Friday, December 22, 2017

Wait…now the Trump admin is coming for waitpersons’ tips??!! [feedly]

Wait…now the Trump admin is coming for waitpersons' tips??!!
http://jaredbernsteinblog.com/wait-now-the-trump-admin-is-coming-for-waitpersons-tips/

Heidi Shierholz is an economist at the Economic Policy Institute, but before that, she was the chief economist at the U.S. Department of Labor during the Obama administration. When I read some of Heidi's jaw-dropping work on this rule change on tips the Trump administration was making, I thought even — especially — in the midst of all this attention to the GOP's lousy tax plan, readers needed to learn about this latest effort to whack the working class. Below is my interview with Heidi.

JB: What is this new rule about tips and why is the Department of Labor proposing it?

Heidi Shierholz (Courtesy of Heidi Shierholz)

HS: The Department of Labor's proposed rule is about employers taking control of workers' tips. It rescinds portions of long-standing Department of Labor regulations that prohibit employers from taking tips. Under the administration's proposed rule, as long as the tipped workers earn the minimum wage, the employer can legally pocket their tips.

JB: They make it sound like the point of this is to share the tips with workers "in the back of the shop," like dishwashers and cooks. But I thought that was pretty common already? Do we really need a new administrative rule for that?

HS: Right now, employers cannot require tipped workers to share their tips with "back of the house" workers like dishwashers and cooks, though voluntary tip-sharing arrangements are common. To sell this proposed rule to the public, the Trump administration is talking about it as if it is about tip-pooling, because employers could give some of the tips they take from tipped workers to back-of-the-house workers. They're basically taking money from one group of low-income workers and trying to hide it by suggesting that some of that money could go to other low-wage workers. But in fact, the administration is giving a windfall to restaurant owners out of the pockets of tipped workers.

JB: You've suggested that employers could and would pocket the waitpersons' tips themselves under this rule. What makes you say that?

HS: Evidence shows that even now, when it is illegal for employers to pocket tips, many still do.  Research on workers in three large U.S. cities (Chicago, Los Angeles and New York) found that 12 percent of tipped workers had tips stolen by their employers or supervisors. With that much illegal tip theft taking place, it's clear that when employers can legally pocket the tips, many will. Further, basic economics tells us that back-of-the-house workers are very unlikely to get more pay overall.  The fact that workers are in those jobs means employers are alreadypaying them what they need to pay them to get them in the current environment. If employers do share some tips with them, it will likely be offset by a reduction in their base pay. Here's the bottom line on the economics of this rule: (1) tipped workers will lose out, (2) the take-home pay of back-of-the-house workers will be largely unchanged, and (3) employers will be enriched.

JB: Do you have any sense of the amount in play here?

HS: We estimate that under this rule, employers would pocket $5.8 billion in tips earned by tipped workers each year. This is 16 percent of the estimated $36.4 billion in tips earned by tipped workers annually — roughly $1,000 per tipped worker on average each year.  I should add that this is a conservative estimate. We were careful not to overstate the amount of workers' tips that will be pocketed by employers.

JB: What does the Department of Labor say about this possibility?

HS: DOL acknowledges that employers could legally pocket tips under their proposed rule, stating that the rule "rescinds those portions of the 2011 regulations that restrict employer use of customer tips [emphasis added] when the employer pays at least the full Federal minimum wage." In a deeply unusual move, DOL did not provide an estimate of the amount of tips that will be transferred from workers to employers (which is one reason we did so). This is unusual because agencies are required by law as a part of the rulemaking process to assess all quantifiable costs and benefits to the fullest extent possible. DOL could have produced an estimate; at EPI, we produced an estimate in less than two weeks using routine procedures and taking a methodological approach that is in exactly the same spirit of estimates the Department of Labor produces all the time [Note: Shierholz was formerly chief economist for the DOL]. Why didn't DOL produce an estimate?  To ask the question is to answer it; any good-faith estimate would have shown this rule will result in a substantial shift of tips from workers to employers and the DOL under President Trump — and Labor Secretary Alexander Acosta — is trying to hide that fact.

