The leaked document that purports to show the Obama administration’s opening bid for resolving the “fiscal cliff” is deeply encouraging, on many fronts—as detailed by Andrew Fieldhouse. Given how strong a proposal it is, and how in-line it is with many of the principles for fiscal policy that we have laid out in the medium– and long-run, it seems churlish to raise any note of criticism. It needs to be said, however, that as good as this proposal is, it still does not look like strong-enough medicine to solve the most pressing problem of sluggish economic growth and chronic joblessness in the coming years.

To be sure, if adopted it would turn fiscal policy from dangerously contractionary to supportive of growth in the next couple of years. And the most basic contours of their proposal, as Andrew notes, are actually very much in line with the proposed strategy we recently outlined.

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

But, as our own paper noted, both our strategy and the Obama administration’s proposal start with the presumption that measures that are strong enough to reliably solve the crisis of joblessness in the near term are totally outside the bounds of political realism. Read more

President Obama’s opening bid for negotiations resolving the “fiscal cliff” has surfaced, and the contours are both familiar and sound. The Washington Post and an unofficial outline drafted by Republican aides both suggest that the administration has essentially proposed its budget request for fiscal 2013. And the president’s latest budget offers a solid framework for navigating the fiscal obstacle course, as it would substantially moderate the pace of deficit reduction while making a responsible down payment on longer-term deficit reduction. Relative to current policy, the contours are shaping up roughly as follows:

• Allow the upper-income Bush tax cuts to expire (+$850 billion)
• Restore the estate and gift taxes to 2009 parameters (+$120 billion)
• Curb tax expenditures (+600 billion)
• Stimulus spending (-$50 billion)
• Extend emergency unemployment benefits (-$30 billion)
• Extend or replace the payroll tax cut (-$110 billion)
• Continue AMT patch, “doc fix,” and tax extenders (-$240 billion)
• Defer sequestration (?)

Most critically, the Obama framework includes a variation of his American Jobs Act, proposing increased near-term government spending on infrastructure and state fiscal relief while maintaining the ad hoc stimulus set to expire at year’s endRead more

Last week, President Obama’s vestigial campaign sent out an infographic touting his plan to address the fiscal cliff. This plan would end the upper Bush tax cuts and cut spending by more than $3 trillion, including the cuts already signed into law since early 2011, and preserve nondefense public investments in areas like education and infrastructure.

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

There’s an irony in that the cuts already signed into law were never actually supported by the president, who only relented when the House GOP threatened to shut down the government (the spring 2011 appropriations showdown) and collapse the economy (the summer 2011 debt ceiling showdown). He was right then, because these cuts—particularly the half that come out of the domestic discretionary budget—are horrible policy. Domestic (non-security) discretionary spending is the portion of the overall budget that not only delivers the primary source of investment in our nation’s future, but also provides vital services to people in need, protects Americans from corporate abuses and environmental degradation, and keeps the government itself operating. (The nondefense budget includes all of non-security plus homeland security, veterans affairs, nuclear weapon security, and foreign affairs.) Bottom line, it’s important stuff. And yet over the last year, the president has begun touting the fact that his budget brings the non-security portion of the budget down to record low levels—“the lowest level since President Eisenhower,” as the president is fond of saying—as if this is somehow a good thing. Read more

In a year of professional sports lockouts, teacher strikes, and disappearing Twinkies, we’ve heard a lot about the “labor dispute.” The phrase implies unreasonable labor demands and stalled collective bargaining negotiations and has frequently provided cover for businesses that have failed to adapt to changing economic conditions. The Hostess bankruptcy is the latest example of workers bearing the blame for years of bad management and myopic business strategy. The language used to describe these events is indicative of the vilification of workers —from Detroit, to Irving, Texas, to Washington, D.C. Yet, in so many of these cases, labor is neither the provocateur nor the problem.

