January 30, 2014 (GDP Byte)

The Office of the U.S. Director of National Intelligence (DNI) released its “Worldwide Threat Assessment of the US Intelligence Community” [PDF] for the Senate Select Committee on Intelligence today. The assessment takes what is probably a much more realistic and beneficial stance (for both the people of the U.S. and of Latin America) on Latin America than previously. In contrast to last year’s assessment, which fretted over perceived political instability in Venezuela, the only South American threat noted this year – and mentioned only in passing – is “cocaine from source countries in South America.” (This is in the context of “[d]omestic criminal gangs and transnational organized crime groups” operating in Central America.)

On Honduras, the assessment states:

Central America’s northern tier countries—El Salvador, Guatemala, and Honduras—will likely struggle to overcome the economic and security problems that plague the region.  All three countries are facing debt crises and falling government revenues because of slow economic growth, widespread tax evasion, and large informal economies.  Entrenched political, economic, and public-sector interests resist reforms.   Domestic criminal gangs and transnational organized crime groups, as well as Central America’s status as a major transit area for cocaine from source countries in South America, are fueling record levels of violence in the region.  Regional governments have worked to improve citizen security but with little-to-moderate success.  

…

The homicide rate in Honduras remains the highest in the world.  New Honduran President Juan Orlando Hernandez will likely prioritize security policy and seek to build a coalition within the divided legislature to push his economic reform agenda.  However, weak governance, widespread corruption, and debt problems will limit prospects for a turnaround.

In this case the assessment seems to be overstating the extent of Honduras’ “debt crisis.” As we noted ahead of the November elections last year, “the country's debt burden is still relatively low, with interest payments on the debt totaling less than 1.7 percent, and much of the debt is internal and denominated in domestic currency.” This means that the new government “will have ample room to pursue expansionary fiscal policies, increase employment, and invest in infrastructure, education and development” if it chooses to do so. But economics does not seem to be the DNI’s strong suit. Last year’s assessment described an “increasingly deteriorating business environment and growing macroeconomic imbalances” in Venezuela and warned that “[d]ebt obligations will consume a growing share of Venezuela’s oil revenues, even if oil prices remain high.” But as CEPR Co-Director Mark Weisbrot pointed out in a November column for The Guardian:

The Office of the U.S. Director of National Intelligence (DNI) released its “Worldwide Threat Assessment of the US Intelligence Community” [PDF] for the Senate Select Committee on Intelligence today. The assessment’s section on Haiti is longer this year,

Mark WeisbrotTruthout, January 29, 2014

In a 2012 paper published in the peer-reviewed Industrial and Labor Relations Review (ILRReview), economists Joseph Sabia, Richard Burkhauser, and Benjamin Hansen concluded that the 39 percent increase in the New York state minimum wage in 2005-2007 (fro

Tonight the bars of DC will fill up with folks watching the President's annual State of the Union address.  There are even a bunch of SOTU drinking games to play -- including CEPR's #SOTUBingo! 

On a serious note, predictions abound about what the President will talk about. Two economic policy issues that may be front and center are inequality and the minimum wage.

January 28, 2014

Washington Post columnist Charles Lane took great leaps in philosophical thinking today, coming down firmly against freedom of contract when it comes to public sector unions. In the course of the discussion Lane develops several new principles for guiding public sector policy.

The starting point is whether public sector workers can sign contracts that require all the workers who are represented by a union to pay for that representation. The courts have long upheld that workers could negotiate such contracts. The remedy for workers who feel so strongly opposed to unions that they don't want anything to do with them is to work for a different employer.

It is difficult to see why other workers should be forced to pay for a worker's representation. Under the law, non-union workers not only get the same pay and benefits as everyone else covered by the union contract, they also are entitled to representation by the union in a grievance or disciplinary action. This is the rationale for requiring them to pay for representation even though they do not have to pay for union activities, such as supporting political candidates.

But Lane is going beyond just this issue that the Supreme Court is now considering. He apparently wants to outlaw public sector unions. He writes:

"Is public-sector collective bargaining in the public interest?

"The answer is no. All members of the public use schools, roads, parks and other government services — and pay taxes to support them. Their interest lies in receiving the highest-quality services at the lowest feasible cost. Period."

I kind of like this one. The public's interest is in the highest-quality services at the lowest feasible cost. Period."

Let's see, the government pays for lots of things like computers, paper, desks and chairs for school kids. Why should we pay for them? Why not just take them from the companies that produce them? After all, "the public's interest is in the highest-quality services at the lowest feasible cost. Period." 

Do you think that might be wrong, that it might be stealing? What part of Lane's declaration don't you understand?

Maybe we could get people to work for lower pay if we threatened them or their families. Remember "the public's interest is in the highest-quality services at the lowest feasible cost. Period."

In Tuesday's State of the Union address President Obama will likely repeat the call made he made in last year's speech to raise the federal minimum wage. Just in case, here's an FAQ on the minimum wage.

Dean Baker
Truthout, January 27, 2014

In recent months, the minimum wage has moved to the center of the economic policy debate. Proposals for minimum-wage increases are being introduced at the local, state, and national levels of government. Nationally, President Obama is working alongside Congressional Democrats on a push to raise the federal minimum wage from its current level of $7.25 to $10.10 by 2016.

At the state level, 20 states and the District of Columbia have minimum wages above the federal level, and on January 1, 2014, 13 states raised their minimum wage, with California set to follow suit with an increase to $9 in July. Of these 14 state increases, 9 are automatic adjustments based on indexing the value of the minimum wage to the cost of living, while 4 (NJ, CT, NY, RI) are the product of either ballot-measures or legislative action.

Dean Baker
American Prospect, January 27, 2014