JB: What happens next? Can people voice their concerns about this rule change?

HS: This is a proposed rule.  Anyone can submit a comment about the rule, and the Department of Labor is required to read them before they decide what the final rule will look like. The rule is open for public comment until Feb. 5.

Further, states can move to increase the protections in their state. Our estimate of the amount of tips that would be pocketed by employers as a result of this rule would have been significantly higher if it weren't for the fact that many states have laws on the books that prohibit employers from pocketing workers' tips. Those laws will not be preempted or superseded by the Trump rule, so tipped workers in those states are protected from this rule. Other states can and should follow suit.

JB: You have been tracking these sorts of behind-the-scenes attacks of labor standards. This tip rule is part of a larger pattern, no?

HS: When Trump was running for office, he made big claims about how he was going to fight for workers.  But since in office, he has consistently moved against the interest of workers in favor of corporate interests — by rolling back important worker protections, advancing nominees to key posts with records of enabling the exploitation of working people, pushing for the dismantling of Obamacare, fighting for a tax bill that overwhelmingly favors the wealthy, etc.  In the case of the tip rule, Trump has delivered a huge gift to the owners of big chain restaurants, for whom getting their hands on workers' tips has been a holy grail for a very long time.  In Donald Trump, they finally found a president who will do their bidding.


 -- via my feedly newsfeed

Wednesday, December 20, 2017

Enlighten Radio:Station Break Over the Holidays

John Case has sent you a link to a blog:



Blog: Enlighten Radio
Post: Station Break Over the Holidays
Link: http://www.enlightenradio.org/2017/12/station-break-over-holidays.html

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#SaveTPS: A Working-Class Struggle [feedly]

#SaveTPS: A Working-Class Struggle
https://workingclassstudies.wordpress.com/2017/12/18/savetps-a-working-class-struggle/

Jessica's TPS work permit cards

By the time the Deferred Action for Childhood Arrivals (DACA) was announced in 2014, I had already benefited from another immigration relief program: Temporary Protected Status (TPS). In January and February 2001, my birth country of El Salvador experienced two earthquakes – a month apart from each other – that utterly devastated every aspect of life in Salvadoran Society. In order to help El Salvador reconstruct and get back on its feet, the United States extended TPS status to undocumented Salvadorans immigrants already in the U.S. I was one of them.  Created by Congress in the Immigration Act of 1990, TPS was meant for people from countries going through environmental disaster and other extraordinary and temporary conditions or confronting armed conflict. Currently, the program is administered by the U.S. Department of Homeland Security (DHS).

In the past two months, TPS has come under attack from the Trump Administration. In November 2017, DHS terminated the program for Haiti, and four months later it extended that terrible decision to TPS-protected immigrants from Nicaragua and Honduras. Starting January 2019, an estimated 50,000 Haitians, 57,000 Hondurans, and 2,550 Nicaraguans with TPS status will become undocumented. They will be expected to leave the U.S. Furthermore, TPS was allowed to expire for three black-majority countries: Guinea, Liberia, and Sierra Leone earlier this year. None of them were granted a renewal period as the DHS had done in previous years.

From a working-class perspective, terminating TPS would be catastrophic for workers and families. The Center for Migration Studies (CMS) has estimated that 81 to 88 percent of TPS-protected immigrants just from El Salvador, Honduras, and Haiti participate in the labor market – well above the rate for the total US population at 63 percent. Indeed, many TPS workers have been in the US for so long that they're now homeowners and entrepreneurs, and so they are very invested in their local economies. For example, Salvadorans with TPS must have continuously resided in the U.S. since the designation date of March 9, 2001 – that's more than a decade of working legally and paying taxes in the U.S. Furthermore, the Center for American Progress (CAP) calculates that the loss of TPS workers would cost employers $967 million in turnover and reduce America's GDP by $164 billion over a decade. Of course, working people represent more than just economic contributions, but you'd think that reports like these would influence rational policymakers. But this administration operates with little regard to facts, policy briefs by experts, or peer-reviewed research. Instead, it responds to the worst instincts in our politics, even excusing and allying with white supremacy. This is not rational. It is shamelessly racist.

