Tuesday, June 26, 2012

Midweek Reading

Americans Like Federal Spending After All
Americas Long Slope Down
Declining Labor Share & The Global Rise Of Corporate Savings
The Hidden & Excessive Costs Of 401(K)s
Macroeconomics: What Is It Good For?
Private Equity: Heads We Win, Tails We Win
Real House Prices & Price-To-Rent Ratio
Scott Walker's Victory, Un-Sugar-Coated
The Scott Walker No Tax Increase Lie
Walkergate: The Russell Revelations

Politicking With Pensions

Back in April I posted:

"From the Daily Kos:

I saw this post on a trusted person's wall on Facebook, and felt that due to the severity of the claims, the info should be made as public as can be. Down below the old piece of Christmas Candy.

The following is the context of the post:

I just had a call from a friend whose wife is a retired extension agent in St. Croix County and is now back there working in another kind of professional job. Anyway, spread the word - she just got back from a regional meeting and the word there was that Walker is saying that after he wins the recall election, he plans to push through the legislature a plan to abolish the state retirement system and convert everyone to 401k which will reduce our pensions by at least a third. And then he can have the rest of the money for whatever he wants.

This is not a rumor, he is openly talking about it in Madison, it just isn't being publicized. Remember how folks thought he was going to do anything to unions?"

Yet, as the Pew Center On The States has just reported, Wisconsin Pension Is Strongest In The Nation.

And, as the articles notes, "More impressively, Wisconsin got those high marks for its pension funding for fiscal year 2010 - before Gov. Scott Walker and Republican lawmakers required public employees to contribute more for their pension and work longer hours and more years to qualify for one."

Strangely, despite all this, Scott Walker seems to feel modification and reform is necessary for Wisconsin's pension system. (Or, as usual, he just wants to funnel some of that money to his cronies.) Yes, when a government program works and the participants are pleased with the program, in the Republicans' minds, what better program to monkey with and/or dismantle.

For Further Reading:
The Failure Of The 401(K)
It's Time To Retire The 401(K)
Pension & Retirement Reading
Pension Petulance
Perilous Posturing
Recoiling Retirement
Walking Off A Cliff

Saturday, June 23, 2012

Is There Anything A Stadium Can't Solve?

We're broke. (Well, at least that's what Scott Walker keeps telling us.)

What better time to build a few hundred million dollar stadium?

Yes, we're no longer just considering upgrading the Bradley Center.

The power brokers and urban growth coalition of Milwaukee are scheming to build a completely new stadium on vacant Park East land.

No one would love to see development along this corridor more than me, but as I (and much more rigorous analysts before me) have written many times, stadiums are not economic catalysts.

We have no money for public workers, parks, trains, schools, green energy, or numerous other projects that would benefit the majority of citizens. But we have more than enough cash for tax cuts, bailouts, stadiums, and any other scams well-connected private-sector actors can imagine.

You may be out of work, but at least the Bucks will have a shiny new stadium to play in. Hooray!

For Further Reading:
Basket Case
Buck The System
Buck You
Economic Engine Or Albatross?
Overblown Bradley Center Impacts
Stadium Rip-off(s)
Stadium Swindle 
The Time Is Now?

Bar City Of The Year


Weekend Reading

Bush Ignored Seven Warnings About Attacks
Dear Mr. Dimon, Is Your Bank Getting Corporate Welfare?
The Hard Lessons Of Wisconsin
How Policy Has Contributed To The Great Economic Divide
'Nuns On The Bus' Visit Paul Ryan's Office
Public Sector Layoffs
Reagan's Gone. You're Old. Get Over It.
The Rent Is Too Damn High
Revenge Of The Urban Nerds
The Scam Wall Street Learned From The Mafia
Twilight Of The Elites
Wages Continue To Fall

Wednesday, June 20, 2012

Republican Scapegoat Politics or Demeaning Government: Cutting Off Our Nose To Spite Our Face


Shrink government!

Make those teachers sacrifice!

