Overworked America [feedly]

Overworked America
https://economicfront.wordpress.com/2019/12/03/overworked-america/

Those living in the US are encouraged to think that they live in the best country in the world with little to learn from the experiences of working people in other countries.  This sense is reinforced by the fact that the mainstream media generally discusses US problems without reference to developments or trends in other developed capitalist countries.

Here is one example: hours of work.  It is a common complaint that Americans work too many hours.  What is rarely noted, as Ryan Cooper points out in his study titled The Leisure Agenda, is that "Americans work far, far more than their counterparts in peer European nations."

The figure below, based on OECD reported data for the year 2018, shows just how much more. The average US worker works roughly 110 hours a year more than the average Japanese worker, or some 2.6 weeks more; about 265 hours a year more than the average French worker, or some 6.6 weeks more; and 420 hours more than the average German worker, or some 10.5 weeks.

The OECD defines average annual hours worked per employed person as:

the total number of hours actually worked per year divided by the average number of people in employment per year. Actual hours worked include regular work hours of full-time, part-time and part-year workers, paid and unpaid overtime, hours worked in additional jobs, and exclude time not worked because of public holidays, annual paid leave, own illness, injury and temporary disability, maternity leave, parental leave, schooling or training, slack work for technical or economic reasons, strike or labor dispute, bad weather, compensation leave and other reasons. The data cover employees and self-employed workers.

The trend in average annual hours of work in the US and other developed capitalist countries highlights just how far outside the mainstream the US labor experience is.  The following figure, again based on OECD data, is taken from Cooper's study.  As he summarizes:

As most nations have gotten richer, their average worker has worked fewer hours. But this is not true of the United States. As shown [below], among wealthy OECD nations with data going back that far, the US was in the middle of the pack among rich nations in 1970. Now, it works the most out of any in this cohort.

One reason for the higher average hours of work in the US is that it is the only major OECD country that does not provide a federal statutory minimum annual leave entitlement to its workers, as illustrated in the following figure which is also from Cooper's study.

The annual US work hours presented above is for the average worker, which means that it includes the work experience of people who are forced to work extremely long hours as well as those who cannot find full-time employment. In both cases, the US employment situation is a major contributor to the stress, poor health, and weakening community ties experienced by growing numbers of workers.

The lower average annual hours of work in other OECD countries does not mean that workers in those countries don't have their own challenges, especially as many now confront governments that seek to undermine their past gains. At the same time, it does demonstrate that there is plenty of room for improvement in the United States.

In other countries a reduction in work hours and paid annual leave entitlements were won through aggressive workplace struggle and political pressure on governments. There is, of course, a long history of struggle for a shorter workday in the US, which came to be symbolized by May Day demonstrations and strike actions, and deserves renewed attention.  It is also worth remembering that activists in that struggle were well aware that achieving a shorter work week was critical to securing for workers the time and energy needed to build a powerful working class movement for social transformation.

 -- via my feedly newsfeed

November job gains beat expectations, as Wal S’yas (reversed Say’s Law) takes hold [feedly]

November job gains beat expectations, as Wal S'yas (reversed Say's Law) takes hold
http://jaredbernsteinblog.com/november-job-gains-beat-expectations-as-wal-syas-reversed-says-law-takes-hold/

Payrolls rose by 266,000 last month and the unemployment rate ticked down slightly to 3.5%. Hourly wage growth for all private sector workers remained where it has been, up 3.1%, year-over-year, while the pay of lower-wage workers–the 82% of payroll employment that's blue collar in factories and non-managers in services–has been trending up a bit, and was up 3.7% last month (a slight tick down from 3.8% in October). With inflation running around 2%, this translates into solid real wage gains for these workers. The stronger trend for lower-paid workers is also a reminder of who disproportionately benefits from persistently high-pressure labor markets.

The November jobs number of 266K was boosted by the return of almost 50,000 strikers due to the end of the GM strike. Thus, much like we discounted the loss of those workers in the previous month's jobs report, we should discount their return (I discuss the trend in manufacturing employment below). Even so, our monthly smoother implies, if anything, there's been a slight acceleration in job gains in recent months (the smoother averages monthly payroll gains over 3, 6, and 12-month windows, and thus smooths out the strike effect).

