Strengthening collective bargaining is essential to reforming the rigged economy [feedly]

Strengthening collective bargaining is essential to reforming the rigged economy
http://www.epi.org/blog/strengthening-collective-bargaining-is-essential-to-reforming-the-rigged-economy/

Yesterday, Democratic lawmakers released another plank in their "Better Deal" agenda. The policy proposals included focus on strengthening workers' collective voice and ability to negotiate for better wages and working conditions. These are critical components of any meaningful attempt to reform an economy that is rigged against working people. They are essential to creating a fair economy. And they stand in stark contrast to Republican efforts to further advantage those at the top with a tax proposal that would provide 80 percent of its benefits to the top 1 percent—households that currently have incomes of around $730,000 or more.

While the Republican tax proposals will do nothing to help boost workers' wages or overall economic leverage, today's "Better Deal" agenda would help to address these issues by promoting workers' freedom to organize and bargain collectively. The steady decline in unionization over the last 40 years has led to rising inequality and stagnant wages for the American middle class. Not only do union workers earn higher wages, unions have strong positive effects on the wages of comparable nonunion workers, as unions help to set standards for industries and occupations.

Figure A

Working people understand that the economy is not working for them and broadly support the right to organize. In fact, the majority of American workers would vote for union representation if they could. However, current policy fails to ensure that workers have this basic freedom. As private employer opposition to organizing has intensified, policymakers have failed to ensure that the law responds to the realities of the modern workplace. American workers deserve policies that boost our wages and restore our economic leverage and bargaining power. The agenda Democratic lawmakers introduced yesterday would make important strides toward this goal. Ensuring that working people can freely choose to join a union and bargain for better wages and working conditions, that workers are able to exert economic leverage when negotiation fails, and that employers who infringe on workers' freedoms face meaningful penalties is important. In fact, this was the promise of the National Labor Relations Act enacted over 80 years ago. Now, lawmakers need to work to again make this agenda a reality for America's workers.

 -- via my feedly newsfeed

Real world data continues to show no link between corporate cuts and wage increases [feedly]

Real world data continues to show no link between corporate cuts and wage increases
http://www.epi.org/blog/real-world-data-continues-to-show-no-link-between-corporate-cuts-and-wage-increases/

With today's release of the Republican tax plan, the debate over tax policy has finally officially begun. The Trump administration's Council of Economic Advisers (CEA) has been doggedly campaigning for corporate tax cuts by claiming, unconvincingly, that these cuts will off a cascade of economic changes that lead to higher wages for American workers. Earlier this week the CEA released a second report claiming to marshal evidence showing the benefits of corporate tax cuts for economic growth and wages. This post first notes a key flaw that undermines much of the CEA's review of this evidence, and then moves on to data from U.S. states that demonstrates (yet again) that there is no reliable link between cutting corporate taxes and raising wages.

The key flaw undermining much of the CEA report from earlier this week is that they completely ignore how their tax cuts will be financed in the long-run. The economic theory relating corporate rate cuts to higher wages rests on these cuts leading to a drop in interest rates (or a related concept, the "user cost of capital", or UCC) which in turn spurs businesses to invest in productivity-enhancing plants and equipment. The new report cites a number of papers that estimate the effect of a lower user cost of capital (UCC) on economic outcomes.

The first thing to note about these claims is that the size of the effect of a lower UCC on economic outcomes is a contested issue in macroeconomics. But even if it was not, and even if there were universal agreement that a lower UCC significantly boosted growth, there is no reason to believe that enacting the Republican tax plan announced today would result in a lower UCC.

This is because the plan's architects are silent on how these tax cuts will be financed. Cutting corporate income taxes in isolation would indeed boost post-tax returns to capital, which could lower the user cost of capital. But unless these corporate tax cuts are paired with cuts in federal spending or tax increases elsewhere, the resulting increases in budget deficits would put upward pressure on interest rates and the UCC so long as the economy was near full employment.

