New York Labor Didn't Shrink from Confronting Amazon [feedly]

New York Labor Didn't Shrink from Confronting Amazon
https://prospect.org/article/new-york-labor-didnt-shrink-confronting-amazon

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AP Photo/Bebeto Matthews

New York City Councilman Jimmy Van Bramer, second from left, speaks during a press conference in Gordon Triangle Park in the Queens borough of New York, following Amazon's announcement it would abandon its proposed headquarters for the area. 

Ever since Amazon's plans to open a second headquarters in New York were announced last November, two things have become clear about organized labor and Amazon. First, labor is eager to unionize Amazon, or at least parts of Amazon, a fiercely anti-union company that doesn't have a single unionized facility in the United States—none of its "fulfillment center" workers, Whole Foods workers, or drivers are unionized. Second, labor is seriously divided about how to achieve its ambitious goal of unionizing Amazon.

Days after Governor Andrew Cuomo and Mayor Bill de Blasio trumpeted the deal in which Amazon promised to create 25,000 jobs in Queens and would receive $3 billion in subsidies, New York's building trades unions announced that Amazon had given its blessing to letting the project's construction work, involving an estimated 5,000 workers, be unionized.  Moreover, Local 32BJ of the Service Employees International Union said that Amazon and the developers on the new project had agreed that the janitors and security guards who worked at Amazon's new headquarters would be unionized. 

Even as the building trades unions and Local 32BJ openly supported Amazon's plans for New York, however, many New York progressives railed against the deal because of Amazon's anti-union reputation, the $3 billion subsidy and fears that Amazon's arrival would push up New York's already high rents. 

But many labor leaders wanted more from Amazon than what the construction trades and Local 32BJ were getting. 

These labor leaders noted that the unionized construction workers and janitors would not be directly employed by Amazon, but by contractors and developers working with Amazon. The AFL-CIO, the Teamsters and the Retail, Wholesale, and Department Store Union (RWDSU) were intent on using Amazon's New York ambitions as a way to get a union inside Amazon. For too long, union leaders argued, major corporations like Amazon have allowed a little unionization on their fringes—for instance, among janitors and construction workers—but not in their core operations. 

As one union strategist put it, "The labor movement had to decide: Are we happy to be a movement on the margins, or do we want to fight for the real pie? … Do we stay in the box or do we fight for the real economic core of the labor market?" The AFL-CIO, Teamsters and RWDSU concluded that with Amazon growing so large and so central to the nation's economy, it was time to confront the giant. 

"We had a broad message that if Amazon wanted the largesse of New York, if they wanted the subsidies, they first needed to respect workers and respect communities," said Stuart Appelbaum, the RWDSU's president. "We looked at how Amazon treats workers all over the world, and it was unacceptable. We looked at the health and safety problems when you go to work at Amazon, and it wasn't good. We talked about how the International Trade Union Confederation named Jeff Bezos [Amazon's founder] one of the worst bosses in the world."

The AFL-CIO, Teamsters and RWDSU called on Amazon to agree to neutrality to help unions organize the 2,500 workers at Amazon's new fulfillment center in Staten Island. Appelbaum voiced confidence that neutrality (a commitment not to oppose unionization) would enable labor to organize the Staten Island warehouse and that this would lead to unionization at other Amazon facilities. As a model, Appelbaum pointed to what his union had done with Zara. The retail clothing chain had agreed to neutrality at one New York store, and once the RWDSU unionized that store, it used that as a launching pad to unionize all eight Zara stores in New York. Similarly, that union used neutrality to organize more than 1,500 workers at 17 H&M stores in the New York area.  

"Everyone knows the history of Amazon across the world, their labor relations and how they treat their workers—it's notorious," said George Miranda, the top Teamsters official in New York. "Now that they were coming into New York, the most progressive, union-heavy state, we were looking for neutrality where they would not fight unionization."

At a tense City Council hearing on January 30, Brian Huseman, Amazon's vice president of public policy, was asked whether his company would agree to neutrality. Huseman said no.  Jimmy Van Bramer, the City Councilman who represents Long Island City, where the Amazon headquarters would be located, responded, "Shame on you,"and "it's a union-busting deal from the beginning."

As the AFL-CIO and unions sought neutrality, sharp divisions emerged within labor. The RWDSU had urged Local 32BJ not to openly endorse the Amazon deal to help keep the heat on the company, but 32BJ said that it was too late, that it already had a deal. Local 32BJ's leaders worried that the other unions' demand for neutrality—and its timing—could fan the anti-Amazon flames just when Amazon officials were hinting they might have second thoughts about opening a headquarters in a city where they didn't feel welcome. 