In tandem with the wage results, payroll gains of this magnitude suggest that the persistently high-pressure labor market is boosting labor supply at both the extensive and intensive margins, i.e., pulling people in and adding hours for incumbent workers. I often stress the positive wage effects of high pressure labor markets, but the supply effects are structurally important, as they imply the potential for increased economic capacity. Fans of economic theory will recognize this as reversed "Say's Law." That is, Say's Law, which is now widely viewed as erroneous, argued "supply creates demand." It appears more accurate to argue that demand–in this case, persistently strong demand for labor–creates (labor) supply.

A hugely important policy question is whether that supply lasts past the next recession. This will surely require employment-oriented policies to avoid last-hired, first-fired outcomes when demand eventually lags. Such policies include subsidized employment, training, and apprenticeship programs.

Turning to one key, and less favorable, recent sectoral development, many different data sources have shown weakness in manufacturing employment, driven by the trade war and slower global growth. What is sometimes not emphasized enough in this context is that both of these factors tend to put upward pressure of the US dollar. As trade economist Rob Scott pointed out in a recent op-ed: "The dollar has climbed 10 percent since the tariffs first took effect in March 2018, and has also risen 11 percent against the [Chinese] yuan in the same period. This lowers the cost of imports and raises the cost of U.S. exports…"

As the next figure shows (and note the figure smooths out the strike effects), there's but a large deceleration in manufacturing job gains as the above-named factors have seriously dinged manufacturing activity.

The U.S. job market continues to post impressive job gains. While overall wage trends remain stalled, those of lower-paid workers serve as a reminder of one of the benefits of high-pressure job markets. At the micro-level, especially given low inflation, this means real paycheck gains for working Americans. At the macro-level, it means we can expect the American consumer to continue to fuel the already record-long expansion. Against this broadly favorable backdrop, Trump's trade war is a clear negative, demonstrably hurting factory workers.

 -- via my feedly newsfeed

America’s Red State Death Trip [feedly]

America's Red State Death Trip
https://www.nytimes.com/2019/12/02/opinion/life-expectancy-united-states.html

"E pluribus unum" — out of many, one — is one of America's traditional mottos. And you might think it would be reflected in reality. We aren't, after all, just united politically. We share a common language; the unrestricted movement of goods, services and people is guaranteed by the Constitution. Shouldn't this lead to convergence in the way we live and think?

In fact, however, the past few decades have been marked by growing divergence among regions along several dimensions, all closely correlated. In particular, the political divide is also, increasingly, an economic divide. As The Times's Tom Edsall put it in a recent article, "red and blue voters live in different economies."

What Edsall didn't point out is that red and blue voters don't just live differently, they also die differently.

About the living part: Democratic-leaning areas used to look similar to Republican-leaning areas in terms of productivity, income and education. But they have been rapidly diverging, with blue areas getting more productive, richer and better educated. In the close presidential election of 2000, counties that supported Al Gore over George W. Bush accounted for only a little over half the nation's economic output. In the close election of 2016, counties that supported Hillary Clinton accounted for 64 percent of output, almost twice the share of Trump country.

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The thing is, the red-blue divide isn't just about money. It's also, increasingly, a matter of life and death.

Back in the Bush years I used to encounter people who insisted that the United States had the world's longest life expectancy. They hadn't looked at the data, they just assumed that America was No. 1 on everything. Even then it wasn't true: U.S. life expectancy has been below that of other advanced countries for a long time.

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The death gap has, however, widened considerably in recent years as a result of increased mortality among working-age Americans. This rise in mortality has, in turn, been largely a result of rising "deaths of despair": drug overdoses, suicides and alcohol. And the rise in these deaths has led to declining overall life expectancy for the past few years.

What I haven't seen emphasized is the divergence in life expectancy within the United States and its close correlation with political orientation. True, a recent Times article on the phenomenon noted that life expectancy in coastal metropolitan areas is still rising about as fast as life expectancy in other advanced countries. But the regional divide goes deeper than that.

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A 2018 article in The Journal of the American Medical Association looked at changes in health and life expectancy in U.S. states between 1990 and 2016. The divergence among states is striking. And as I said, it's closely correlated with political orientation.

I looked at states that voted for Donald Trump versus states that voted for Clinton in 2016, and calculated average life expectancy weighted by their 2016 population. In 1990, today's red and blue states had almost the same life expectancy. Since then, however, life expectancy in Clinton states has risen more or less in line with other advanced countries, compared with almost no gain in Trump country. At this point, blue-state residents can expect to live more than four years longer than their red-state counterparts.

