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Article Artículo

Thomas Friedman Shows Yet Again the Economy Still Has Good Paying Jobs for People Without Skills

The people who run the economy have really screwed it up over the last four decades from the standpoint of ordinary workers. This is a bipartisan issue, so it's not a blame Reagan, Bush I, Bush II, and Trump story. Clinton and Obama were also willing to support a bloated financial sector and trade policies that redistributed upward by subjecting ordinary workers to low-wage competition while protecting doctors, dentists, and other highly paid professionals. This policy was made worse by the high dollar policy pushed by President Clinton which led to the massive expansion of the trade deficit in the years from 1997 to 2005.

They also supported longer and stronger patent and copyright monopolies, policies that allow for hundreds of billions to be sucked away from the rest of us to pay the small group in a position to benefit from these rents. And both Democratic presidents (especially Clinton) were just fine with monetary policy that keeps millions of people (disproportionately African American and Hispanic) from having jobs and depresses the pay of tens of millions of workers who have jobs.

Anyhow, the key to ensuring that the bulk of the population benefits from future growth depends on reversing these policies. (Yes, this is the topic of my [free] book Rigged.) Naturally many of us would like public policy debates to focus on reversing the structural barriers that prevent most people in sharing the gains from growth.

However the beneficiaries of these gains don't really want public discussions of the policies that gave them all the money, hence we get a NYT column from Thomas Friedman with the title, "Owning your own future."

CEPR / May 11, 2017

Article Artículo

Financial Transaction Tax

Workers

Financial Transactions Taxes: Job Killing Robots for the Wall Street Hedge Fund Crew

Last week, Representative Peter DeFazio reintroduced his financial transactions tax (FTT) proposal. The bill would impose a tax 0.03 percent on trades of stock, bonds, options, and other derivative instruments. (That's 3 cents on $100 of trades.) This can be thought of as the equivalent of a sales tax imposed on financial transactions, which are now largely untaxed.

According to the Joint Tax Committee, this tax would raise roughly $400 billion over a 10-year budget horizon. This translates into 0.2 percent of GDP. That would cover about 60 percent of the annual food stamp budget.

The tax would also dampen speculative trading on Wall Street. Many trades that involve flipping assets in a matter of minutes or even seconds would become unprofitable with even this small tax. This could make financial markets more stable.

But the really neat aspect of this tax is that it all comes out of the hide of Wall Street, rather than ordinary investors. Considerable research shows that trading volume declines roughly in proportion to the increase in trading costs.

This means that if the DeFazio proposal would raise trading costs by one-third, then trading volume would fall by roughly one-third. Investors will pay one third more on each trade, but they will carry out one-third fewer trades. This means their total cost of trading with the tax will be no larger than it was without the tax. (The Tax Policy Center of the Urban Institute and the Brooking Institution actually assumed that trading volume fall by 25 percent more than the percentage increase in trading costs, meaning that total trading costs would fall as a result of the tax.)

CEPR / May 08, 2017

Article Artículo

Affordable Care Act

Do We Need Jobs In Health Care to Keep People From Being Unemployed?

The NYT had a piece discussing some of the potential economic ramifications of the repeal of the Affordable Care Act (ACA). The article points out that the health care sector has been a major source of job growth in recent decades. If we cut back spending on health care, then presumable employment growth in the sector would slow.

There are few points to be made here. First, job growth in health care is only desirable insofar as it is improving people's health. More people who directly provide care, doctors, nurses, physical therapists, fit this bill. People working in providers' office dealing with insurance forms do not. So if the repeal were to lead to more of the former and less of the latter (unlikely) that would be a positive development.

But beyond providing health care, the sector has been an important source of jobs, as the piece notes. Suppose that the job growth in the sector slows due to less money going to pay for people's health care. The question is then what happens to the money saved?

Most immediately, the money saved will go the country's richest people in the form of tax cuts. The question is then whether they will save or spend it? One of the economy's major economic problems, at least since the collapse of the housing bubble, has been not enough spending. If we give Bill Gates and Jeff Bezos another hundred million a year or so, do we think they will increase their consumption? My guess is no, which means we are reducing demand in the economy.

CEPR / May 08, 2017