When Hostess executives (who recently treated themselves to 30–300 percent pay increases) proposed a plan to slash employee compensation by 30 percent, it wasn’t in response to labor demands. When the workers refused to accept management’s proposed compensation cuts, it was resistance to extortion, not a labor dispute. Employees sticking together to protect the compensation they’d earned, following recent sacrifices to the tune of at least $110 million, wasn’t “big labor” picking a fight or wanting more. Read more

In a recent blog post, we made the point that the debate over the “fiscal cliff/obstacle course/austerity crisis” is fixated on the too-modest goal of avoiding outright recession in the coming year, rather than actually pushing the U.S. economy back to full economic recovery. This latter goal—actually ending the economic slump that began with the Great Recession in late 2007—is obviously politically unrealistic (which, by the way, should be sign one of just how deranged D.C. policymaking has become), but we should be clear that it’s the right thing to do.

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

The U.S. economy has already forfeited literally trillions of dollars in national income by not pushing the economy back to full health after the Great Recession. Knock-on effects of this policy failure include damage to future potential income from economic “scarring;” to put it simply, allowing productive economic resources (both people and capital) to sit idle and atrophy is exceptionally inefficient. A less important knock-on effect of this continuing slump is that it will predictably cause future projected budget deficits to balloon. Yet far too many self-proclaimed deficit hawks among D.C. policymakers seem strangely unconcerned about this particular driver (continued economic weakness and unemployment) of future budget deficits, and too many are instead advocating near-term fiscal contraction that will further delay recovery.

The U.S. economy is running $973 billion (5.8 percent) below potential economic output—what the economy could produce with higher (but noninflationary) levels of employment and industrial capacity utilization. Cumulatively, these output gaps imply that the U.S. has forgone roughly $3.6 trillion of national income over 2008—2011, projected to hit $4.6 trillion by the end of 2012.

Moreover, the Congressional Budget Office’s (CBO) economic baseline shows output gaps persisting into 2018: Under current law, another $3.5 trillion worth of cumulative output gaps are projected over 2013–2017. These forecasts are likely overstated in the near term, as Congress probably won’t actually allow all the fiscal contraction baked into current law to actually come to pass. Still, CBO’s current economic forecast indicates a decade-long economic slump, in which the United States will forgo $8.1 trillion of national incomeRead more

Here’s some of the interesting content that EPI’s research team browsed through today:

• “Obama must push for another extension of unemployment insurance” (Washington Post)
• “Poor management, not union intransigence, killed Hostess” (Los Angeles Times)
• “Tax Time: Why we pay” (New Yorker; subscription)

Zachary Goldfarb wrote an interesting piece on President Obama’s commitment to fight rising economic inequality as president. Lots of it rings true—the president has indeed expressed concerns about rising inequality and many of his policy initiatives (particularly the coverage expansion included in health reform) will indeed do much to ensure that rising inequality no longer provides as daunting a barrier to low– and middle-income households’ living standards growth.

What’s consistently depressing in the inequality debate as waged around D.C. politics, however, is the telescoping of the debate into being all about tax rates and educational attainment.

Goldfarb repeats a piece of ossified conventional wisdom in his piece, writing, “The data show that rising inequality is largely the result of a changing economy that handsomely rewards people with better skills or credentials—a college education—and leaves people with a basic education at a disadvantage.”

This just isn’t right. Check out how wages for college graduates have fared in the past decade. Read more

Warren Buffett wrote a great New York Times op-ed in which he illustrated the ridiculousness of the claims that higher tax rates on the rich will cause them to forego profitable investments. As he points out, the decline of tax rates on the rich over the last few decades have only served to further fuel their skyrocketing incomes at the expense—rather than to the benefit—of everyone else.

Making the highest income households pay a fair share of taxes is important for the principles of fairness itself: the concept of vertical equity stipulates that tax burdens should be proportionate to a taxpayer’s ability to pay, so as income rises, so too does the share of income paid in taxes (and thus effective tax rates). As my colleague Andrew Fieldhouse calculates, very high-income households start to see their effective individual income tax rate start to fall, as the preferential treatment of capital gains and dividends undermine the basic tenant of our progressive income tax that effective tax rates should rise with income. This implies the burden of taxation is being shifted from those best able to pay to those more burdened by higher effective taxation.