Is this all about deaths of despair in the eastern heartland? No. Consider our four most populous states. In 1990, Texas and Florida had higher life expectancy than New York and almost matched California; today, they're far behind.

What explains the divergence? Public policy certainly plays some role, especially in recent years, as blue states expanded Medicaid and drastically reduced the number of uninsured, while most red states didn't. The growing gap in educational levels has also surely played a role: Better-educated people tend to be healthier than the less educated.

Beyond that, there has been a striking divergence in behavior and lifestyle that must be affecting mortality. For example, the prevalence of obesity has soared all across America since 1990, but obesity rates are significantly higher in red states.

One thing that's clear, however, is that the facts are utterly inconsistent with the conservative diagnosis of what ails America.

Conservative figures like William Barr, the attorney general, look at rising mortality in America and attribute it to the collapse of traditional values — a collapse they attribute, in turn, to the evil machinations of "militant secularists." The secularist assault on traditional values, Barr claims, lies behind "soaring suicide rates," rising violence and "a deadly drug epidemic."


 -- via my feedly newsfeed

OECD highlights temporary labor migration: Almost as many guestworkers as permanent immigrants [feedly]

OECD highlights temporary labor migration: Almost as many guestworkers as permanent immigrants
https://www.epi.org/blog/oecd-highlights-temporary-labor-migration-almost-as-many-guestworkers-as-permanent-immigrants/

The 2019 edition of the Organization for Economic Cooperation and Development's (OECD) annual International Migration Outlook report included a new chapter, "Capturing the ephemeral: How much labour do temporary migrants contribute in OECD countries?" It's a good question, and one that had not yet been answered.

There is a dearth of data on temporary labor migration programs (TLMP) or schemes—aka guestworker programs, where migrants are employed temporarily in a country outside their own—and it hinders the ability of policymakers to make informed decisions. The OECD declared TLMPs are "a core concern in the public debate across OECD countries" but warns that their impacts are "understudied." This information deficit exists despite the fact that TLMPs are controversial and make up an increasing share of labor migration, and in the United States in particular have been at the center of debates about how to reform the U.S. immigration system.

Why are TLMPs controversial and at the center of public debates? First, their size. One of OECD's key findings is that the 4.9 million temporary labor migrants that entered OECD countries in 2017 is "almost as many… as permanent migrants in all categories combined." Ignoring temporary labor migration in the OECD means ignoring nearly half of all migration.

Many employers want larger TLMPs and fewer regulations governing their use. But there are high economic, social, and psychological costs for the migrant workers who participate in temporary programs, including frequent human rights violations suffered in both countries of origin and destination. Further, some abuses that are technically legal are facilitated by the legal frameworks of TLMPs. In most TLMPs, employers control the visa status of their temporary migrant employees or "guestworkers"—which means getting fired makes them deportable. In part, that's why TLMPs have been called things like "The New American Slavery."

TLMPs raise technical issues that are not easily resolved. For example: Which industries are permitted to hire migrant workers? How will appropriate numerical limits in TLMPs be determined? What rights will migrants have once they've been admitted into receiving country labor markets? Can they bring their families? Will migrants be tied to one employer or be allowed to change jobs and employers? How will receiving country governments ensure that migrants return after their employment contracts end, or will migrants be allowed to become permanent residents? Do citizens in receiving countries have first preference for jobs that employers want to fill with migrants? Will migrants be paid the same wages as similarly situated local workers?

Answers to these questions require honest discussions about the trade-offs that are inherent in migration policymaking, including whether labor migration is an appropriate response to employer claims of labor shortages. (Raising wages or increasing training may be a better response in many cases.) But these questions are particularly difficult—if not impossible—to answer satisfactorily without reliable data for evidence-based policy making.

The United States illustrates the problem of trying to make policy without reliable data. Comprehensive immigration reform bills adopted by the Senate in 2006 and 2013 were based on a "three-legged stool" of more enforcement, legalization for unauthorized immigrants, and more temporary labor migration. Thinking about the future impacts of temporary labor migration required analysis about existing TLMPs and predictions based on that analysis. But U.S. government-collected data on temporary work visas are inadequate, generally of poor quality, recorded in an inconsistent manner across federal agencies, and the most useful data are not published regularly or systematically. The result was a lack of reliable estimates and assumptions—instead, policymakers and the public had only claims made by advocates and employers to rely on.