Those labor unions have too much power! 

Medicare, Social Security, pensions, unemployment insurance, public services, parks ... they're things of the past.

Our ultra efficient, ultra market, ultra conservative post-Reagan paradigm is allocating capital in a much different fashion.

Much more efficiently!

[Wink. Wink.]

No longer do we use government as a tool for mass investment and mass benefit. Instead, we funnel seemingly endless streams of money into private, for lack of a better word, schemes. Government has stepped aside based on the (empirically disproven) belief that less regulation and less taxation are some panacea.

This is a Republican political concoction which caused Thomas Frank, in 2004, to ask, What's The Matter With Kansas? Why do people vote against their own economic interest? The question, perplexingly, still applies today.

Look around you. You can already count ten things that government does for you. Roads, street lights, sewers, stops signs, police, parks, water, the broadcasting airwaves, libraries, waste management, schools, recycling...

Whatever! They're overpaid hacks! I refuse to allow those positive societal outcomes to change my political opinions!

Yes, the level of discourse has sunk to new depths. And, as Thomas Mann and Norman Ornstein affirm, The Republicans Are The Problem.

La, la, la, I can't hear you!

As the Economic Policy Institute shows, "The passage in 1935 of the National Labor Relations Act, which protected and encouraged unions, sparked a wave of unionization that led to three decades of shared prosperity and what some call the Great Compression. The “countervailing power” of labor unions (not just at the bargaining table but in local, state, and national politics) gave them the ability to raise wages and working standards for members and non-members alike. Both median compensation and labor productivity roughly doubled into the early 1970s. Labor unions both sustained prosperity, and ensured that it was shared; union bargaining power has been shown to moderate the compensation of executives at unionized firms. However, over the next 30 years—an era highlighted by the filibuster of labor law reform in 1978, the Reagan administration’s crushing of the PATCO strike, and the passage of anti-worker trade deals with Mexico and China—labor’s bargaining power collapsed. The consequences are driven home by the figure below, which juxtaposes the historical trajectory of union density and the income share claimed by the richest 10 percent of Americans. Union membership has fallen and income inequality has worsened—reaching levels not seen since the 1920s."

Cate Long, of Reuters, found, "Benjamin Landy writes eloquently in his Blog of the Century about the outstanding work being done by the Project on Government Oversight (POGO). POGO calculated the cost differential between work done by government workers versus private contractors, and the data is strinking. It may be time to rethink the conventional wisdom that says outsourcing equals cost savings. Here is the money quote and graph." That's right...the public sector actually does a lot of things more cheaply than the private sector. And, the jobs are family-supporting. WOW! What a concept!

Ezra Klein writes, "I don’t think anyone disputes that it’s harder to unionize in the modern economy. This chart shows unionization rates in the United States, the United Kingdom, Germany, France, Japan and Canada since 1960. It also shows average unionization across the 34 countries in the Organization for Economic Cooperation and Development — that’s the highlighted red line with the gray dots* — most of which are much friendlier to labor unions than we are. The decline is sharpest in the United States, but evident in all the included countries, and in the aggregate of all OECD countries."

But, for Republicans, it's just a coincidence that when workers have a weaker voice they tend to see a weaker paycheck

Move along, nothing to see here.

As E.J. Dionne laments, "And the events of recent weeks suggest that if progressives do not speak out plainly on behalf of government, they will be disadvantaged throughout the election-year debate. Gov. Scott Walker’s victory in the Wisconsin recall election owed to many factors, including his overwhelming financial edge. But he was also helped by the continuing power of the conservative anti-government idea in our discourse."

Dionne adds, "One of the reasons I wrote my book “Our Divided Political Heart” was to show that, from Alexander Hamilton and Henry Clay forward, farsighted American leaders understood that action by the federal government was essential to ensuring the country’s prosperity, developing our economy, promoting the arts and sciences and building large projects: the roads and canals, and later, under Abraham Lincoln, the institutions of higher learning, that bound a growing nation together...permitting federal action to serve the common good. A belief in government’s constructive capacities is not some recent ultra-liberal invention."

