Inequality Has Grown in All 50 States [feedly]

Inequality Has Grown in All 50 States
http://www.cbpp.org/blog/inequality-has-grown-in-all-50-states

The gaps between the richest and poorest families have grown in every state since the late 1970s, a new report from the Economic Policy Institute shows. The top 1 percent's share of income is close to its 1928 peak (see chart).

 

 

The report's alarming findings include:

• In 2013, the average income of the top 1 percent of families nationally was $1.2 million — more than 25 times the average income of the bottom 99 percent.
• The lion's share of income growth since the late 1970s has gone to the richest households.
• The top 1 percent's share of income rose in every state and the District of Columbia — and it doubled nationally, from 10 percent to 20 percent — between 1979 and 2013.
• Since 2007, due to the Great Recession, family income at all levels has fallen and income gaps narrowed somewhat.  On the other hand, the richest families have benefitted most from the economic recovery.  In 24 states, the top 1 percent captured at least half of all income growth between 2009 — the year the recession officially ended — and 2013.

I'll be back tomorrow with some steps that states can take to push back against this extreme income inequality

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Bernanke on Economic implications of Brexit [feedly]

Economic implications of Brexit
http://www.brookings.edu/blogs/ben-bernanke/posts/2016/06/28-brexit

After several days of market upset, a few reflections on last week's momentous vote in Great Britain.

Even more obvious now than before the vote is that the biggest losers, economically speaking, will be the British themselves. The vote ushers in what will be several years of tremendous uncertainty—about the rules that will govern the U.K.'s trade with its continental neighbors, about the fates of foreign workers in Britain and British workers abroad, and about the country's political direction, including perhaps where its borders will ultimately lie. Such fundamental uncertainty will depress business formation, capital investment, and hiring; indeed, it had begun to do so even before the vote. The U.K. economic slowdown to come will be exacerbated by falling asset values (houses, commercial real estate, stocks) and damaged confidence on the part of households and businesses. Ironically, the sharp decline in the value of the pound may be a bit of a buffer here as, all else equal, it will make British exports more competitive.

In the longer run, the uncertainty will dissipate, but the economic costs to the U.K. still will exceed the benefits. Financial services and other globally oriented industries, which depend on unfettered access to European markets and exchanges, will come under pressure. At the same time, the purported gains from freeing the U.K. from the heavy regulatory hand of Brussels will be limited, because Britain will likely have to accept most of those rules (without ability to influence them) as part of restructured trade agreements. Immigration is unpopular in the U.K., and slowing it was a motivation for some "leave" voters, but a more slowly growing labor force likely would also reduce overall economic growth.

The rest of Europe will also be adversely affected, even though Frankfurt and a few other cities may gain finance jobs at the expense of London. The biggest risks here are political, as has been widely noted: In particular, markets are already beginning to price in the risk that other countries or regions will press for greater autonomy from Brussels. Even those sympathetic to such demands should worry that attempts to unwind existing trade and regulatory arrangements could be highly disruptive, as they will likely be for Great Britain. A move toward exit by a member of the euro zone would be particularly destabilizing, as even the possibility that a country might leave the common currency could provoke bank runs and speculative attacks on the country's sovereign debt and on other countries that might be thought to be next in line. The challenge for European leaders will be to keep the overall integration process on track, while finding ways to meet the concerns of potential leavers. One issue that could be revisited is the EU's commitment to the absolutely free movement of people across borders, which seems more a political than an economic principle; the perception that the U.K. had lost control of its borders was one of the most effective arguments for "leave," and secessionist movements elsewhere have also seized on the issue. [1]

Globally, the Brexit shock is being transmitted mostly through financial markets, as investors sell off risky assets like stocks and flock to supposed safe havens like the dollar and the sovereign debt of the U.S., Germany, and Japan. Investors are perhaps more risk-averse than they otherwise would be because they know that advanced-economy central bankers have less space than in the past to ease monetary policy. Among the hardest hit countries is Japan, whose battle against deflation could be set back by the strengthening of the yen and the decline in Japanese equity prices. In the United States, the economic recovery is unlikely to be derailed by the market turmoil, so long as conditions in financial markets don't get significantly worse: The strengthening of the dollar and the declines in U.S. equities are relatively moderate so far. Moreover, the decline in longer-term U.S. interest rates (including mortgage rates) partially offsets the tightening effects of the dollar and stocks on financial conditions. However, clearly the Fed and other U.S. policymakers will remain cautious until the effects of the British vote are better sorted out.