Last Wednesday, Appelbaum, Miranda and Mario Cilento, the president of the New York State AFL-CIO, met in Governor Cuomo's office with four top Amazon executives. But Cuomo, one labor leader said, made clear that "neutrality isn't even on the table." Nonetheless, the union leaders and Amazon executives then came close to agreeing on a four-point plan that might be called "near neutrality." The points were no company hostility, a fair election process, a pledge not to retaliate against union supporters, and allowing union organizers some access to the Staten Island warehouse to communicate with workers. (Under a 1992 Supreme Court ruling, employers have the right to prohibit union organizers from setting foot on company property.)

Appelbaum said the four-point plan meant "the company would still be able to say, 'You don't need a union. We don't think you need a third party.' But they wouldn't be able to say, 'This terrible union, all they want is to take you money.' But none of that was defined."

Appelbaum continued, "We all agreed to have our attorneys, our wordsmiths, flesh out the concepts." The Teamsters' Miranda added, "It was a good conversation, it wasn't antagonistic. … There was, 'no, we're not doing this.'" 

The labor leaders left thinking they were near a deal. So they were stunned to learn hours later that Amazon had pulled the plug on New York. Mayor de Blasio said, "Out of nowhere, they took their ball and went home."

"I was totally surprised," said the Teamsters' Miranda. "I can only surmise that the boss [Jeff Bezos] decided he had enough. I was disappointed because we lost a lot of jobs, a lot of good jobs. All we were asking for was for people in Staten Island to have an opportunity to decide whether to be unionized. It would have been a win-win for everyone."

It's not clear why Amazon scrapped its New York plans. Some concluded that Amazon, facing a wave of resistance from Alexandria Ocasio-Cortez, many city and state lawmakers and community groups, feared that it would face years of opposition and complaints, even though polls showed that most New Yorkers approved the Amazon deal. Some said that Amazon pulled out because it didn't want to grant labor the least toehold or even a watered-down form or neutrality for just one fulfillment center. 

In a statement, Amazon said, "While polls show that 70 percent of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward." 

Hector Figueroa, Local 32BJ's president, said, "This was a really a lost opportunity from the labor perspective. ... I think people overplayed their hand and they [Amazon] are now gone." Figueroa clearly regretted Amazon's withdrawal; he said his union had deals in the works to have unionized janitors and security guards at Amazon facilities in Queens, Virginia, and Seattle that could have meant over 2,000 well-paid unionized positions. 

Figueroa wrote an op-ed for The New York Daily News, criticizing the left for chasing Amazon away. Amazon, he wrote, was "coming to the most progressive, union-friendly city and high-tax state in the country," and "New York was showing the world that strong unions, smart regulation and progressive taxation are not an impediment to growth." Figueroa added that "opposition from a few progressive organizations—many of which I have historically considered allies—created enough controversy to make Amazon abandon the project."

He asked whether Amazon's decision to reject New York "for expanded operations in Virginia and Tennessee" and other states would "help Amazon workers seeking to organize?"

"Not one bit," he wrote "Does it hurt those efforts? Probably."

Figueroa argued that rather than risk chasing away Amazon before it opened its headquarters, it would have been smarter to let Amazon set up shop in progressive, pro-union New York and then mount a big unionization drive and demand neutrality and more, perhaps by staging mass demonstrations at Amazon's New York headquarters.

Appelbaum sharply questioned Figueroa's suggested strategy. "The point about Amazon being in a pro-union environment would make it more likely that Amazon would be organized is nonsense," Appelbaum said. "Germany is a more pro-union environment; and it [Amazon] has been viciously anti-union there, even refusing to comply with laws requiring it to negotiate with Ver.di [one of Germany's biggest unions]. And Ver.di is a very strong union."

A top labor leader in Washington said Amazon was making a "stupid business decision" by running away from New York over some progressives' complaints and a demand for neutrality when "New York is the greatest collection of human capital in the world."

Despite their differences over strategy regarding Amazon, Figueroa and Appelbaum vigorously agreed on the continued importance of seeking to unionize Amazon. Figueroa said, "I'm hoping that the desire to organize Amazon—which is absolutely necessary for the labor movement—is backed by the planning and level of resources needed." 

Appelbaum said, "Amazon is transforming industry after industry. What we're talking about here is the future world of work. The Bezos model is to treat employees as expendable, to dehumanize and mistreat them. Because Amazon is transforming so many industries, we cannot accept that it's allowed to continue to operate as an anti-union, non-union company." 