Rally to Defend Dream Act and TPS on December 6, 2017 in Washington, D.C.. Image from DMV Sanctuary Network

TPS is a racial and environmental justice issue. The program's primary beneficiaries are Black, LatinX, Asian, and Middle Eastern. We come from Haiti, Syria, Nepal, Honduras, Yemen, Sierra Leone, El Salvador, Somalia, Guinea, South Sudan, Nicaragua, Liberia, and Sudan. All of these nations have historically been at the mercy of imperialist policies – by the U.S. and other countries — that pillage natural resources and do little to promote the well-being of residents, most of whom are people of color. For these countries, TPS was granted on account of either civil strife (usually the reason for Middle Eastern and African countries) and natural disasters (usually the reason for countries in Latin America and the Caribbean) thereby helping these countries rebuild what US Imperialism has destroyed. Thus, TPS is a form of humanitarian relief for civil war refugees and natural disaster victims that is also a form of reparations to formerly colonized working people of the world.

Similar to DACA, TPS beneficiaries like me receive provisional protection against deportation and permission to work in the United States for a limited period of time –no less than 6 months and no more than 18. In order to be eligible, immigrants from TPS-designated countries must be physically present in the U.S. on the date on which the program is designated for their nationality and must continue to reside in the U.S. In addition, the program does not grant permanent legal status in the United States, nor are TPS beneficiaries eligible to apply for permanent residence or for U.S. citizenship. In other words, working-class immigrants can be workers, but not residents let alone citizens.

My TPS work permit has provided me with many opportunities to pursue the American Dream by making it possible for me to join the workforce. It also allowed for me to file taxes – something that I've been doing since I was 17 years old. Since attaining full-time employment, I have been saving to purchase a home in Virginia for my mother. This is my greatest dream – the chance to honor my mother's sacrifice by providing her with a home that she can call her own. Throughout my time living in the United States, I had never thought I'd be faced with the possibility of giving up this dream. Yet all of this changed on November 9, 2016. The morning after, I felt a fear unlike any I had felt before. The right side of my chest hurt, my stomach felt strange. I was hungry, but couldn't bring myself to eat. I could just think of one thing: if Donald Trump's DHS Secretary does not approve our renewals, then we'd potentially be forced to return El Salvador. As of today, I have 81 days left on my TPS work permit if the designation isn't renewed by DHS.

Since the beginning of December, a number of actions have taken place in Capitol Hill to urge members of Congress to save TPS and pass a Clean Dream Act. The deadline for Congress to act is December 22 – the date Congress adjourns for the holidays. The urgency has escalated even more after Congress failed to include protections for immigrant youth in their spending bill fix. If Congress doesn't act soon, then a number of Dreamers and TPS beneficiaries await deportation and an inhumane removal experience from US society.

As we have seen in recent years, more and more of our working-class brothers and sisters from the global south have had to flee civil war, genocide, economic exploitation, and the environmental effects of climate change – and that will almost certainly continue. Efforts have already begun to eliminate other venues for legal immigration, and the gradual termination of TPS is unlikely to be the end of the assault on immigrants under this Administration. If naturalized and documented allies do not step up to demand a comprehensive immigration reform that makes it easier for all workers, political asylees, climate change refugees, and persecuted people to pursue new beginnings in the United States, then we will forsake our responsibility to whose labor provided the capital to build the economies of developed nations.

Jessica F. Chilin-Hernández

Jessica F. Chilin-Hernández serves as Assistant Director of the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown University. She is originally from San Salvador, El Salvador.