Proponents of the Republican tax cut plan could argue that the economy is not currently at full employment, so increases in budget deficits would not push up interest rates but would simply increase overall economic activity. This is a more-than-defensible argument—though not one these proponents typically make. But if they chose to make this argument, it severely weakens the case for a corporate tax cut in the first place. If the economy is not currently at full employment, the overriding policy goal should be to push it there as quickly as possible. And corporate tax rate cuts are about the weakest fiscal toolwe have to push the economy towards full employment. Tax cuts targeted at low- and middle-income households, or direct spending on infrastructure and similar investments, would yield a much higher bang-for-the-buck in terms of creating jobs to get us back to full employment.

Finally, if the economy is indeed not at full employment, then productivity-enhancing investment is not constrained by the availability of economy-wide savings, instead it is constrained by a shortfall of spending by households, businesses and governments. In this environment, there will be no downward pressure on interest rates or the UCC from trying to induce more private savings, and even the supply-side rationale for these cuts evaporates.

This debate, and the CEA advocacy for tax cuts, continues to be plagued by a failure to mobilize convincing real-world evidence. I've noted before that the economic data clearly indicates that each link in the causal chain of events that must occur for corporate rate cuts to result in wage gains is weak when assessed against real-world data. In a blog post last week, I called out the CEA for falsely asserting that the benefits of corporate rate cuts for increased capital investment are "highly visible" in international data. Instead, evidence I presented shows that large corporate tax rate cuts between 2000 and 2016 were associated with (very slightly) slower growth in capital investment.

Another place to look for direct evidence that could be "highly visible in the data" regarding the effect of corporate rate cuts is across individual U.S. states. These states are in many ways the best possible candidate for lower corporate taxes to actually show up as higher wages. In the jargon of economists, these individual states can be thought of as "small and open" economies—meaning that their wages, prices, and interest rates are highly driven by influences external to the state economy. This is important because economic models that suggest that corporate income tax rate cuts could translate into large wage gains essentially require economies be small and open. If the data show that even individual U.S. states see little correlation between corporate rate cuts and wage growth, it is almost impossible to credibly claim that a cut in the federal corporate rate for the entire—clearly not "small and open"—U.S. economy would deliver wage growth.

Figure A shows the change in state corporate income tax rates from 1980 to 2010 and the change in the inflation-adjusted state median wage in that period. There is no correlation at all visible in the data. This reveals a key truth policymakers should face: boosting wages will require a range of policies, and most of these useful wage-boosting policies will not involve taxes.

Figure A

Are we sure that nobody in these states will see any gain from cutting corporate taxes? No. Figure B looks at the same 1980 to 2010 period and shows the relationship between the change in state corporate income tax rates and the change in the share of total state income claimed by the richest 1 percent of households. Here the correlation (evidenced by the downward sloping trend-line) is clearer: a reduction in the corporate rate is associated with an increase in the share of total income claimed by the top 1 percent.

Figure B

Essentially, the only thing that seems to qualify as "highly visible in the data" regarding corporate rate cuts is that they send a lot of money to the top of the income distribution.

 -- via my feedly newsfeed

Enlighten Radio Podcasts:Podcast: Winners and Losers Radio: West Virginia Center for Budget and Policy Priorities on the 'China Deal'

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Blog: Enlighten Radio Podcasts
Post: Podcast: Winners and Losers Radio: West Virginia Center for Budget and Policy Priorities on the 'China Deal'
Link: http://podcasts.enlightenradio.org/2017/11/podcast-winners-and-losers-radio-west.html

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Justice, Thrasher tout China deal, but won't release project list or MOU

400 lb Gov. Jim Justice on Monday continued to tout what he says is a 'whale of a' deal for $83.7 billion in Chinese investment in West Virginia's natural gas industry, but he refused to make public a list of the proposed projects or to release an agreement that Commerce Secretary Woody Thrasher signed on the state's behalf.