The OECD "aims at closing" research gaps on labor migration "by providing the first estimates of the total employed temporary migrant population in full-year equivalent for 20 OECD countries." This is an especially useful finding, since the United States government has no official corresponding estimate of the number of temporary migrants employed in the labor market. The U.S. Department of Homeland Security (DHS) estimates what it refers to as the "resident nonimmigrant population"—temporary migrant workers are issued "nonimmigrant" visas that authorize employment—but it does not estimate how many nonimmigrants were employed in the U.S. labor market or calculate the number of full-time equivalent (FTE) jobs, nor does it provide numerical estimates by individual TLMP or visa classification.

OECD includes in their estimates "all categories of temporary migrants who may participate in the host country labour market" such as "international students, cultural exchange programme participants, service providers such as [European Union/ European Free Trade Association-]posted workers, as well as cross-border workers." There are hundreds of thousands of temporary labor migrants in the United States, and many more around the world, who are employed despite the fact that their visas are ostensibly for other purposes, like attending university or participating in a trainee or cultural exchange program. But while DHS's provides a population estimate for international students and cultural exchange visitors, it does not provide an estimate on how many of each group were employed.

Before the OECD's report, previous EPI research estimated that there were 1.4 million nonimmigrants employed in the United States during some portion of 2013, accounting for approximately 1% of the labor force. The OECD found 1.6 million FTE jobs filled by temporary labor migrants in the United States in 2017, accounting for 1.04% of the labor force.

OECD reported that 1.8 million temporary residence visas were issued in the United States in 2017, accounting for a third of all temporary residence visas issued across all 20 OECD countries. Next on the list were Australia, Japan, Canada, New Zealand, France, and South Korea. While most of the visas counted in this estimate permit employment, not all of them do, and across the OECD, one-quarter of the visas issued were renewals rather than newly issued visas. OECD also found that in the United States, less than half of temporary visas were issued to migrants in traditional TLMPs; over 20% went to accompanying family members, one-quarter to international students, and 6% to exchange visitors.

The OECD charted the distribution of the maximum allowed duration of stay of temporary visa holders, finding that 14.5% allowed a stay of over five years and 13.7% had no maximum duration, while just over one-fifth allowed a stay of 13–24 months and one-third allowed a stay of two to five years. Only 12.1% authorized a stay of less than 12 months.

These findings raise questions about what "temporary" means and whether the jobs migrant workers fill are truly temporary: If nearly nine in 10 temporary visas authorize a stay longer than one year, are migrants really filling temporary jobs? Can a job that lasts more than one year be considered temporary? Many of these jobs may be permanent jobs that have been misclassified as temporary—perhaps because employers prefer precarious workers over whom they can exert more control if they hold job-contingent temporary visas. Shouldn't governments instead consider issuing permanent immigrant visas that lead to citizenship for migrants who are filling de facto permanent jobs?

The OECD has spotlighted an important gap in migration research—one we have tried to call attention to in the past—that leads to important questions about the current trend in labor migration governance toward more temporary workers instead of permanent immigrants who have equal rights in destination countries. We hope that the OECD's new findings revealing the importance and size of temporary labor migration will spur improved data collection by governments and more research on TLMPs

 -- via my feedly newsfeed

Trump Inflames the Trade Wars, Again [feedly]

Trump Inflames the Trade Wars, Again
https://www.nytimes.com/2019/12/03/business/trump-trade-wars.html

 -- via my feedly newsfeed

LONDON — President Trump left the global economy unsettled on Tuesday when he threatened NATO allies and suggested that he could wait a year to reach a trade agreement with China, sending stock markets swooning.

In comments to reporters sandwiched between meetings with fellow leaders of the North Atlantic Treaty Organization, Mr. Trump said a trade deal with China might not be finalized until after the 2020 presidential election in November. Earlier this fall, he hinted that a deal was near completion, signaling that the trade war could be winding down.

But this week, peace no longer seems at hand. Beyond Mr. Trump's downbeat assessment of the conflict with China, his administration is considering tariffs as high as 100 percent on French items including wines, cheeses and handbags. He promised to impose tariffs on aluminum and steel from Brazil and Argentina. And he raised fresh doubts about international negotiations that were supposed to defuse a growing conflict over how American technology companies are taxed in Europe.