But it’s not just about fairness—raising taxes on the rich produces a lot of revenue, which we can then use to create jobs and Read more

The Washington Post lead editorial today claims that the chained CPI-U is a better measure of the inflation facing the elderly than the current estimate of consumer prices used for that purpose. The editors argue that using the chained CPI-U is therefore not just an effective way to get substantial budget savings from a major entitlement program, but also a fair way to do so.

If the current COLA is set too high because it is calculated using a measure that systematically overstates inflation, then we ought to change it. But in fact, it doesn’t. Contrary to the Post’s assertions, the chained CPI-U and the current unchained version probably understate inflation for the elderly and disabled because the mix of goods and services they purchase is much more heavily weighted toward medicine and health services, where inflation is very high, than it is for younger consumers. In addition, elderly and disabled beneficiaries spend a greater share of their incomes on necessities like rent and utilities, and are therefore less able to substitute cheaper goods and services in response to price increases.

It is possible that Alan Simpson and Erskine Bowles didn’t know this when they recommended Read more

There is a widely held view in Washington that if employers don’t like the labor force they find in their area, they should be able to replace the locals with foreign workers. If people who live and work where a business is located aren’t willing to work for however little a business owner wants to pay, the business should be able to resort to “guest workers,” foreign workers who are permitted to work only for that employer while they are in the U.S. and who have to leave as soon as the employer has finished with them.

The Washington Post, for example, recently announced that any comprehensive immigration reform would have to give businesses “timely access to adequate numbers of seasonal and agricultural workers.” Francisco Ordonez, a McClatchy News reporter, spoke to Republican leaders who say that if immigration reform is going to happen, “Democrats have to stand up to unions and support an expanded guest-worker program, including some non-agriculture jobs.” The unemployment or underemployment of 15 percent of the U.S. labor force apparently isn’t enough to provide “adequate numbers.” Read more

Here are a few links that EPI’s research team clicked through today:

• “The biggest challenge to immigration bill may be guest workers” (Kansas City Star)
• “Boehner: Deficit talks must be broadened to include … Obamacare” (Washington Post)
• “The Morning Plum: Dems shouldn’t agree to ‘temporary’ fiscal cliff solution” (Washington Post)
• “U.S. Deficit Shrinking At Fastest Pace Since WWII, Before Fiscal Cliff” (Investor’s Business Daily)
• “Law School Admission Testing Plunges” (New York Times)
• “Family Becomes Focal Point in Fight to Lower Prison Phone Rates” (ColorLines)

This post originally appeared on Dissent Magazine’s website

By now it’s well known that Papa John’s Pizza CEO John Schnatter is claiming—or threatening—that compliance with the Affordable Care Act would force him to reduce employee hours or raise prices. This was one of a number of post-election “job-creator” tantrums based on the curious belief that President Obama’s re-election (and the continuation of his policies) had somehow changed the political and regulatory landscape.

Schnatter was quickly skewered for his inflated estimation of the ACA’s burden—he claimed it would increase prices 10 to 14 cents—which Forbes calculated to be about one-half of 1 percent of the chain’s operating expenses—or between 3.4 and 4.6 cents per pizza. With Papa John’s charging $1.50 for each extra topping, this is about the cost of a single slice of pepperoni on a large pizza (if we assume a generous portion of 30 pieces of pepperoni per pizza).

But, more important, in the big picture the best way to think of the ACA is that it is providing a mandate (with admittedly small and not particularly sharp teeth) that deters  low-road employers like Papa John’s from continuing to shirk responsibilities to their employees. Read more

Here’s a sampling of links that EPI’s research team found insightful today:

• “What Are Conservatives Getting Wrong About The Economy? (Douthat Reply Edition)” (Rortybomb)
• “Understanding President Obama’s Revenue Targets” (TaxVox)
• “Budget crisis calls for focus on entitlements and revenue” (Washington Post)

It’s remarkable how quick people are to blame workers and their unions whenever a company goes bankrupt or goes out of business. On Friday, I heard Rush Limbaugh on the radio blaming the Bakery Workers for the closing of the Hostess bakeries. His insight apparently didn’t require a look at the company’s history of buyouts and downsizing, the CEO and managers’ pay, the competition, the wage cuts the employees had already taken, or even the company’s products, which have contributed more to diabetes and heart disease than nutrition for decades.