 -- via my feedly newsfeed

How Might Restricting Immigration Affect Social Security's Finances? [feedly]

How Might Restricting Immigration Affect Social Security's Finances?
https://www.urban.org/research/publication/how-might-restricting-immigration-affect-social-securitys-finances

Immigration helps finance Social Security by expanding the labor force and increasing payroll tax revenue, which largely funds the program. A recently introduced congressional bill would reduce lawful permanent immigration by about 50 percent. This brief shows that this bill, if enacted, would worsen the already strained finances of the Social Security trust funds. Program revenues would fall faster than expenditures, raising the present value of Social Security's unfunded future obligations by $1.5 trillion, or 13 percent, over the next 75 years. Restricting immigration would require additional Social Security benefit cuts or tax increases to balance the system.

 -- via my feedly newsfeed

Stiglitz: The Global Economy’s Risky Recovery [feedly]

The Global Economy's Risky Recovery
https://www.project-syndicate.org/onpoint/global-economy-risky-recovery-in-2018-by-joseph-e--stiglitz-2017-12

 

As the advanced economies' post-2008 recession fades into the distant past, global prospects for 2018 look a little better than in 2017. The shift from fiscal austerity to a more stimulative stance will reduce the need for extreme monetary policies, which almost surely have had adverse effects not just on financial markets but also on the real economy.

NEW YORK – A year ago, I predicted that the most distinctive aspect of 2017 would be uncertainty, fueled by, among other things, Donald Trump's election as president in the United States and the United Kingdom's vote to leave the European Union. The only certainty, it seemed, was uncertainty – and that the future could become a very messy place. 

Throughout 2017, Trump proved every bit as bombastic and erratic as expected. Anyone who paid attention only to his incessant tweets might think the US was teetering between a trade war and a nuclear war. Trump would insult Sweden one day, Australia the next, and then the EU – and then support neo-Nazis at home. And the members of his plutocratic cabinet rival one another in terms of conflicts of interest, incompetence, and sheer nastiness.

There have been some worrisome regulatory rollbacks, especially concerning environmental protection, not to mention the many hate-driven acts that Trump's bigotry may have encouraged. But, so far, the combination of America's institutions and the Trump administration's incompetence has meant that there is (fortunately) a yawning gap between the president's ugly campaign rhetoric and what he has actually accomplished.

Most important for the global economy, there has been no trade war. Using the exchange rate between Mexico and the US as a barometer, fears for the future of the North American Free Trade Agreement have largely subsided, even as trade negotiations have stalled. Yet the Trump roller-coaster never ends: 2018 may be the year that the hand grenade Trump has thrown into the global economic order finally explodes.

Some point to the US stock market's record highs as evidence of some Trumpian economic miracle. I take it partly as evidence that the decade-long recovery from the Great Recession is finally taking hold. Every downturn – even the deepest – eventually comes to an end; and Trump was lucky to be in the White House to benefit from the work of his predecessor in setting the scene.

But I also take it as evidence of market participants' short-sightedness, owing to their exuberance at potential tax cuts and the money that might once again flow to Wall Street, if only the world of 2007 could be restored. They ignore what followed in 2008 – the worst downturn in three quarters of a century – and the deficits and growing inequality that previous tax cuts for the super rich have brought. 

They give short shrift to the deglobalization risks posed by Trump's protectionism. And they don't see that if Trump's debt-financed tax cuts are enacted, the Fed will raise interest rates, possibly setting off a market correction.

In other words, the market is once again showing its proclivity for short-term thinking and pure greed. None of this bodes well for America's long-term economic performance; and it suggests that while 2018 is likely to be a better year than 2017, there are large risks on the horizon.

It's a similar picture in Europe. The UK's decision to leave the EU didn't have the jolting economic effect that those who opposed it anticipated, largely because of the pound's depreciation. But it has become increasingly clear that Prime Minister Theresa May's government has no clear view about how to manage the UK's withdrawal, or about the country's post-Brexit relationship with the EU.