 -- via my feedly newsfeed

Progressives need to ignore the noise and stay ambitious [feedly]

Progressives need to ignore the noise and stay ambitious
https://www.washingtonpost.com/outlook/2019/02/14/progressives-need-ignore-noise-stay-ambitious/

By Jared Bernstein

Jared Bernstein, a former chief economist to Vice President Joe Biden, is a senior fellow at the Center on Budget and Policy Priorities and author of 'The Reconnection Agenda: Reuniting Growth and Prosperity'.

February 14

The New Green Deal is a 14-page document that exists about 40,000 feet up in terms of abstraction. It will not be passed by this Congress. That's not just because of the political divide but also because it is not legislation: It's a set of broad ideas — good ones, from my perspective — to reduce carbon emissions while creating good jobs through investment in green industry.

The Green New Deal isn't the only such proposal. Sen. Elizabeth Warren's wealth tax, Sen. Bernie Sanders's estate tax, Rep. Alexandria Ocasio-Cortez's 70 percent income tax over $10 million, Rep. John B. Larson's Social Security expansion, jobs programs from Sen. Cory Booker and Sen. Ron Wyden, universal health coverage plans from every Democratic senator running for president (which is itself a sizable subset of the party's caucus). None of these ideas will become law through this Congress because that's just the political reality of divided government.

So what's the point of offering them? All these proposals elevate vital alternatives to the status quo, on everything from the economy to the environment to racial justice to the basic functions of our democracy. Those of us who agree with the need for changes can, and should, debate the best alternatives. But we must be careful not to let those debates diminish or shut down their urgency.

One challenge we face is that it's harder than it should be to recognize the urgency of the moment. Unemployment is 4 percent and, at the national level, job and wage growth appear solid.

But it doesn't take much to see the cracks in the veneer.

As Kathleen Bryant and I have described, during the 35-day government shutdown, workers with middle-class jobs were seen to be living paycheck-to-paycheck. A 2017 survey by the Federal Reserve found that 4 in 10 adults would be unable to meet an unexpected expense of $400 without "selling something or borrowing money." The scientific community is in wide agreement that the impact of global warming is already being felt in the increased volatility of temperatures and intensity of storms. Wealth concentration is close to levels last seen in the late 1920s, and need I remind you: That didn't end well.

The deterioration of democratic institutions should be setting off daily alarm bells, but instead, we feel like things must be working, because Congress appears to have agreed on Monday not to shut the government down on Friday (though the president had yet to agree). Talk about lowering the bar!

Thanks in no small part to an activist, diverse progressive base — populated by young voters anxious to get out of the center-left box, people of color, immigrants and a few dinosaurs like myself — the new Democratic majority is reflecting this urgency and offering up ideas to address the pressing challenges we face.

Their actions have triggered a typology of responses.

There's the technocratic response (one with which I'm intimately familiar). Policy wonks, even including those favorably disposed toward these sorts of ideas, point out that taxing wealth demands valuations with which the IRS is unfamiliar. (Warren's plan recognizes and addresses this challenge.) We note that guaranteeing a lot of people good government jobs would require a massive extension of administrative capacity by a barely functional federal sector. We point out that despite some assumptions embedded in certain Medicare-for-all plans, private insurers aren't about to "go gently into that good night."

There's the histrionic "socialist!" response, one born of fear that progressives are finally catching onto the game played by the oligarchs and the politicians they fund. Watch this CNBC clip of a debate I just had with anti-tax lobbyist Grover Norquist. When such people claim that progressive ideas threaten to turn the U.S. into the Weimar Republic, you know they're scared, and for good reason. Warren et al. really are coming after their clients!

Finally, there's the response that the new Democrats are "overreaching" and thus undermining their potential success. This is a political argument, based on the belief that there exists a significant, heretofore largely silent, majority of the electorate that might lean toward Democrats but will be scared off by an ambitious progressive agenda.

From where I sit, many of the technocratic challenges are off point, insisting on a level of specificity that is unwarranted at this early stage, as when David Brooks asks about the Green New Deal, "Exactly which agency would inspect and oversee the renovation of every building in America?" Obviously, the fear mongering about socialism is just that; it should be quickly dismissed out of hand.

The question of political overreaching may be a good one, though. My theory of the case is there's a significant swath of the electorate that feels the urgency of the moment — that agrees that when it comes to the toxic combination of wealth concentration and money in politics, climate change and government functionality, it's well past time for nibbling around the edges. They're not worried about precisely which agency will implement future plans. They're worried about the existence of a viable future.