The New Yorker‘s James Surowiecki does a better job of considering the many factors that contributed to such a brutal loss of jobs in “Who Killed The Twinkie?” Surowiecki focuses on the inability of Hostess Brands’ s management to adapt to a changing market rather than the supposed greed of the workers who were trying to hang onto pension benefits they had bargained for decades ago.

The Sacramento Bee‘s Bruce Maiman points out that Hostess’ revolving-door management failed Read more

Washington is fixated with the so-called “fiscal cliff” of legislated spending reductions and expiring tax cuts scheduled for 2013, which are projected to induce a recession if they materialize. As my colleague Josh Bivens and I have repeatedly explained in a series of recent papers and blog posts, this “cliff” simply represents the macroeconomic reality that budget deficits closing too quickly—thus public debt accumulating too slowly—will, if left unaddressed deep into 2013, push the U.S. economy into an austerity-induced recession. Last week, we released a paper, Navigating the fiscal obstacle course, offering our policy recommendations for moderating the pace of deficit reduction and sustaining recovery by reshuffling various components of the fiscal obstacle course (cliff is a terrible metaphor as it implies a false dichotomy). Now it’s worth zooming out and placing this debate in its proper context: in a depression.

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

Paul Krugman’s latest book, End This Depression Now!, wasn’t hyperbolically titled—the United States truly is in a depression. U.S. economic output is currently depressed $973 billion below potential economic output—what the economy could produce with higher (but noninflationary) levels of employment and industrial capacity utilization. The U.S. economy has operated at 5 percent or more below potential output since Read more

Last Friday, the Peter G. Peterson Foundation held an event called “The Fiscal Cliff and Beyond.” The event both highlighted the results of the Solutions Initiative II (in which EPI took part) and convened discussion panels around the topic of the fiscal cliff as well as longer-term fiscal and economic issues.

I found a few comments from two different panels interesting. In one panel, Erskine Bowles, who co-chaired the 2010 fiscal commission and now is a big supporter of the Fix the Debt campaign,  said that if we go over the fiscal cliff, U.S. credit will be downgraded by rating agencies—for example Moody’s or Fitch. On a different panel, Douglas Holtz-Eakin, former John McCain adviser, CBO head, and now director of the American Action Forum, said that if we go over the fiscal cliff (a terrible metaphor), financial market reactions will be severe.

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

Since “financial market reaction” to fiscal developments is going to be a big theme in coming months, it’s worth thinking a little more carefully about statements like these. Read more

Piggybacking on my earlier post, this post outlines the five job creation proposals in our new paper, Navigating the fiscal obstacle course, which offers policymakers a realistic blueprint for moderating the pace of deficit reduction to boost growth and employment. These job creation policies are also adopted in a comprehensive federal budget proposal that EPI will release on Friday as part of the Peter G. Peterson Foundation 2012 Solutions Initiative.

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

Relative to current policy, our paper recommends investing roughly $600 billion over the next decade, mostly over the next three years, in emergency unemployment benefits, aid to state governments, infrastructure investment, investing in teachers and school modernizations, and a one-year targeted tax rebate.1 These are all cost-effective ways to boost demand, and EPI endorsed variations of each of these proposals in our Sept. 2011 paper Putting America back to work: Policies for job creation and stronger economic growth. Note that any purported “resolution” of the fiscal obstacle course (e.g., a “grand bargain”) that omits these or similar proposals for increasing near-term budget deficits relative to current policy unequivocally fails the challenge actually facing policymakers, which is to sustain and accelerate the recovery.