There are two further potential hazards for Europe. One risk is that heavily indebted countries, such as Italy, will find it difficult to avoid crisis once interest rates return to more normal levels, as they likely will. After all, is it really possible for the eurozone to maintain record-low rates for the foreseeable future, even as US rates increase?

Hungary and Poland represent a more existential threat to Europe. The EU is more than just an economic arrangement of convenience. It represents a union of countries with a commitment to basic democratic values – the very values that the Hungarian and Polish governments now disparage.

The EU is being tested, and there are well-founded fears that it will be found wanting. The effects of these political tests on next year's economic performance may be small, but the long-term risks are clear and daunting.

On the other side of the world, Chinese President Xi Jinping's Belt and Road Initiative is changing Eurasia's economic geography, putting China at the center, and providing an important stimulus for region-wide growth. But China must confront many challenges as it undergoes a complicated transition from export-led growth to growth driven by domestic demand, from a manufacturing economy to a service-based economy, and from a rural to an urban society. The population is aging rapidly. Economic growth has slowed markedly. Inequality is by some accounts almost as severe as in the US. And environmental degradation poses a growing threat to human health and welfare.

China's unprecedented economic success over the past four decades has been partly based on a system whereby broad consultation and consensus-building within the Communist Party and the Chinese state underpinned each set of reforms. Will Xi's concentration of power work well in an economy that has grown in size and complexity? A system of centralized command and control is incompatible with a financial market as large and complex as China's; at the same time, we know where insufficiently regulated financial markets can lead an economy.

But these are all essentially long-term risks. For 2018, the safe bet is that China will manage its way, albeit with slightly slower growth.

In short, as the advanced economies' post-2008 recession fades into the distant past, global prospects for 2018 look a little better than in 2017. The shift from fiscal austerity to a more stimulative stance in both Europe and the US will reduce the need for extreme monetary policies, which almost surely have had distortionary effects not just on financial markets but also on the real economy.

But the concentration of power in China, the eurozone's failure (thus far) to reform its flawed structure, and, most important, Trump's contempt for the international rule of law, his rejection of US global leadership, and the damage he has caused to democracy's standing all pose deeper risks. Indeed, they threaten not just to hurt the global economy, but also to slow what, until recently, had seemed to be an inevitable march toward greater democracy worldwide. We should not let short-run success lull us into complacency.

 -- via my feedly newsfeed

Must-Read : Martin Wolf writes a better version of my appeals than I have managed to: Martin Wolf : Inequality is a thr... [feedly]

Must-Read : Martin Wolf writes a better version of my appeals than I have managed to: Martin Wolf : Inequality is a thr...
http://www.bradford-delong.com/2017/12/must-read-martin-wolf-writes-a-better-version-of-my-appealshttpwwwbradford-delongcom201712six-tax-reform-rela.html

 -- via my feedly newsfeed


Must-Read: Martin Wolf writes a better version of my appeals than I have managed to: Martin WolfInequality is a threat to our democracies: "Between 1980 and 2016, the top 1 per cent captured 28 per cent of the aggregate increase in real incomes in the US, Canada and western Europe, while the bottom 50 per cent captured just 9 per cent of it...

...But these aggregates conceal huge differences: in western Europe, the top 1 per cent captured "only" as much as the bottom 51 per cent. In North America, however, the top 1 per cent captured as much as the bottom 88 per cent....

After agriculture (and the agrarian state) was invented, elites were amazingly successful in extracting all the surplus the economy created. The limit on predation was set by the need to let the producers survive. Remarkably, many desperately poor agrarian societies approached this limit....

In the 20th century... when revolutionary regimes softened (or collapsed) or the exigencies of war faded from memory, quite similar processes to those of the old agrarian states took hold. Vastly wealthy new elites emerged, gained political power, and again used it for their own ends. Those who doubt this should look closely at the politics and economics of the tax bill now going through the US Congress. The implication of this parallel would be that, barring some catastrophic event, we are now on the way back to ever-rising inequality....