But why stop going to the well if it hasn't run dry? Thus, Republicans continue their Phony War On Public Employees. Yet, as John Perr finds, "Over 44% of federal employees have a college degree, compared to about 19% of private sector workers. More importantly, an assessment of salaries (excluding benefits) by the Office of Personnel Management found that on average comparable federal civilian workers are paid 22 percent less than private workers. The disparities, even including incentive pay, are even greater in some metropolitan areas."

Ben Polak and Peter Schott explain, "There is something historically different about this recession and its aftermath: in the past, local government employment has been almost recession-proof. This time it’s not. Going back as long as the data have been collected (1955), with the one exception of the 1981 recession, local government employment continued to grow almost every month regardless of what the economy threw at it. But since the latest recession began, local government employment has fallen by 3 percent, and is still falling. In the equivalent period following the 1990 and 2001 recessions, local government employment grew 7.7 and 5.2 percent. Even following the 1981 recession, by this stage local government employment was up by 1.4 percent...Without this hidden austerity program, the economy would look very different. If state and local governments had followed the pattern of the previous two recessions, they would have added 1.4 million to 1.9 million jobs and overall unemployment would be 7.0 to 7.3 percent instead of 8.2 percent."

David Cooper, Mary Gable and Algernon Austin detail how the austerity taking place amongst state and local government is disproportionately hurting minorities and women.

With some historical perspective, Bruce Western and Jake Rosenfeld state, "As unions started to make concessions to big business in the lean days of the early 1980s, however, the Treaty of Detroit formula was abandoned. In an influential 2009 paper, "Institutions and Wages in Post-World War II America," the MIT economists Frank Levy and Peter Temin described the emergence in the 1980s of what they called "the Washington Consensus," an era of deregulation in which earnings inequality increased. As the decline of unions accelerated in those years, wage bargaining became more defensive. New union workers were given less favorable contracts, and lump-sum payments commonly replaced regular wage increases. As the fraction of all income captured by the top one percent of earners more than doubled, middle-class pay stagnated for the first time in decades; from 1973 to 2009, the median hourly wage increased by less than ten percent, even though nonfarm productivity ballooned by about 70 percent."

Zaid Jilani recounts, "Strong unions have traditionally been the free-market solution to income inequality, allowing people to get higher salaries without government intervention. Unionization has allowed middle class and working-class Americans to have the ability to bargain for stronger wages and benefits and a larger share of national income. Highly-unionized countries tend to have far less income inequality."

One of the few economists, before the last bubble burst, to warn that the economy was a house of cards, Nouriel Roubini commented on the detrimental outcomes from undervaluing labor, "Karl Marx had it right. At some point, capitalism can destroy itself. You cannot keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand. That's what has happened. We thought that markets worked. They're not working. The individual can be rational. The firm, to survive and thrive, can push labor costs more and more down, but labor costs are someone else's income and consumption. That's why it's a self-destructive process."

Lee Sustar points to research from David Rosenburg which found, "The 'labor share of national income has fallen to its lower level in modern history,' 57.5 percent in the first quarter of 2011, compared to 59.8 percent when the recovery began. While that might seem like a small change, given the $14.66 trillion size of the U.S. economy, it's huge."

In the real world, Labor's numbers are diminishing, government size and spending are shrinking, and, simultaneously, income inequality is increasing. If one were to actually delve into the data, he/she would find that reality doesn't support the idea of a growing, recklessly-spending government, full of do-nothing, overpaid public workers.

Paul Krugman observes, "We haven’t seen spending cuts like this since the demobilization that followed the Korean War."

Let's simply look at the promises of Republican doctrine contrasted with their actual results.