Emergency Unemployment Compensation

We propose restoring the Emergency Unemployment Compensation program to again support up to 99 weeks of benefits in high unemployment states Read more

Yesterday, my colleague Josh Bivens and I released a paper, Navigating the fiscal obstacle course, intended to offer a realistic blueprint—one that accounts for the constraints regrettably imposed by the current political climate—for how policymakers should navigate the so-called “fiscal cliff” of legislated spending reductions and expiring tax cuts scheduled for 2013. At its core, the fiscal cliff reveals the macroeconomic reality that budget deficits closing too quickly—thus public debt accumulating too slowly—will, if left unaddressed deep into 2013, push the U.S. economy into an austerity-induced recession. Contrary to the misplaced but pervasive inside-the-Beltway hand-wringing of recent years about rising public debt, this outlook implies that big budget deficits and rising public debt have been sustaining growth and economic recovery in recent years. The only way for policymakers to successfully navigate the scheduled fiscal restraint is to substantially moderate the pace of deficit reduction while the economy remains depressed—meaning for several years at minimum.

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

Our recommendations build on our analysis from a recent paper, A fiscal obstacle course, not a cliff, which argued that “cliff” is a terrible metaphor because it implies Read more

Today, the Census Bureau released new data from the Research Supplemental Poverty Measure (SPM) that showed that more Americans are likely in poverty than is reflected by the official federal poverty line. The SPM estimates for 2011 show a poverty rate of 16.1 percent, or roughly 49.7 million people, which is higher than the official poverty rate of 15.1 percent, or 46.6 million people.

First introduced last year, the SPM attempts to make a more holistic appraisal of household well-being by incorporating greater detail on real household expenses and additional resources available to households through government programs. The SPM also takes into account individuals’ residence type (renters, homeowners, homeowners with a mortgage), and regional differences in consumer prices.

With this inclusion of more detailed data on government assistance, the SPM allows for some interesting back-of-the-envelope calculations on the poverty-fighting effects of these programs. Read more

Here’s some reading material for you from items EPI’s research team skimmed through today:

• “Help Wanted: Regulatory Czar with Commitment to Protecting Public Health, Worker and Consumer Safety, and the Environment” (Center for Progressive Reform)
• “Offsetting a Carbon Tax’s Cost on Low-Income Households” (Congressional Budget Office)
• “How to Bridge the Hiring Gap” (New York Times)

The normally-useful Wonkblog potentially leads some readers this past weekend to the wrong by pointing to a recent study on the effects of NAFTA and concluding:

“This is the pattern generally with trade liberalization. All else being equal, all parties tend to benefit, but developing countries benefit most.” [Emphasis added]

If by “parties” they mean “countries,” then this is roughly right. If by “parties” they mean “people,” then this is really wrong.

See here (and here if you really have some time to kill), but the rough story is simply that for the U.S., expansions of trade with poorer trading partners should be expected to raise national income while still lowering wages for most American workers. Even worse, the higher the national gains from trade, the larger the losses are for most American workers.

Lastly, it’s important to note that the vast majority of economic gains from an agreement like NAFTA for poor countries like Mexico could actually be obtained by Mexico unilaterally. That is, most gains come from countries reducing their own tariffs, not in gaining market access abroad. So, Mexico didn’t need NAFTA to achieve these gains—they could have had them on their own.

After serving our country, many of our nation’s veterans come home to low-wage jobs. In fact, of the more than 9 million veterans in the workforce today, over a million would see their wages go up if Congress were to pass the Fair Minimum Wage Act of 2012. The bill, introduced by Iowa Sen. Tom Harkin in the Senate and Calif. Rep. George Miller in the House, would raise the federal minimum wage from $7.25 per hour to $9.80 per hour in three increases of 85 cents, and then index it to inflation.

A few months ago, we released an analysis of the Harkin/Miller bill that showed that more than 28 million workers nationwide would see a wage increase as a result of the legislation (including the parents of more than 21 million children). Of these 28 million affected workers, roughly 1.1 million are veterans (655,000 directly-affected; 417,000 indirectly-affected)1. Here’s a full demographic profile of affected veterans.