The big question,,, is whether the pressures for inequality will go on rising and the willingness to offset them generally decline. On the former, it is quite hard to be optimistic. The market value of the work of relatively unskilled people in high-income countries seems very unlikely to rise. On the latter, one can point, optimistically, to a desire to enjoy some degree of social harmony and the material abundance of modern economies, as reasons to believe the wealthy might be prepared to share their abundance.... [But] elites may become more determined to seize whatever they can for themselves. If so, that would augur badly, not just for social peace, but even for the survival of the stable universal-suffrage democracies that emerged in today's high-income countries in the 19th and 20th centuries... "plutocratic populism"....

Mr Scheidel suggests that inequality is sure to rise. We must prove him wrong. If we fail to do so, soaring inequality might slay democracy, too, in the end.

A primal scream on taxes. And why the plan will likely send more, not less, jobs/investment abroad [feedly]

A primal scream on taxes. And why the plan will likely send more, not less, jobs/investment abroad
http://jaredbernsteinblog.com/a-primal-scream-on-taxes-and-why-the-plan-will-likely-send-more-not-less-jobsinvestment-abroad/

 -- via my feedly newsfeed

First, I give a primal scream over at WaPo re the tax plan that may well be law by the time you read this.

Next, there's been a lot of writing, including my own, on the question of whether the plan further incentivizes or discourages offshoring of investment and jobs. I've thought so, for a number of reasons, and I'm increasingly convinced that's the case.

However, the writing on this is often quite technical and dense. So I was glad to see this WaPo piece break it down quite simply. Here are some of the main factors that I expect to juice the incentive of to offshore production, with my bold added.

First, a corporation would pay that global minimum tax only on profit above a "routine" rate of return on the tangible assets — such as factories — it has overseas. So the more equipment a corporation has in other countries, the more tax-free income it can earn. The legislation thus offers corporations "a perverse incentive" to shift assembly lines abroad, said Steve Rosenthal of the Tax Policy Center.

Second, the bill sets the "routine" return at 10 percent — far more generous than would typically be the case. Such allowances are normally fixed a couple of percentage points above risk-free Treasury yields, which are currently around 2.4 percent.

As a result, a U.S. corporation that builds a $100 million plant in another country and makes a foreign profit of $20 million would pay roughly $1 million in tax versus $4 million on the same profit if earned in the United States, said Rosenthal, who has been a tax lawyer for 25 years and drafted tax legislation as a staffer for the Joint Committee on Taxation.

Finally, the minimum levy would be calculated on a global average rather than for individual countries where a corporation operates. So a U.S. multinational could lower its tax bill by shifting profit from U.S. locations to tax havens such as the Cayman Islands.

Simply put, the more factories you build abroad, the more you can cut your tax bill. They set the non-taxable foreign profits high enough that even with the lower rate at home, there's still a big incentive to produce abroad. And as long as you book some of your profits in non-tax-haven countries, you can send the rest of them to bask on the beach in the Caymen's.

For a deeper dive, see Gene Sperling, Brad Setser, Kim Clausing.

Why is the other side–the folks who claim the plan will increase onshoring/bringing foreign earnings back home–wrong?

First, some profit repatriation is sure to occur, though there's no reason to expect it to flow into investment and jobs here as opposed to share buybacks and dividend payouts. That's the track record, and its likelihood is significantly boosted in this repatriation round as firms are already sitting on more than enough capital to invest and expand if that's what they wanted to do.

But the main analytic mistake I hear folks making is the use of the wrong delta. That is, they're looking at the change in the statutory corporate rate–35-21 percent, a big 14 point drop–and keying their predicted response off that. But the true delta, especially for multinationals, many of whom are already paying effective rates well below 21%, is a lot smaller than that. And, as Setser and others stress, the fact that they can still play all the transfer pricing games they've long perfected–booking income in low-tax havens; booking deductible costs in higher tax places–along with the three points above from the WaPo piece, suggest more, not less, offshoring.

Trust me, I and others will be keeping a very close eye on this.