So that means the new Democrats face an interesting challenge: They realize they were sent here to signal that they get the urgency of the moment, and that they aspire to rebuild the institutions necessary to meet the challenges we face. But they must do that under the scrutiny of policy wonks, vicious opponents and the constraints of a complex political process.

I think they're doing a great job so far. The noise will only get louder, but I urge them to block it out and just keep on pushing ahead.

 -- via my feedly newsfeed

Jobs for the Future: Protecting the Labour Market in the Face of the AI Revolution [feedly]

Jobs for the Future: Protecting the Labour Market in the Face of the AI Revolution
https://www.globalpolicyjournal.com/blog/13/02/2019/jobs-future-protecting-labour-market-face-ai-revolution

Technological progress, particularly the development of artificial intelligence (AI), has the potential to drastically change our societies and our labour markets. Whilst AI could make a large proportion of jobs redundant, it also offers opportunities to reshape labour markets and improve the ways in which we work. However, we still know very little about the impact AI will actually have on labour markets – predictions in the academic literature vary wildly, with some claiming that 47% of US jobs are at risk of automation (1), while other work arrives at a prediction of a comparatively small 9% (2).

This is why our research set out to review the literature on labour market effects of automation and AI, critically evaluating the assumptions behind it and the paradigms that shape different predictions. We found that while much of the literature uses highly rigorous methods to estimate the labour market impact of AI, authors end up with drastically different conclusions because there are simply many things we do not yet know about how automation will affect labour markets. These include how the process of automation will proceed in countries with different labour market structures, how long it will take for AI to overcome certain "bottlenecks" such as social intelligence and creativity, and whether AI will be able to replace some occupations entirely, or merely certain tasks within occupations. Moreover, a holistic assessment should estimate not only rates of job replacement, but also the potential for job creation in new sectors and occupations made possible by technological progress, further complicating matters.

While we conclude that cautious estimates may overall be more appropriate, there is no denying that AI has the potential to fundamentally transform our labour markets, and a number of valuable conclusions can be drawn from the literature. AI could disrupt labour markets significantly, and the burden of adjustment will fall mainly on workers in low-skilled, low-wage jobs that will be most easily replaced by technology. Yet the focus on job destruction should not stop us from recognizing the possibility of job creation through new technologies, and it is imperative for policymakers to harness this potential. Finally, a focus on the employment impact of AI as a "numbers game" is too narrow – technology will have large consequences for the ways in which we work, and if the challenges it poses are met, could inject greater flexibility and opportunity into labour markets.

Focusing on the UK policy context, we argue that so far AI has been largely seen as an investment opportunity, with comparatively little attention paid to its potentially disruptive socioeconomic impact. Drawing on international examples, our white paper identifies a number of policy recommendations to address the challenges posed by automation, focusing on labour market and education policy:

1) Assigning Responsibility: Dealing with AI requires coordinated government action across a range of different departments affected, necessitating the establishment of an "AI Tsar" who can draw together different government bodies for an effective and coordinated response.

2) Education and Training: While the UK government has identified investment in STEM education as a priority, more can be done to encourage take-up of STEM subjects among pupils, such as closer embedding of career advice in schools. Moreover, more investment is needed to address the inequitable socio-economic take-up of STEM education. Crucially, however, an exclusive focus on STEM education neglects the fact that collaborative and creative skills remain one of the fields in which humans are expected to retain a comparative advantage over technology in the medium term, necessitating a focus on take-up of these types of skills. We recommend a variety of measures, including the bridging of gaps between the arts and sciences in schools, and raising the profile of caring work as a career through improving its economic and social status.

3) Job Quality: The disruption to labour markets caused by technological progress raises concerns over job quality, and it is imperative that the government smooth increasingly frequent transitions between jobs and rethink a social security system built on the assumption of continuous careers over people's working lives. This necessitates revisiting the incentive structures linked to unemployment support and anticipating effects of longer transitions on pensions and savings, as well as a particular focus on raising job quality in growth sectors such as care work. Moreover, we recommend wider consultation on and greater employee engagement in the improvement of working conditions.

4) Skills and Retraining: The government needs to take action to ensure that workers can update their skills throughout their working lives. Measures that can be taken to make this possible include greater investment in lifelong learning, creating incentives for employers and private contractors to run training programmes, ensuring that necessary infrastructure such as broadband coverage is in place to smooth the transition, and increasing the focus of sanctioning systems on matching people to long term employment.