The president's affinity for using unpredictability as a negotiating tactic has angered trading partners and at times roiled financial markets — including on Tuesday, when stocks dropped in Europe and the United States after Mr. Trump's trade comments. The S&P 500 index fell about 0.7 percent Tuesday, after a similar decline Monday.

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"In some ways I like the idea of waiting until after the election for the China deal," Mr. Trump told reporters during a 52-minute appearance in London with Jens Stoltenberg, the NATO secretary general. He added: "But they want to make a deal now, and we'll see whether or not the deal's going to be right. It's got to be right."

The president also said Tuesday that he might impose new import taxes on goods from Germany and any other NATO ally that did not fully pay its dues to the organization, an inaccurate description of how the military alliance is maintained. Member states are expected to maintain robust military spending, but they do not pay dues.

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He then renewed a threat, which his administration made in a formal trade investigation concluded on Monday, to place tariffs of up to 100 percent on some French exports. That would be in response to a new French tax on online economic activity, which will hit American giants like Amazon and Facebook. His administration has threatened similar actions in response to digital tax pushes in Italy, Turkey and Austria.

"They're American companies," Mr. Trump said. "We want to tax American companies. That's important. We want to tax them, not somebody else."

The threat of such draconian tariffs, which were spearheaded by Robert Lighthizer, the United States trade representative, raised speculation that the Trump administration could abandon the tax talks taking place through the Organization for Economic Cooperation and Development. However, the Treasury Department, which is leading those negotiations, is expected to proceed with them.

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The events of recent days seem to have put an end to weeks of relative calm and record highs in the stock market, after more than a year of tumult largely caused by Mr. Trump's decisions to impose tariffs on a variety of products, including $250 billion of imports from China.

Image
French wines could face a tariff of up to 100 percent.Credit...Saul Martinez for The New York Times

The jolt to the stock market this week stood out after three straight months of placid trading and incremental gains. Measures of global policy uncertainty, while still historically elevated, had dipped this fall as Mr. Trump suggested a breakthrough with China was near. Farmers, who have been hurt by Chinese retaliatory tariffs against the United States, had reported a surge of economic optimism in November, according to an index compiled by Purdue University.

While some analysts argued that Mr. Trump's bravado was a negotiating tactic that markets should ignore, others said the falling stock prices were a sign that investors had been too optimistic about the trade war. European leaders warned that they would retaliate if Mr. Trump levied tariffs on French goods, blaming him for escalating what is becoming a multinational fight over the taxation of tech companies. Some economic forecasters warned that Mr. Trump was risking the health of the global economy.

"It is remarkable how President Trump seems impervious to the delicate state of an economic expansion that is clearly long in the tooth," Bernard Baumohl, the chief global economist for the Economic Outlook Group, wrote in a research note. He called Mr. Trump's trade remarks "disheartening to say the least."

Legislation that the House passed overwhelmingly on Tuesday could also escalate tensions with Beijing. The bill would require the administration to toughen its response to China's crackdown on predominantly Muslim ethnic minorities, including Uighurs, in the far western region of Xinjiang. Beijing, which has called the bill a malicious attack, has threatened to retaliate.

Business groups expressed alarm about Mr. Trump's China comments.

"We want and need to see a deal as soon as possible," said David French, the senior vice president for government relations for the National Retail Federation. "The tariffs continue to hurt U.S. businesses, workers and consumers and are a substantial drag on the U.S. economy."

ADVERTISEMENT

Continue reading the main story

But delaying a China deal could have political benefits for Mr. Trump, some analysts said.

"Any deal reached now will be subject to scrutiny for the next 12 months and the harsh disinfectant of sunlight during the general election cycle," said Henrietta Treyz, the director of economic policy research at Veda Partners, an investment advisory firm. "Trade wars are political — right now, President Trump has the benefit of widespread bipartisan U.S. voter opposition to China and a robust consumer spending cycle."

Mr. Trump's trademark volatility was on full display Tuesday. At points, he seemed to suggest tensions with trading partners like France and even the long standoff with China could be easily resolved. At others, he suggested that he would make final deals only when he felt like it, and that more tariffs could be on the way in the interim. At one point, he said he would not settle for an "even" agreement with China — only one that favored the United States.

Administration officials sounded increasingly pessimistic that a first phase of any China deal would be reached anytime soon.

Commerce Secretary Wilbur Ross said on Tuesday that he believed holding off on a deal until after the election would give Mr. Trump more leverage in negotiations — assuming he won.

