output by trillions of dollars over subsequent years.

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.

The Washington Post had a rather confused piece that complained that investment encouraged by accelerated depreciation, which was a provision of the Trump tax cut (also the Obama stimulus), is "helping companies replace workers with machines." This is reported as though it is some sort of scandal, when it is in fact precisely the point of this provision.

The stated goal of the Trump tax cut was to promote investment. This was their rationale for having the bulk of the tax cut go to businesses. Their argument was that a lower tax rate would provide businesses with more incentive to invest. More investment would lead to more rapid productivity growth. If workers got their share of gains in productivity, then they would benefit from having higher wages.

The key question in this story is whether the tax cut actually led to more investment. The evidence to date is that it has had at most a minimal effect on investment, with investment running slightly higher in 2018 than before the tax cut in 2017. There certainly has been no boom. There also is zero evidence that it led to any uptick in productivity growth, as productivity growth remained very slow through the year. So, by their own standard, the tax cut seems to be failing badly.

However, if we did see more investment and productivity growth, it would mean displacing workers. Higher productivity means more output can be produced with the same number of work hours, or alternatively, the same output can be produced with fewer work hours. (Fewer work hours doesn't have to mean fewer workers. In other countries, much of the gain from higher productivity has been realized in the form of shorter work years. Workers have 5–6 weeks a year of vacation, paid family leave, paid sick days, and other forms of paid time off.)

Dean Baker
Stanford Social Innovation Review, Spring 2019