5) Sharing the Gains Fairly: While the measures outlined can mitigate the potential negative socio-economic consequences of automation, low-skilled and low-waged workers remain most likely to suffer during the transition. Several measures to ease this burden could be explored such as a "robot tax" or, through small-scale trials, a universal basic income. 

 -- via my feedly newsfeed

The irrelevant Independent Group [feedly]

My reaction to this is to find Ben Friedman's The Moral Consequences of Economic Growth ASAP and read it. Based on this report (in the context of the UK/EU Brexit Crisis) it confirms a key feature of Karl Marx's philosophical approach to economics. Namely, that objective is primary to subjective, that the development of capitalism -- the circulation of commodities and capital -- is AN OBJECTIVE  FORCE, not unlike the wind, or the flow of a river. Why is this of interest? (I am not appealing to Marx as an 'authority'). However, when a billionaire chooses a billion $$ investment path that creates serious harm to others, is it the evil character of the billionaire that is responsible, or is it the force of the billion in capital (which is born in commercial growth and reproduces itself via growth) that wants profitable deployment and accepts no excuses?   Is it bad billionaires--the subjective interpretation, or is capitalism failing? And if the latter, how serious a failure? (Feudalism "failed" for a thousand years, and it still hasn't completely disappeared-- there remain 26 monarchies. 

The data is showing that the latter philosophical stance is a more serious guide to the connections between progress toward a progressive society and the boundaries imposed by capitalism in its current development..

An ancient Vietnamese proverb via Ho Chi Minh, and Jackson Browne, may encapsulate the answer: THE HAMMER SHAPES THE HAND.

The irrelevant Independent Group
https://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2019/02/the-irrelevant-independent-group.html

The Independent Group claims to value an "open, tolerant and respectful democratic society" and to oppose Brexit. It wills the ends, but not the means. It fails to see that Brexit and intolerance are the product of economic conditions, and is silent on what to do about those conditions. It looks therefore like a bunch of narcissists complaining that people are not like them whilst offering no real solutions.

As I've said many times, the key to understanding politics today is Ben Friedman's book, The Moral Consequences of Economic Growth, published in 2005. He shows that economic growth begets liberal attitudes and that stagnation breeds intolerance. Subsequent events vindicate him perfectly. As Thiemo Fetzer has shown, pro-Brexit attitudes are "strongly and causally associated with an individual's or an area's exposure to austerity." In a separate vein, Nick Crafts has blamed Brexit upon the banking crisis.

In this sense, economic stagnation is the cause of Brexit and of the turn away from the liberal values the IG claims to espouse. And this stagnation is still with us. Only today the ONS reported that productivity fell last year: this means it has risen only 0.2% a year since 2007 compared to 2.3% per year in the thirty years before then. Because of this, real wages are still below their pre-crisis peak.

The IG, however, is silent about this. Its statement (pdf) makes no mention of austerity or stagnation. In fact, pretty much its only substantive reference to the economy is to government's "responsibility to ensure the sound stewardship of taxpayer's money", which doesn't inspire hope of a firm rejection of austerity.

It claims that our politics is "broken", but is blind to the fact that capitalism is broken too, and that this is a major cause – perhaps the major cause – of our broken politics. Phil says the IG has "learned nothing, nothing since 2015." I'd question only the year here: it seems it has learned nothing since 2008.

Now, you might reply that it's unreasonable to expect a new political grouping to have detailed policies. True enough. The problem with the IG, though, isn't that it doesn't have solutions: it's that it doesn't even see a problem. There's a good debate to be had about how far capitalist stagnation can be fixed by fiscal and monetary policy alone, and how far it needs institutional change too. The IG shows no sign of entering this debate, though.

At least one of its members has form here. Last year Chris Leslie wrote a paper, Centre Ground (pdf), which also largely ignored the financial crisis. I criticizedhim then for failing to see that the crisis necessitated a rethinking of the relationship between the state and the private sector. He shows no sign of learning this lesson: his claim to believe in "evidence-based" policy-making is a sign of astounding lack of self-awareness.

Herein, for me, lies the great virtue of Corbyn (perhaps his only virtue). He at least sees the problem, that the economy is broken and that the Left needs new policies for new times – just as Blair saw this a generation ago. The IG, by contrast, is stuck in a 1990s timewarp, unaware that the world has changed.

Granted, Corbyn might be right in the same way that a stopped clock is sometimes right. For me, this is unimportant. What matters is that we have something like the right policy ideas for our changed economic times. I can't say how much the IG will affect politics. But I do know that whilst they have no awareness of our economic problem, they will be an intellectual irrelevance.

