November 13, 2019

November 13, 2019 (Prices Byte)

TO: INTERESTED PARTIES

FROM: Revolving Door Project & Demand Progress Education Fund

RE: Dems Must Confront GOP Attacks on Dem Seats at the Independent Agencies 

Date: 11/13/19

 

Trump & McConnell’s Stealth Nuclear Attack on Independent Agencies

It is no secret that President Donald Trump and Senate Majority Leader Mitch McConnell will abandon the basic norms that govern our democracy whenever it serves their interests. However, one important breach has gone largely undetected. 

Quietly, Trump and McConnell have undermined statutorily-mandated political balance on many independent agency boards by refusing to nominate Democrats, and slow-walking or blocking them in the Senate. 

By effectively undermining statutory guarantees of partisan diversity across many disparate agencies, Trump and McConnell have ruined an important avenue by which the party not in the White House exerts influence over a president’s administration. Having trampled a pillar of bipartisanship, McConnell should be made to feel the consequences now and in the future. 

The Democrats have been fortunate to have career civil servants who have been willing to risk their careers, if not their lives, by calling attention to Trump’s abuses of power. If the Democrats don’t take advantage of these people’s courage, it is a safe

Noviembre 2019, Guillaume Long, David Rosnick, Cavan Kharrazian y Kevin Cashman

CEPR recent work and media appearances involving Bolivia

After adjusting for prices, wages have risen 1.5 percent annually over the last five years. If we can continue this pace of wage growth, the Larson bill would take back much less than 10 percent of the pay increase in taxes.

November 2019, Guillaume Long, David Rosnick, Cavan Kharrazian, and Kevin Cashman

Multilateral organizations like the Organization of American States (OAS) have a certain perceived impartiality because they are, in theory, controlled by a diverse group of nations. But sometimes a great power can wield a disproportionate influence.

Rep. Ayanna Pressley introduced legislation last week to require the CEOs of the country’s largest banks to testify before Congress at least once per year. While this might seem a perfectly run-of-the-mill measure from an outside vantage point, it is a marked departure from this Congress’ aversion to most oversight (especially of corporations). Indeed, most members of Congress have shown no appetite for the type of populist, corporate oversight for which we at the Revolving Door Project have advocated. Pressley, along with a handful of other freshman Democrats (and Rep. Maxine Waters) are notable exceptions. It is long past time that their approach became more mainstream. 

(This post originally appeared on my Patreon page.)

This summer, the Business Roundtable, a group that includes most of the country’s largest corporations, made big news. It issued a statement that its members would no longer be concerned exclusively with maximizing returns to shareholders. Instead, Roundtable members would take into account the well-being of their workers, the communities in which they do business, and the environment.

This statement was given a mixed reception. While some applauded the idea of moving away from a single-minded focus on shareholder value others questioned the sincerity of the commitment. After all, drug companies pushing opioids, oil companies lying about fossil fuels, and hotel and retail chains cheating workers out of their pay, always had the option to do the right thing, but chose not to. Did anyone believe this resolution from the Business Roundtable would change the way they operate? 

However, there is a more basic point that got almost no attention. There is little reason to believe that corporations are being run to maximize returns to shareholders. The reason for questioning this claim is that returns to shareholders have actually been low by historical standards in the last two decades, as shown in the figure below.

 

 

 

Source: Shiller 2019 and author's calculations.

The average real return over the last two decades has been just 2.8 percent annually. This compares to average returns of more than 7.0 percent, and sometimes in the double-digits, in the 1950s and 1960s, when corporations were supposedly less single-mindedly pursuing shareholder value. And, this weak return required considerable help from the government in the form of sharply lower corporate tax rates.

The data are very clear. If corporations are being operated to maximize returns to shareholders, they are failing badly in their efforts.

For over half a century, the United States has measured income poverty by comparing a family’s income to a standardized dollar amount (a “poverty line”) that varies by family size. For a family of four, this poverty line was initially set at $3,104 in 1963. The current official poverty line — $25,701 for a family of four in 2018 — is simply the base-1963 poverty line adjusted for nothing but inflation over the last 55 years. Today the United States is the only country in the world that measures present-day poverty by using a poverty line set over half a century ago and since then only adjusted for inflation. 

Our idiosyncratic approach to measuring poverty is deeply flawed for at least two reasons. First, poverty lines are social standards, not merely technical or mathematical ones. A poverty line set over half a century ago will reflect a very different set of assumptions, social conventions, political considerations, and body of social-science research than a poverty line first set in 2019. The initial 1963 poverty line was based on food expenditure data from 1955 and a set of assumptions that haven’t aged well, including that family meals are all prepared at home by a “frugal housewife.” (See more on this here.)

One of the tasks that are keeping economists employed these days is explaining the drop in labor’s share of Gross Domestic Product (GDP). This is supposed to be a major cause of concern since the vast majority of people get most or all of their income from working. 

A wide variety of theories have been put forward to explain the decline. However, there is a big problem these theories; it is not clear that there has been much of a drop in the labor share. 

Much of the decline in shares, before recent revisions, was simply due to an increase in the share of depreciation in GDP. Depreciation is the portion of output that is needed to replace worn-out capital. This is output that is neither profit nor wages; but the greater the depreciation share, other things being equal, the lower will be the labor share.

The latest data on investment, GDP growth, the trade deficit and manufacturing employment all tell us the same thing. When it comes to producing gains for ordinary workers, Trump’s most-touted economic policies have failed badly.