The veteran population that would be affected by raising the minimum wage to $9.80 is similar to the overall population of workers who would be affected by the increase, yet there are a few noticeable differencesRead more

Piggybacking on my colleague Josh Bivens’ previous post regarding the unfounded but pervasive political view that any near-term stimulus be conditioned on long-term deficit reduction, I want to clarify that Speaker of the House John Boehner (R-Ohio) isn’t even talking about this “knife-edge” tradeoff between near-term stimulus and long-run deficit reduction—he’s only talking about the misplaced deficit-reduction plunge. Recent reporting (e.g., the New York Times) has described Boehner as striking a “conciliatory” tone in pledging to resolve the so-called “fiscal cliff,” but there’s a huge difference between professed willingness to compromise and talking policies to address the actual economic challenge facing Congress. Here’s Boehner at a press conference on Friday:

“Now, 2013 should be the year we begin to solve our debt through tax reform and entitlement reform, and I’m proposing that we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems that are facing us … [and later in Q&A:] Clearly the deficit is a drag on our economy.”

As I explained recently, the only way a deficit reduction “grand bargain” could successfully navigate the fiscal obstacle course is Read more

The Congressional Budget Office (CBO) issued a new report yesterday, Economic Effects of Policies Contributing to Fiscal Tightening in 2013, confirming the major findings of a recent EPI report.

But, since they have a much larger megaphone than us, it’s useful to use this to reiterate the main points people should know about in discussions over the “fiscal cliff” or, as we call it (for reasons explained below), the “fiscal obstacle course.”

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

First, the problem posed by the fiscal obstacle course is that budget deficits are falling too quickly in the next two years, and public debt is not rising quickly enough. This is thankfully becoming a bit clearer in discussions about all of this, but it’s always useful to reiterate. Often the fiscal problem—too often referred to as a looming “crisis”—is (mis)represented as the U.S. economy being poised on some knife-edge, where the (clear and present) danger of overly rapid deficit reduction in the next couple of years must be solved only if the (speculative and not imminent) danger of projected long-run structural budget deficits crowding out private investment (by increasing borrowing costs) is also simultaneously addressed. This idea that the U.S. economy is poised between these two roughly equal dangers is why the assumption is often made that the fiscal obstacle course can only be solved with some “grand bargain” Read more

This piece originally appeared on Huffington Post

The American public has repeatedly indicated that the health of the economy is their biggest concern. An Associated Press election-day exit poll found that 59 percent of voters considered the economy to be the most important issue facing the country while only 15 percent considered the deficit to be the number one issue. And when voters say “the economy” they mean jobs and the rising cost of living.

President Obama’s re-election depended significantly on America’s growing numbers of racial and ethnic minorities. For these groups too, the economy is the number one issue. An October CNN poll found that 44 percent of Latinos considered the economy to be the most important issue. Only 6 percent mentioned the deficit. Immigration reform ranked second at 14 percent. A survey of black voters in battleground states also found that jobs and wages were top issues for blacks.

Obama received an impressive 11 percentage-point gain in his share of the Asian-American electorate in the 2012 election relative to 2008. This increase in Asian votes helped him win the swing state of Virginia. For Asian-American voters as with other groups, the economy is the number one issue. Read more

This post originally appeared in The Century Foundation’s series “What’s Next? TCF Fellows Look Ahead at President Obama’s Second Term.”

With the end of the 2012 election, policymakers’ focus will pivot to the so-called “fiscal cliff” of legislated spending reductions and expiring tax cuts scheduled for 2013, which are projected to induce a recession if they materialize. So what does President Barack Obama’s re-election imply for navigating the “fiscal cliff,” both in terms of his budgetary proposals’ economic impacts and their political viability?

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

The “fiscal cliff” exposes that the pace of deficit reduction must be moderated to sustain economic recovery. “Cliff,” however, is a terrible metaphor because it implies a false dichotomy; we prefer “obstacle course” as the numerous separable policies should be weighed on their merits. A recent paper I coauthored with my colleague Josh Bivens concluded that the upper-income Bush-era tax cuts and recent estate tax cuts fail any reasonable cost-benefit analysis and should expire; these policies are the least supportive of jobs of all fiscal obstacle course components. Expiration of remaining stimulus measures—notably the payroll tax cut and emergency unemployment benefits—and looming spending cuts from last summer’s debt ceiling deal actually pose the gravest economic drags.Read more

The election results signaled that the implementation of essential financial regulations can go forward, increasing the likelihood of stable and sustained economic growth. Yet despite this fresh indication of support for curbing the excesses of Wall Street (including the  election of Elizabeth Warren, the most powerful consumer advocate in the country and an insightful critic of the financial industry), the lame duck Congress may, under the public radar, act in a contrary fashion. There is some momentum to move forward legislation that would severely hamper financial regulators, over objections by leading regulators at the federal and state level, and without appropriate due diligence about the bill’s effects.