Although bank stock prices are taking hits, especially in the U.K. and Europe, a financial crisis seems quite unlikely at this point. Central banks are monitoring the funding and financial conditions of banks, and so far serious problems have not emerged. (It helps that the date of the referendum has been known for months, giving authorities time to prepare. Also helpful is the substantial buildup in bank capital in recent years.) Through its currency swap lines, established during the global financial crisis, the Fed is making sure that other major central banks have access to dollars. As I've already suggested, the biggest risks to financial stability at this point appear to be political—specifically, the risk of further defections or breakdown in the European Union—rather than economic. The story may not be over yet.

[1] Britain has substantial immigration from both EU and non-EU countries. The debate over Brexit sometimes seemed to confound the two, even though only the former is protected by the EU treaties.

Comments are welcome, but because of the volume, we only post selected comments. 

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NYTimes: Bernie Sanders: Democrats Need to Wake Up

Here's a story from The New York Times I thought you'd find interesting:

The rejection of globalization that powered the Brexit movement could happen in the United States. And it may help Donald J. Trump.

Read More: http://nyti.ms/29cQUeS

Get The New York Times on your mobile device

Brexit: The end of globalization as we know it? [feedly]

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Brexit: The end of globalization as we know it?
// Economic Policy Institute Blog

The British vote to leave the European Union is a watershed event—one that marks the end of an era of globalization driven by deregulation and the ceding of power over trade and regulation to international institutions like the EU and the World Trade Organization. While there were many contributing factors, the 52 percent vote in favor of Brexit no doubt in part reflects the fact that globalization has failed to deliver a growing standard of living to most working people over the past thirty years. Outsourcing and growing trade with low-wage countries—including recent additions to the EU such as Poland, Lithuania, and Croatia, as well as China, India and other countries with large low-wage labor forces—have put downward pressure on wages of the working class. As Matt O'Brien notes, the result has been that the "working classes of rich countries—like Brexit voters—have seen little income growth" over this period. The message that leaders in the United Kingdom, Europe, and indeed the United States should take away from Brexit is that the time has come to stop promoting austerity and business-as-usual trade deals like the Trans-Pacific Partnership (and the now dead Transatlantic Trade and Investment Partnership) and to instead get serious about rebuilding manufacturing and an economy that works for working people.

Conservative austerity policies in Britain over the past two decades, which have slashed government spending and limited government's ability to deliver public services and support job creation, fueled the anger towards elites that encouraged Brexit. At the same time, the neoconservative, anti-regulatory views of public officials in Brussels—who are disdainful of government intervention in the economy and who consistently pushed for the "liberalization of labor markets" and other key elements of the neoconservative model—left Europe unprepared for the Great Recession. It's no surprise, then, that there has been a revolt against the EU. When the financial crisis hit in 2008, EU authorities, especially banking officials in Germany and other wealthy countries that have a dominant influence over the European Central Bank, reacted by blaming public officials in Greece, Spain, Portugal and other countries hardest hit by the crisis. The budget cuts they demanded led to further contractions in spending and soaring unemployment which still persists in much of southern Europe, putting further downward pressure on employment in the UK and setting the stage for widespread populist revolts from the left and right that have gained traction across much of Europe.

Read more

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Acemoglu et al:State capacity and American technology: Evidence from the 19th century

State capacity and American technology: Evidence from the 19th century

Daron Acemoglu, Jacob Moscona, James A Robinson 27 June 2016

The 'great inventions' view of productivity growth ascribes the excellent growth from 1920 to 1970 in the US to a handful of advances, and suggests that today poor productivity performance is driven by a lack of breakthrough discoveries. This column argues instead that the development of an effective governmental infrastructure in the 19th century accounted for a major part of US technological progress and prominence in this period. Infrastructure design thus appears to have the power to reinvigorate technological progress.

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Robert Gordon's new book, The Rise and Fall of American Growth, argues that rapid technological progress in the US economy between 1920 and 1970 was a result of the availability of 'great inventions' that had the potential to drastically change the way individuals lived their lives (Gordon 2016, p. 2). Present day economic growth is slower because inventions that have the transformative power of electricity and the internal combustion engine are no longer emerging.

This perspective runs counter to approaches that emphasise how the pace and direction of technological change respond to incentives and opportunities, often shaped by the institutional environment and policy decisions (see Acemoglu 2009 for an overview).

• Patents, property rights and functioning judicial institutions, for instance, allow individuals to reap the rewards of their investments and new ideas;
• Educational institutions and policies and a legal environment ensuring lack of discrimination against specific groups are also key for opportunities in business as well as in innovation to be open to most individuals in society; and
• Subsidies for research and development or tax credits are important for innovation incentives as well.