"Like Ronald Reagan, President Bush began his term in office with big tax cuts for the rich and promises that the benefits would trickle down to the middle class. Like Reagan, he also began his term with an economic slump, then claimed that the recovery from that slump proved the success of his policies. And like Reaganomics — but more quickly — Bushonomics has ended in grief. The public mood today is as grim as it was in 1992. Wages are lagging behind inflation. Employment growth in the Bush years has been pathetic compared with job creation in the Clinton era. Even if we don’t have a formal recession — and the odds now are that we will — the optimism of the 1990s has evaporated. This is, in short, a time when progressives ought to be driving home the idea that the right’s ideas don’t work, and never have," declares Krugman.

So, to recap, we're blaming the wrong people (government, public workers) for the wrong things (recession, bailouts, debt), while letting the true culprits (financial engineers and their political operatives - primarily Republicans) responsible for our recurring bubbles and economic calamities off the hook. Our conservative leaders also want us to double-down on the same policies that got us into this mess - tax cuts and deregulation. And, while we're at it, let's elect more jokers, like Scott Walker and Mitt Romney, to keep pushing the same hollow policies. 

What's the matter with America?

Sunday, June 17, 2012

The Skills Mismatch Myth

Dave Altig, Atlanta Fed, The Skills Gap: Still Trying To Separate Myth From Fact:

"We have yet to find much evidence that problems with skill-mismatch are more important postrecession than they were prerecession. We'll keep looking, but—as our colleagues at the Chicago Fed conclude in their most recent Chicago Fed Letter—so far the facts just don't support skill gaps as the major source of our current labor market woes."

For Further Reading:

Sunday Reading

Bitter Money Fights Shaped U.S. History
Everything You Need To Know About Mormonism
The Fiscal Legacy of George W. Bush
Tax Foundation Figures Don't Represent Typical Household
Why Elites Fail
Windfall! Rich Get Richer From New Tax Credit

Democrats Getting Republicans Out Of Debt (Again)

From U.S Debt Load Falling At Fastest Pace Since 1950s:

  • Four years after the storm hit, the economy is still deleveraging. And it’s very hard for any economy to grow when everyone is focused on increasing their savings.
  • Total domestic — public and private — debt as a share of the economy has declined for 12 quarters in a row after surging over the previous decade.
  • As much as we hear politicians, pundits, tea-party patriots and the Congressional Budget Office obsessing about government debt, it was excessive private debt — not public debt — that caused the 2008 financial meltdown. And it was private debt — some of it since transferred to the public — that lies behind the current European debt crisis. 
  • In fact, since the recession ended in June 2009, total U.S. debt has risen at the slowest pace since they began keeping records in the early 1950s. 
  • The ratio of total debt to gross domestic product has fallen from 3.73 times GDP to 3.36 times.

Incentive Pay

Thursday, June 7, 2012

Thanks Wisconsin Non-Voters

You suck!


57.7 percent of eligible Wisconsin voters voted in the recall election. (Sadly, the highest ever for a Wisconsin gubernatorial election.)

Yes, these issues are so important, and so meaningful is our democracy, we allow 42.3 percent of eligible voters to not participate.


The Silver Lining

John Lehman Defeats Incumbent, Democrats Take Back State Senate

Now Democrats get to be the obstructionists.

Democracy marches on.

Tuesday, June 5, 2012

Vote Tom Barrett & Mahlon Mitchell!

Go to your polling place. Time is running out!


Polls close at 8pm. But, if you're in line at 8pm, you can not be turned away. You must be allowed to vote. Even if they've run out of ballots, they have to get more to ensure those in line, waiting to vote by 8pm, are allowed to vote.

If you're not registered, you only need a bill (utility, phone, etc.) with your name and current address to do so.
Vote Tom Barrett and Mahlon Mitchell!

Vote For Tom Barrett, Today!