Specifically, one would hope and expect the lame duck Senate to do nothing to compromise the authority of independent agencies like the SEC and the Consumer Financial Protection Bureau as they implement the Dodd-Frank reforms of Wall Street and the financial sector. Nonetheless, as New York Times editorial writer Teresa Tritch warns, the Senate Homeland Security and Government Affairs Committee might quickly take up and approve legislation to diminish the independence of these important agencies and many others, including the Consumer Product Safety Commission and the National Labor Relations Board. Read more

This piece originally appeared on the Huffington Post

Writing in The Washington Post recently, former Sens. Pete Domenici (R-N.M.) and Sam Nunn (D-Ga.) argued that enacting a bipartisan deficit reduction “grand bargain” could be instrumental in addressing the so-called “fiscal cliff” of legislated spending reductions and expiring tax cuts scheduled for the beginning of 2013. A grand bargain could theoretically mitigate the sizable pending fiscal headwinds, but a deal could also close deficits too quickly, pushing the economy into an austerity-induced recession. Nothing in their op-ed or the two grand bargains it references demonstrates how such a compromise could successfully clear the “fiscal cliff.”

FULL ANALYSIS FROM EPI: Budget battles in the lame duck and beyond

At its core the “fiscal cliff” represents the macroeconomic reality that budget deficits closing too quickly—and public debt accumulating too slowly—will push the U.S. economy back into recession. The scheduled spending cuts and tax increases comprising the legislated fiscal tightening are separable policies, all with varying budgetary costs and a wide range of economic impacts; we decomposed these à la carte in our recent paper, A fiscal obstacle course, not a cliff. “Cliff” is a terrible metaphor, as it implies a binary choice, whereas each policy should be weighed on its economic impacts and budgetary costs. Government spending cuts are more economically damaging than tax increases, particularly for upper-income households and businesses, but tax increases will drag on growth to varying degrees. Collectively, the legislated fiscal tightening would shave 3.7 percentage points from real GDP growth, and the U.S. would experience a 2.9-percent contraction in the first half of 2013, pushing unemployment back above 9 percentRead more

The New York Times has reported that the nonpartisan Congressional Research Service (CRS) has withdrawn a September report (though it can be found on the Senate Democratic Policy Committee site) that examined the relationship between top tax rates and economic outcomes. CRS made the decision in response to objections raised by Senate Minority Leader Mitch McConnell (R-Ky.) and other GOP senators about the reports “tone and … its findings.”

We’ll leave arguments about tone aside for a moment and focus on the research quality of the report and whether or not the GOP objections have any basis. Spoiler alert: they don’t. The report mostly just confirms what a rich economic literature already has shown: Raising marginal tax rates on the highest incomes just doesn’t have much impact at all on aggregate economic indicators, though it does have considerable impact on inequality.

This is shown in the report through a wide range of descriptive data and scatter plots that show very little obvious relationship between top tax rates and aggregate economic indicators, but which show striking relationships between falling top tax rates in recent decades and the share of overall income accruing to the top 1 percent of households. It then tests to see if these simple two-way relationships hold in a multivariate regression. They do.

So what are the allegedly substantive objections raised by GOP senators to this report? Read more

The Center for Immigration Studies issued an alarming-sounding report yesterday that, at first glance, seemed to indicate that immigrants have gotten most of the jobs during the recovery from the Great Recession. In fact, the great majority of jobs gained back since the recession have gone to natives, but clever cherry-picking of the comparison dates by CIS could trick a reader into believing otherwise.

The following figure from the CIS report tells the story:

Employment declined from 2009, when President Obama took office, to early 2010, continuing the employment shrinkage that began in 2007 and escalated in 2008. Natives, who make up 84 percent of the workforce, took the brunt of the recession’s job losses. Read more