These factors have not only been shown to be important in general, but also to have played a critical role in 19th century American innovation (e.g. Sokoloff 1988, Khan 2005).

In a recent working paper, we empirically tests the hypothesis that the US government's infrastructural capacity helped drive innovation during the 19th century (Acemoglu et al. 2016). Our results suggest that, notwithstanding the view that the American state was weak in the 19th century, a major part of the explanation for US technological progress and prominence is the way in which the US developed an effective state.

State capacity and the Post Office

We measure state capacity by making use of the fact that during this period one of the most widespread and instrumental federal institutions was the post office, established by the Post Office Act of 1792. By 1816, 69% of the federal civilian workforce were postmasters and by 1841 the figure had grown to 79% (John 1995, p. 4). According to John (1895), "[F]or the vast majority of Americans the postal system was the federal government" (p. 4, italics in original).

The scale and significance of the post office during the 19th century was noted by its contemporary observers as well. In his famous travels through the US, Alexis de Tocqueville wrote, "There is an astonishing circulation of letters and newspapers among these savage woods… I do not think that in the most enlightened districts of France there is an intellectual movement either so rapid or on such a scale as in this wilderness" (de Tocqueville 1969, p. 283). In 1852, the New York Timesdescribed the post office as the "mighty arm of the civil government" (John 1995, p. 10). In the spirit of the empirical approach in Acemoglu et al. (2015), we use the number of post offices in a county as a proxy for the general infrastructural power and presence of the state, and argue that it was this state presence – not just good timing, randomness, or external factors – that made 19th century innovation and patenting feasible and desirable.

Using historical records compiled by the US Postmaster General, we determined how many post offices were in each US county for several years between 1804 and 1899.¹ As a measure of county-level innovative activity, we use the number of patents granted to inventors living in the county (these data are presented in Akcgit et al. 2013).² There are several reasons for expecting the number of post offices to impact the number of patent grants. First, post offices facilitated the spread of ideas and knowledge. Second, more prosaically, the presence of a post office made patenting much easier, in part because patent applications could be submitted by mail free of postage (Khan 2005, p. 59). Third, the presence a post office is indicative of – and thus the proxy for – the presence and functionality of the state in the area. This expanded state capacity may have meant greater access to legal services and regulation, or greater security of other forms of property rights, all of which are essential conditions for modern innovative activity.

New results

We find a significant correlation between a history of state presence – using the number of post offices as a proxy – and patenting in US counties. We show that the correlation holds either using a sample of the 935 US counties that had been established by 1830, or using a sample to which counties are added as they were established between 1830 and 1890, ultimately reaching 2,644 in total.³ This relationship is not only statistically significant, but also economically meaningful. Our results suggest that the opening of a post office in a county that did not previously have a post office or patents on average increased the number of patents by 0.18 in the long run.  

We subject these results to a series of robustness checks. In addition to county and year fixed effects included in all regressions, we control flexibly for a broad range of initial county characteristics – the fraction of the population that were slaves in 1860, the fraction of the adult population that was literate in 1850, and the values of farm and manufacturing output relative to population in 1850.  Despite the inclusion of these 36 controls, the relationship between post offices and patenting remains highly significant. We also include county-level linear trends to check that differential county-level trends do not explain our results.

One concern with this initial set of results might be that they are confounded by the possibility that post offices were built in counties that already had more patenting activity. Though we cannot fully rule out such reverse causality concerns, we find no statistically or economically significant correlation between patenting and the number of post offices in a county in future years. This suggests that post offices led to patenting and not the other way around. Historical evidence also suggests that post offices were established for a range of idiosyncratic reasons during the 19th century, making it unlikely that reverse causality is driving the association. John (1995) [A8] notes that pressure for the state's services from certain segments of society "guaranteed that the postal network would expand rapidly into the trans-Appalachian West well in advance of commercial demand" (p. 44-5). In his early history of the US Post Office, Cushing (1893)[A9]  wrote that post offices were often established in US territories before the territories were formally settled:

"The establishment of post offices in Oklahoma and in other regions recently opened has often been in advance of actual settlement. Before Oklahoma counties were named they were called by the Department A, B, C, D, E, etc. … Postmasters were appointed upon recommendations of the delegate from Oklahoma and of Senators Plumb, Paddock, and Manderson" (p. 286).

In this context, it seems improbable that post office construction followed patenting activity.