 -- via my feedly newsfeed

Jared Bernstein: Real wage gains and energy prices [feedly]

Real wage gains and energy prices
http://jaredbernsteinblog.com/real-wage-gains-and-energy-prices/

Readers know I'm a huge booster of the impact of low unemployment rates on wage gains, especially for middle and low-wage workers. This dynamic is alive and well in current data and those of us on team Full Employment should elevate and tout it!

But, when it comes to real wage gains in "high frequency data," which have been notable of late–as in, beating productivity growth–it's important to also parse out the role of low energy prices.

The most recent CPI report showed a low topline inflation rate of 1.6 percent over the past 12 months (core CPI inflation rose 2.2 percent). The main factor pushing down on price growth was energy, down 5 percent, with gas prices (a sub-category of energy), down 10 percent.

In my recent write-ups of the jobs and other reports with wage info, I've mentioned the role of low energy prices in real wage growth, but here I'd like to formalize the analysis a bit to try to get a more accurate feel of the importance of this factor.

The first figure below shows recent trends in real hourly wages of mid-level workers (the production, non-sup series from the Establishment survey) deflated by both the topline CPI and CPI less energy. Of course, given volatile energy prices, wages deflated by the sans-energy deflator are smoother and have been gradually climbing since 2015, hitting 1.3 percent last month. The other series hit 1.8 percent, suggesting the difference–0.5 percent–is due to low energy prices.

REAL WAGE GROWTH, YR/YR, DEFLATE BY CPI AND CPI-SANS-ENERGY

Source: BLS

How important is this energy-price effect? Well, a year ago, real wage growth for this series was 0.4 percent, meaning real growth has accelerated by 1.4 percent. But back then, rising energy prices were pushing the other way, i.e., slightly crimping real wage growth. Thus, the change in the energy effect–the difference in difference between the values in the two series above over the past year–is 0.8 percent. That means that 56 percent of the acceleration in real wages over the past year is due to falling energy prices. (See note for details)

That's a sizable impact, but look back at 2015 to see even bigger effects. In Jan, 2015, energy prices were 20 percent below their year-ago level. That month, real wages were up a strong 2.2 percent, and acceleration of 1.5 percent over their year-ago level. The energy price effect more than explains that change.

Such findings do not undercut the longer-term full employment/wage growth connection, as both nominal and real gains are correlated with tighter job markets (I've argued non-linearities are in play but others find that not to be the case). Note, again, the smooth acceleration in real wages since 2015 using the non-energy deflator in the figure above.

But they're also a reminder of the important role of energy prices in near-term, real wage trends. For what it's worth, which isn't a lot, the general consensus is that oil prices, while not expected to fall further, should stay roughly around where they are going forward, as strong global supply meets middling demand. However, there are some noises about OPEC constraining supply, so stay tuned.

Data note: What I'm calling the "energy effect" here is: d_rw_c – d_rw_ne, where the first term is the 12 month log change in the real wage deflated by the top line CPI and the second term is the 12 month log change in the real wage deflated by the CPI less energy. The acceleration calculations first difference d_rw_c and d_rw_ne with their values one year ago and then difference those differences to get the change in the energy effect.

 -- via my feedly newsfeed

Piketty: Wealth tax in America [feedly]

Wealth tax in America
http://piketty.blog.lemonde.fr/2019/02/12/wealth-tax-in-america/#xtor=RSS-32280322

Wealth tax in America

What if the final blow for Emmanuel Macron came from the Massachusetts State senator and not from the yellow vests ? Elizabeth Warren, Harvard University law professor, not really an adept of Chavism or urban guerrilla warfare, a declared candidate in the Democratic primaries in 2020, has just made public what will doubtless be one of the key points in the coming campaign, namely the creation for the first time in the United States of a genuine federal progressive wealth tax. Carefully calculated by Emmanuel Saez and Gabriel Zucman, supported by the best constitutionalists, the Warren Proposal sets a rate of 2% on fortunes valued at between 50 million and 1 billion dollars, and 3% above 1 billion. The proposal also provides for an exit tax equal to 40% of total wealth for those who choose to leave the country and to relinquish American citizenship. The tax would apply to all assets, with no exemptions, with dissuasive sanctions for persons and governments who do not transmit appropriate information on assets held abroad.

The debate has only just begun and the schedule proposed could still be extended and made more progressive with rates rising for example to 5% -10% per annum for multibillionaires. What is certain is that the issue of fiscal justice will be central to the presidential campaign in 2020. The representative from New York, Alexandria Ocasio-Cortez has suggested a rate of 70% on the highest incomes, while Bernie Sanders defends a tax rate of 77% on the highest inherited estates. While the Warren proposal is the most innovative, the three approaches are complementary and should be mutually beneficial.