The Governor's Office had billed a late-morning news conference during legislative interim meetings as an opportunity for Justice to "provide more details" on what the administration says is a historic investment by China Energy Investment Corp. in natural gas industry infrastructure and "downstream" facilities that would allow the state to add value to and greatly boost the economic impact of the boom in gas drilling in the Marcellus Shale region.

However, the appearance by Justice and Thrasher actually provided little new information, except for a description of how the deal almost fell through just a week before last Thursday's announcement during President Donald Trump's visit to China.

"When it got to crunch time, we almost lost this," Justice said. "We went crazy and we scrambled."

Thrasher said state officials became concerned when a news story appeared in late October that described Trump's China trip including energy deals in Texas and the Virgin Islands, but not in West Virginia. The state's team went into high gear to rescue the China Energy investment in West Virginia. Justice and Thrasher credited the governor's personal relationship with Trump as being one of the keys to success, and Justice said the China announcement is more proof of momentum in improving the state's economy.

"There have been incredible things happening in West Virginia," the governor said. "We're truly on our way."

Still, at least two of the projects that are targeted for China Energy's investment — natural gas power plants in Brooke and Harrison counties — have been in the works for some time. And, so far, there have been more questions than answersabout the details of the deal.

Last week's announcement by the Commerce Department said China Energy plans to invest its money in "shale gas development and chemical manufacturing projects" in West Virginia. By way of explanation, the release added that "the projects will focus on power generation, chemical manufacturing, and underground storage of natural gas liquids and derivatives." Planning for the projects "is underway," the release said, and "will proceed in phases over the course of 20 years."

The release noted that Trump and Chinese President Xi Jinping witnessed Thrasher and China Energy President Ling Wen sign a "memorandum of understanding" about the investment.

On Monday, Thrasher said there is an actual list of projects, and explained that his office had initially put together that list in response to China Energy's suggestion that it was looking to invest roughly $80 billion in West Virginia to help address Trump's complaints about a U.S. trade deficit with China. Thrasher said he went through that list with Justice, and then with China Energy, to work it into something that "specifically identified those projects that we were going to go forward with."

Thrasher responded to a question seeking examples of the projects by saying that he "didn't want to get into the specifics of the projects."

When asked if he would make public the project list and the state's "memorandum of understanding" with China Energy, Justice first told reporters that he is "the guy who wants to be so transparent that it's unbelievable," but then referred the question about disclosure to Thrasher. Thrasher said state officials had agreed with China Energy that, "at this point in time, it's not appropriate to release that MOU."

Justice and Thrasher said China Energy had not sought any specific financial incentives from the state beyond what existing programs might provide. They also said the company had not mentioned needing any sorts of changes in existing state laws, rules or regulations — such as the forced-pooling legislation that industry officials have made a priority for them — to make the natural gas projects it wants to fund work.

"It wasn't brought up," Justice said of any changes in state regulation of the gas industry. "None of that was even brought up."

Reach Ken Ward Jr. at kward@wvgazettemail.com, 304-348-1702, or follow @kenwardjr on Twitter.

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John Case
Harpers Ferry, WV

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Enlighten Radio Podcasts:Podcast: The Moose Turd Cafe -- Dr Lechter invites Judge Moore for a 'Turtle Soup' Cafe Appetizer

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Blog: Enlighten Radio Podcasts
Post: Podcast: The Moose Turd Cafe -- Dr Lechter invites Judge Moore for a 'Turtle Soup' Cafe Appetizer
Link: http://podcasts.enlightenradio.org/2017/11/podcast-moose-turd-cafe-dr-lechter.html

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Enlighten Radio: Tuesday alert -- WV China gas deal

http://www.enlightenradio.org/2017/11/tuesday-alert-wv-china-gas-deal.html

Enlighten Radio Podcasts:Podcast: The Moose Turd Cafe -- Why not just ask Putin?

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Blog: Enlighten Radio Podcasts
Post: Podcast: The Moose Turd Cafe -- Why not just ask Putin?
Link: http://podcasts.enlightenradio.org/2017/11/podcast-moose-turd-cafe-why-not-just.html

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