Taken together – while we do not establish unambiguously that the post office and greater state capacity caused an increase in patenting – our results highlight an intriguing correlation and suggest that the infrastructural capacity of the US state played an important role in sustaining 19th century innovation and technological change. In the current economic climate in which pessimism about US economic growth prospects is common, we present a more optimistic historical narrative in which government policy and institutional design have the power to support technological progress.

References

Acemoglu, D. (2009), Introduction to Modern Economic Growth, Princeton University Press

Acemoglu, D., C. Garcia-Jimeno and J. Robinson (2015) "State Capacity and Economic Development", American Economic Review, 105 (8), 2364-2409

De Tocqueville, A. (1969), Democracy in America, ed. J P Mayer, Garden City, Doubleday & Co.

Gordon, R. J. (2016), The Rise and Fall of American Growth, forthcoming, Princeton University Press.

Endnotes

[1] The years for which we were able to obtain county-level post office data are 1804, 1811, 1819, 1830, 1837, 1846, 1850, 1855, 1867, 1870, 1879, 1891, and 1899.  For the years before 1879, we used United States Post Office Department publications titled List of the Post Offices in the United States (in some years, the publication was referred to as Table of Post Offices in the United States). In 1874, the federal government began publishing post office information more systematically in a publication titled The United States Postal Guide, which is digitised only for some years. This publication is our source for the years 1879, 1891, and 1899.

[2] We are grateful to Tom Nicholas for sharing these data.

[3] The former results in a balanced panel of counties while the latter is an unbalanced panel in which counties are included in the data only for the years after their establishment.

John Case
Harpers Ferry, WV

The Winners and Losers Radio Show

7-9 AM Weekdays, WSHC-Listen Live, Shepherd University

Sign UP HERE to get the Weekly Program Notes.

In Case You Missed It . . . [feedly]

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In Case You Missed It . . .
// Center on Budget: Comprehensive News Feed

This week at CBPP, we focused on Social Security and Medicare, health care, the federal budget and taxes, housing, and poverty and opportunity.

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Re: [CCDS Members] Common Dreams: Betraying Progressives, DNC Platform Backs Fracking, TPP, and Israel Occupation

Another bad feature of TPP is it lets corporations sue states and cities for passing environmental measures that may reduce the corporations' imagined future profits. Say goodbye to sovereignty. Say hello to Flint and Benton Harbor.

 

As to austerity, it should start at the top.

 

Per Fagereng

 

From: John Case

Sent: Monday, June 27, 2016 3:50 PM

To: Socialist Economics ; jcase4218.lightanddark@blogger.com ; CCDS-Members

Subject: [CCDS Members] Common Dreams: Betraying Progressives, DNC Platform Backs Fracking, TPP, and Israel Occupation

 

1. There is much I do not buy in this analysis, though I am sure it contains some truth. First: TPP. I thought, and still think, it was a mistake for Sanders, and the labor movement, to make a litmus test out of this issue. Trade inevitably cuts two ways, and in politics, as Brexit shows, it is potentially extremely divisive. Plus, defeating trade agreements, contrary to some popular opinion, does not have much to do with limiting actual real trade. Exporters are winners, imports create losers -- displaced workers with both lower prices AND wages, or higher indebtedness. It's true working families, on average, and on the median, have gotten nothing from trade. But blocking trade agreements, or fighting the objective and irreversible aspects of trade, will not put any money in any workers pockets. The right track on trade is not hard to find: universal collective bargaining, combined with big payoffs and compensation to the "losers" in trade. The #anywonebuthillary folks blame her for this "betrayal" -- but I am pretty sure removing death to TPP was more Obama's influence.

2. The most important issue(s) in the entire election is, as Sanders and Clinton both campaigned on, inequality (on several dimensions) -- and falling incomes and prospects of working families. If that issue is not addressed, if austerity is not reversed, not a single other issue -- not even climate change -- will will get the attention it deserves. If that issue is not addressed, if austerity is not reversed, every struggle will be threatened by fascist distractions -- which will grow stronger and stronger until they ARE addressed.

3. Moratorium on fracking: Science is divided on this.  In West Virginia, it would further exacerbate the already severe economic crisis in the state. Education and the arts would take ANOTHER big hit for a start. Plus, the price of  gas will go up if there is a moratorium. And -- anything that reduces net income for most Americans -- regardless how reasonable --  will be rejected by half. Personally, I think the moratorium is the right call given the earthquake and water contamination reported incidents. But I do not think it is worth going to the mat over -- especially given Clinton and the DNCs pretty strong positions on the wide range of environmental policies. More evidence and study will bring consensus if the strong critics are right.