To understand this, let's look back. Between 1880 and 1910, while the concentration of industrial and financial wealth was gaining momentum in the United States, and the country was threatening to become almost as unequal as old Europe, a powerful political movement in favour of an improved distribution in wealth was developing. This led to the creation of a federal tax on income in 1913 and on inheritances in 1916.

Between 1930 and 1980, the rate applied on the highest incomes was on average 81% in the United States, and the rate applied to the highest inherited estates was 74%. Clearly this did not destroy American capitalism, far from it. It made it more egalitarian and more productive, at a time when the United States had not forgotten that it was their level of educational advancement and their investment in training and skills that was the backbone of their prosperity, and not the religion of property and inequality.

Reagan, then Bush and Trump subsequently endeavoured to destroy this heritage. They turned their backs on the egalitarian origins of the country, by counting on historical amnesia and by fuelling identity-based divisions. With the hindsight we have today, it is obvious that the outcome of this policy is disastrous. Between 1980 and 2020, the rise in per capita national income was halved in comparison with the period 1930-1980. What little growth there was, was swept up by the richest, the consequence being a complete stagnation in income for the poorest 50%. There is something obvious about the movement of return to progressive taxation and greater justice which is emerging today and which is long over-due.

The innovation is that it is now a question of creating an annual wealth tax, in addition to the income and inherited estate taxes. This is a crucial innovation in terms of justice and efficiency. Numerous one-shot capital levies have been successfully applied to real estate, professional and financial assets subsequent to the world wars to pay off public debts, in particular in Japan, in Germany, Italy, France and in many European countries. Collected only once, the rates applied to the largest private estates often rose to 40% -50%, or even more. With an annual wealth tax designed to be applied on a permanent basis, the rates are of necessity more restricted. However, they must be high enough to enable genuine mobility of wealth. From this point of view, the tax on inherited wealth comes much too late. We are not going to wait until Bezos or Zuckerberg reach the age of 90 before they begin to pay taxes. With the 3% annual rate proposed by Elizabeth Warren, a static estate worth 100 billion would return to the community in 30 years. This is a good beginning but, given the average rate of progression of the highest financial assets, the aim should undoubtedly be higher (5% – 10% or more).

It is also crucial to allocate all the revenue to the reduction of inequalities. In particular, the American property tax, like the French real estate tax (taxe foncière) weighs heavily on those with limited resources. Those two venerable property taxes which, contrary to what is sometimes stated, tax not only the ownership of housing (independent of any income, which everyone readily admits, at least for the biggest owners), but also tax business assets (offices, plots of land, warehouses, etc.). The problem is that they have never been genuinely re-thought since the 18th century. The time has come for them to become progressive taxes with graduated rates on net assets, with the key element being strong reductions for indebeted households who are seeking to accede to property ownership. Let's hope that the forthcoming American campaign, like the French discussion around the yellow vests, will at last afford the opportunity for an in-depth discussion on the taxation of property and fiscal justice.

PS: on the Warren proposal, see also this paper by E. Saez and G. Zucman, « How would a progressive wealth tax work?« .

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A Rant on Trump, Trade, and China... [feedly]

An excellent rundown from Brad DeLong on the fools running the China trade war. 

DeLong: A Rant on Trump, Trade, and China...
https://www.bradford-delong.com/2019/02/a-rant-on-trump-trade-and-china.html

I'm still trying to come to terms with my Commonwealth Club event with Steve Moore last month. As therapy, I took some of my less-than-coherent ravings and tried to turn then into proper rant:

Steve, what you are saying is simply delusional.

You keep saying that Xi needs to deal because Trump is deadly serious on China and will not back down. Do remember that Trump declared victory on reforming NAFTA, "the worst trade deal in the history of the world", with small adjustments on autoparts rules-of-origin. Small adjustment on auto parts were enough to transform NAFTA, in Trump's mind, from the worst trade deal in the history of the world into something he is now very proud of. Xi has to to be thinking that he should deal with Trump the same way that Mexico did—hang tough, provide a few symbolic concessions only, and Trump will cave and go back to business-as-usual. What is there in the situation that would keep that from being the obvious strategy for Xi?