"Because once the election occurs — and the president seems to be in very good shape for the election — once it occurs and he's back in, now that's no longer a distraction that can detract from our negotiating position," Mr. Ross told CNBC.

Mr. Ross said that the agreement in principle that Mr. Trump promoted in October was at the "40,000-foot level," but that coming to terms on details such as what American agriculture products China would buy and how the deal would be enforced had proved to be more challenging. He said that barring a breakthrough, additional tariffs scheduled to be imposed on Dec. 15 would go into effect.

ADVERTISEMENT

Continue reading the main story

"We don't have a breakthrough until it's in black and white, on paper — signed, sealed and delivered," he said.

Trump Inflames the Trade Wars, Again [feedly]

Trump Inflames the Trade Wars, Again
https://www.nytimes.com/2019/12/03/business/trump-trade-wars.html

LONDON — President Trump left the global economy unsettled on Tuesday when he threatened NATO allies and suggested that he could wait a year to reach a trade agreement with China, sending stock markets swooning.

In comments to reporters sandwiched between meetings with fellow leaders of the North Atlantic Treaty Organization, Mr. Trump said a trade deal with China might not be finalized until after the 2020 presidential election in November. Earlier this fall, he hinted that a deal was near completion, signaling that the trade war could be winding down.

But this week, peace no longer seems at hand. Beyond Mr. Trump's downbeat assessment of the conflict with China, his administration is considering tariffs as high as 100 percent on French items including wines, cheeses and handbags. He promised to impose tariffs on aluminum and steel from Brazil and Argentina. And he raised fresh doubts about international negotiations that were supposed to defuse a growing conflict over how American technology companies are taxed in Europe.

The president's affinity for using unpredictability as a negotiating tactic has angered trading partners and at times roiled financial markets — including on Tuesday, when stocks dropped in Europe and the United States after Mr. Trump's trade comments. The S&P 500 index fell about 0.7 percent Tuesday, after a similar decline Monday.

Subscribe to With Interest

Catch up and prep for the week ahead with this newsletter of the most important business insights, delivered Sundays.

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Continue reading the main story

"In some ways I like the idea of waiting until after the election for the China deal," Mr. Trump told reporters during a 52-minute appearance in London with Jens Stoltenberg, the NATO secretary general. He added: "But they want to make a deal now, and we'll see whether or not the deal's going to be right. It's got to be right."

The president also said Tuesday that he might impose new import taxes on goods from Germany and any other NATO ally that did not fully pay its dues to the organization, an inaccurate description of how the military alliance is maintained. Member states are expected to maintain robust military spending, but they do not pay dues.

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He then renewed a threat, which his administration made in a formal trade investigation concluded on Monday, to place tariffs of up to 100 percent on some French exports. That would be in response to a new French tax on online economic activity, which will hit American giants like Amazon and Facebook. His administration has threatened similar actions in response to digital tax pushes in Italy, Turkey and Austria.

"They're American companies," Mr. Trump said. "We want to tax American companies. That's important. We want to tax them, not somebody else."

The threat of such draconian tariffs, which were spearheaded by Robert Lighthizer, the United States trade representative, raised speculation that the Trump administration could abandon the tax talks taking place through the Organization for Economic Cooperation and Development. However, the Treasury Department, which is leading those negotiations, is expected to proceed with them.

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After 240 Years and 7 Generations, Forced to Sell the Family Farm

Continue reading the main story

ADVERTISEMENT

Continue reading the main story

The events of recent days seem to have put an end to weeks of relative calm and record highs in the stock market, after more than a year of tumult largely caused by Mr. Trump's decisions to impose tariffs on a variety of products, including $250 billion of imports from China.

Image
French wines could face a tariff of up to 100 percent.Credit...Saul Martinez for The New York Times

The jolt to the stock market this week stood out after three straight months of placid trading and incremental gains. Measures of global policy uncertainty, while still historically elevated, had dipped this fall as Mr. Trump suggested a breakthrough with China was near. Farmers, who have been hurt by Chinese retaliatory tariffs against the United States, had reported a surge of economic optimism in November, according to an index compiled by Purdue University.

While some analysts argued that Mr. Trump's bravado was a negotiating tactic that markets should ignore, others said the falling stock prices were a sign that investors had been too optimistic about the trade war. European leaders warned that they would retaliate if Mr. Trump levied tariffs on French goods, blaming him for escalating what is becoming a multinational fight over the taxation of tech companies. Some economic forecasters warned that Mr. Trump was risking the health of the global economy.