Ed Schultz Live From Wisconsin: Scott Walker Recall Will Determine 'If The People Still Matter'

Sunday, June 3, 2012

Republicans Killing Unions In Wisconsin

h/t Crooks & Liars

Also watch - Martin Bashir to GOP leadership: Congratulations on undermining the country

And, don't forget:

36 Reasons Why You Should Thank a Union
  1. Weekends
  2. All Breaks at Work, including your Lunch Breaks
  3. Paid Vacation
  4. FMLA
  5. Sick Leave
  6. Social Security
  7. Minimum Wage
  8. Civil Rights Act/Title VII (Prohibits Employer Discrimination)
  9. 8-Hour Work Day
  10. Overtime Pay
  11. Child Labor Laws
  12. Occupational Safety & Health Act (OSHA)
  13. 40 Hour Work Week
  14. Worker's Compensation (Worker's Comp)
  15. Unemployment Insurance
  16. Pensions
  17. Workplace Safety Standards and Regulations
  18. Employer Health Care Insurance
  19. Collective Bargaining Rights for Employees
  20. Wrongful Termination Laws
  21. Age Discrimination in Employment Act of 1967
  22. Whistleblower Protection Laws
  23. Employee Polygraph Protect Act (Prohibits Employer from using a lie detector test on an employee)
  24. Veteran's Employment and Training Services (VETS)
  25. Compensation increases and Evaluations (Raises)
  26. Sexual Harassment Laws
  27. Americans With Disabilities Act (ADA)
  28. Holiday Pay
  29. Employer Dental, Life, and Vision Insurance
  30. Privacy Rights
  31. Pregnancy and Parental Leave
  32. Military Leave
  33. The Right to Strike
  34. Public Education for Children
  35. Equal Pay Acts of 1963 & 2011 (Requires employers pay men and women equally for the same amount of work)
  36. Laws Ending Sweatshops in the United States

Walker's Terrible Job Record

A "great" "debate" is taking place on jsonline over Walker's Jobs Record An Unmitigated Disaster. (Actually, it's the typical uninformed conservatives griping about that which they seem to know little.)

One commenter, Cubcake, has been continually trying to fault the arithmetic in the article. When a professor does an analysis, he/she is just being a devious liberal lying with statistics. But when Scott Walker pulls  preliminary "data" from his rectum, which can't be compared to other states' numbers, this is sound statistical analysis.

Ceomrman2 has the definitive takedown(s), "You can view the total seasonally adjusted non-farm payroll here: http://www.bls.gov/news.release/laus.t05.htm . There were about 2,732,000 jobs in Wisconsin in April of 2012. That is 21,400 fewer than in April, 2011. The numbers you're thinking of (i.e. the ones you linked to in previous posts) are not correct for this discussion. You can't blame a politician for the seasons or the rainfall levels, so numbers must be seasonally adjusted and must exclude farm labor. Yes, of course there are more jobs in summer when high school and college kids are out of school and farms need workers. Try taking a deep breath and thinking to yourself "maybe the guy who has spent decades researching employment trends in the industrial heartland of the United States actually knows what basic economic indicators mean?" Cubcake - the numbers you are referencing are not the correct numbers for this discussion. I can see why you might think they are - the profession's jargon can be unintuitive - but the relevant time series for this discussion is the seasonally adjusted non-farm payroll count. You can view that data here: http://www.bls.gov/news.release/laus.t05.htm. You can feel free to disagree with Prof. Levine, but he does understand his basic economics measurements."

The cognitive dissonance of Republicans is breathtaking. No matter the reality (comparative stats, criminal investigations, lying to Congress, stalling investigations, crony capitalism, or dividing and conquering for big-money donors), whatever Walker says or does is correct in the eyes of his followers. This mindset is now de facto for conservatives. Nothing oppositional can penetrate their worldview. Close-mindedness and a penchant for sloppy analysis are not the prerequisites we should want for those supposedly involved in shaping public policy.

WOW! This recall election is big! Vote Tom Barret, Mahlon Mitchell June 5th!

Weekend Reading

An Autocratic King Scott Damaged The State
Debunking Goldbugs
Is The Filibuster Unconstitutional?
Rich Will Get Richer From New Tax Credit
Sorkin's Glass-Steagall Straw Man
Walker's Job Record An Unmitigated Disaster
What Is Shadow Banking?
Walker Stalled Inquiry