4.Israel. I agree with the criticism of Clinton on  this. I fear the foreign policy mess -- now raised to a new order of magnitude by the EU crisis --- will result in calls to arms no president will be able to resist. I am not Sanders would be able to resist either.

5. Any article that  quotes Cornel West extensively drives me to the Trust But Verify position. I have read two of his books. Hyper radicalism -- and some powerful insights,  but, to me, a lot of hot air.

Betraying Progressives, DNC Platform Backs Fracking, TPP, and Israel Occupation

Despite its claims to want to unify voters ahead of November's election, the Democratic party appears to be pushing for an agenda that critics say ignores basic progressive policies, "staying true" to their Corporate donors above all else.

During a 9-hour meeting in St. Louis, Missouri on Friday, members of the DNC's platform drafting committee voted down a number of measures proposed by Bernie Sanders surrogates that would have come out against the contentious Trans-Pacific Partnership (TPP), fracking, and the Israeli occupation of Palestine. At the same time, proposals to support a carbon tax, Single Payer healthcare, and a $15 minimum wage tied to inflation were also disregarded.

In a statement, Sanders said he was "disappointed and dismayed" that representatives of Hillary Clinton and DNC chairwoman Debbie Wasserman Schulz rejected the proposal on trade put forth by Sanders appointee Rep. Keith Ellison (D-Minn.), despite the fact that the presumed nominee has herself come out against the 12-nation deal.

"Inexplicable" was how Sanders described the move, adding: "It is hard for me to understand why Secretary Clinton's delegates won't stand behind Secretary Clinton's positions in the party's platform."

The panel also rejected amendments suggested by 350.org co-founder Bill McKibben, another Sanders pick, that would have imposed a carbon tax, declared a national moratorium on fracking as well as new fossil fuel drilling leases on federal lands and waters.

"This is not a political problem of the sort that we are used to dealing with," McKibben stated during the marathon debate. "Most political problems yield well to the formula that we've kept adopting on thing after thing—compromise, we'll go halfway, we'll get part of this done. That's because most political problems are really between different groups of people. They're between industry and environmentalists. That is not the case here."

"Former U.S. Representative Howard Berman, American Federation of State, County, and Muncipal Employees executive assistant to the president, Paul Booth, former White House Energy and Climate Change Policy director Carol Browner, Ohio State Representative Alicia Reece, former State Department official Wendy Sherman, and Center for American Progress President Neera Tanden all raised their hands to prevent a moratorium from becoming a part of the platform," noted Shadowproof's Kevin Gosztola.

According to Gosztola's reporting on the exchange, Dr. Cornel West lambasted the aforementioned panel members, particularly Browner, for "endorsing reform incrementalism" in the face of an urgent planetary crisis.

"When you're on the edge of the abyss or when you're on that stove, to use the language of Malcolm X, you don't use the language of incrementalism. It hurts, and the species is hurting," West said.

Other progressive policies were adopted piecemeal, such as the $15 minimum wage, which the committee accepted but without the amendment put forth by Ellison that would have indexed the wage to inflation.

The panel did vote unanimously to back a proposal to abolish the death penalty and adopted language calling for breaking up too-big-to-fail banks and enacting a modern-day Glass-Steagall Act—measures that Sanders said he was "pleased" about.

According to AP, the final discussion "centered on the Israel-Palestinian conflict."

"The committee defeated an amendment by Sanders supporter James Zogby that would have called for providing Palestinians with 'an end to occupation and illegal settlements' and urged an international effort to rebuild Gaza," AP reports, measures which Zogby said Sanders helped craft.

Instead, AP reports, the adopted draft "advocates working toward a 'two-state solution of the Israel-Palestinian conflict' that guarantees Israel's security with recognized borders 'and provides the Palestinians with independence, sovereignty, and dignity.'"

Citing these "moral failures" of the platform draft, West abstained during the final vote to send the document to review by the full Platform Committee next month in Orlando, Florida.

"If we can't say a word about TPP, if we can't talk about Medicare-for-All explicitly, if the greatest prophetic voice dealing with pending ecologically catastrophe can hardly win a vote, and if we can't even acknowledge occupation... it seems there is no way in good conscience I can say, 'Take it to the next stage,'" West declared before the assembly.

"I wasn't raised like that," he said. "I have to abstain. I have no other moral option, it would be a violation of my own limited sense of moral integrity and spiritual conscience," adding, "That's how I roll."

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License

 

 

John Case
Harpers Ferry, WV

 

The Winners and Losers Radio Show

7-9 AM Weekdays, WSHC-Listen Live, Shepherd University

Sign UP HERE to get the Weekly Program Notes.

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