The United States in the nineteenth century did not pay a cent to Britain for its intellectual property in textiles and steel. Japan industrialized without paying a lot of attention to claims about who owned intellectual property. Now China is doing the same thing—this is what rising powers always do. We did not pay a cent in royalties to Charles Dickens for all of his novels in the nineteenth century. In fact, as late as the 1950s we used a loophole to steal J.R.R. Tolkien's copyright to The Lord of the Rings. We did it to Britain. Japan did it to us. Now China is doing it to us and Japan. This is a source of annoyance. This is a thing to negotiate about. We push, we pull. But that does not change the fact that international trade relationships—whether between Britain and the United States in the 19th century or Japan and America in the mid-20th century or the U.S. and China today—are all enormously valuable win-wins. We are arguing about the division of an enormous surplus from the global division of labor. Letting that argument turn into a trade war that wrecks the joint is hte definition of stupidity.

The Obama administration sought leverage over China with respect to intellectual property issues. It wished take a harder line with China on intellectual property. The Obama administration sought to get as many as possible of China's other trading partners on our side. It formed this organization called the Trans-Pacific Partnership to set up a common negotiating position on what the international trade régime in the Pacific should be. The plan was for the TPP countries to then confront and negotiate with China. And back then you thought this was good—you and Art Laffer wrote a number of pieces about how great the TPP was, and how much leverage it would have—and, indeed, when the bulk of countries from which China might seek to buy from or sell to are on board, you have a lot of leverage. You wrote about how Marco rubio was to be praised because he had been willing to become a decisive Senate vote to grant Obama the power to negotiate the TPP.

Then, lo and behold, suddenly someone convinces trump that the TPP is the second-worst trade deal in American history—"it's almost as bad as NAFTA!"—and you switch sides: all of a sudden you are there on Trish Regan's show claiming the TPP is a horrible deal for America.

Donald Trump... is not a terribly wise person. Jared Kushner finds a guy Peter Navarro who seems to be simply delusional and brings hin into the White House, Robert Lighthizer—who was an effective pro-free trade technocrat back in the Reagan and Bush 41 administrations—as now adopting positions that I can only understand as driven by corruption. Trump, Navarro, and Lighthizer appear to be running this China trade war. And I cannot find a single person in the White House who approves of what they are doing.

Trump was—it appears Trump still is—insisting on bilateral balance with China. That is not going to happen. Balanced trade inevitably requires bilateral surpluses and deficits because for no country in the world is the set of countries it wants to export to identical to the set of countries it needs to import from. Balance is always triangular and more complicate patterns of balance, not bilateral balance. Moreover, low-savings countries run trade deficits. The United States is a low-savings country. And the United States is a country that wants to import from China but sees other countries as more attractive export targets.

Consider how things look from Xi's perspective, sitting there in Beijing. Xi has got to conclude that somebody who truly cared about and was genuinely serious about the intellectual property issues would not have blown up his leverage on day 1 by nuking the TPP. Someone who cared about trade issues at all would not be damanding something—bilateral trade balance—that is never going to happen both because the U.S. is a low-savings country and low-savings countries run trade deficits, and because the way trade would balance would have China running bilateral deficits with its materials suppliers, its materials suppliers running bilateral deficits with us, and our running a bilateral deficit with China.

Xi has got to conclude 's going on, um, that either this is all a big bluff because someone who was genuinely serious about intellectual property would not have thrown away his leverage to start with and would not be demanding something that simply ain't going to happen no matter what balanced bilateral trade, either it's a bluff or this is simply someone who cannot be reasoned with. Um, and so we're going up kind of have to do what other people do. What the mexican government, the mexican government was faced with trump who thought that naft claimed to think proud. Nafta was not the second worst, but the worst trade deal in american history. And lo and behold, change the name of nafta to what is it canadian us mexican free trade agreement or something and have some very minor adjustments. In what counts as domestic auto parts, production adjustments that us auto manufacturers didn't really want them don't really care about, and all of a sudden, instead of being the worst trade deal in american history, naf does something perfectly fine that trump is way competent to happy to sign and is extraordinarily proud of those ge thinks is betting that trump will fold here again as he folded with nafta and ge thinks if trump doesn't fold well, this isn't really a rational agent we're dealing with.

From Xi's perspective, it has to look like he is negotiating with somebody who is (a) bluffing or (b) flunking his Turing Test.

So Xi and his advisors have to conclude that (a) Trump is probably bluffing—as he bluffed on the shutdown, as the bluffed on NAFTA—and that (b) even if Trump is not bluffing, there is no point in offering concessions because the people running policy—Trump, Navarro, Lighthizer—are not wise, are delusional, appear corrupt—and they have no support either inside or outside the White House. So we had better hope this is another Trump bluff.

#publicsphere #orangehairedbaboons #highlighted #globalization

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