"It is remarkable how President Trump seems impervious to the delicate state of an economic expansion that is clearly long in the tooth," Bernard Baumohl, the chief global economist for the Economic Outlook Group, wrote in a research note. He called Mr. Trump's trade remarks "disheartening to say the least."

Legislation that the House passed overwhelmingly on Tuesday could also escalate tensions with Beijing. The bill would require the administration to toughen its response to China's crackdown on predominantly Muslim ethnic minorities, including Uighurs, in the far western region of Xinjiang. Beijing, which has called the bill a malicious attack, has threatened to retaliate.

Business groups expressed alarm about Mr. Trump's China comments.

"We want and need to see a deal as soon as possible," said David French, the senior vice president for government relations for the National Retail Federation. "The tariffs continue to hurt U.S. businesses, workers and consumers and are a substantial drag on the U.S. economy."

ADVERTISEMENT

Continue reading the main story

But delaying a China deal could have political benefits for Mr. Trump, some analysts said.

"Any deal reached now will be subject to scrutiny for the next 12 months and the harsh disinfectant of sunlight during the general election cycle," said Henrietta Treyz, the director of economic policy research at Veda Partners, an investment advisory firm. "Trade wars are political — right now, President Trump has the benefit of widespread bipartisan U.S. voter opposition to China and a robust consumer spending cycle."

Mr. Trump's trademark volatility was on full display Tuesday. At points, he seemed to suggest tensions with trading partners like France and even the long standoff with China could be easily resolved. At others, he suggested that he would make final deals only when he felt like it, and that more tariffs could be on the way in the interim. At one point, he said he would not settle for an "even" agreement with China — only one that favored the United States.

Administration officials sounded increasingly pessimistic that a first phase of any China deal would be reached anytime soon.

Commerce Secretary Wilbur Ross said on Tuesday that he believed holding off on a deal until after the election would give Mr. Trump more leverage in negotiations — assuming he won.

"Because once the election occurs — and the president seems to be in very good shape for the election — once it occurs and he's back in, now that's no longer a distraction that can detract from our negotiating position," Mr. Ross told CNBC.

Mr. Ross said that the agreement in principle that Mr. Trump promoted in October was at the "40,000-foot level," but that coming to terms on details such as what American agriculture products China would buy and how the deal would be enforced had proved to be more challenging. He said that barring a breakthrough, additional tariffs scheduled to be imposed on Dec. 15 would go into effect.

ADVERTISEMENT

Continue reading the main story

"We don't have a breakthrough until it's in black and white, on paper — signed, sealed and delivered," he said.


 -- via my feedly newsfeed

Yes, our tax system needs reform. Let’s start with this first step. [feedly]

Larry Summers on the owed, but uncollected, taxes of the 1%. It is not a trivial amount of money.

Yes, our tax system needs reform. Let's start with this first step.
http://larrysummers.com/2019/11/17/yes-our-tax-system-needs-reform-lets-start-with-this-first-step/

By Natasha Sarin and Lawrence H. Summers

November 17, 2019

While there's plenty of disagreement about how the money should be used, almost everyone involved in public-policy debates agrees that it would be good if the federal government could collect more revenue without raising tax rates or reducing tax deductions or credits.

It should be indisputable that investment to make sure all citizens meet their tax obligations is desirable. Such investment would raise substantial revenue, as well as increase economic efficiency and help redress growing inequality: Our rough estimates suggest that at least 70 percent of the "tax gap"— defined as owed but uncollected taxes — comes from underpayment by the top 1 percent. This contributes to legitimate concerns that our tax system unfairly advantages the elite.

Our new analysis suggests that better-focused audits, raising Internal Revenue Service enforcement to previous peak levels, investing in information technology and broadening earnings reporting could raise more than $1 trillion in the next decade, primarily from very high-income taxpayers. This well exceeds the revenue benefit of raising the top individual rate to 70 percent.

Some basic facts about tax compliance and enforcement:

Extrapolating from the most recently available IRS information, the tax gap will be more than $7.5 trillion over a decade. You only need to close 15 percent of this gap to raise $1 trillion.

Enforcement effort — as reflected in the share of gross collections reinvested in the IRS — has declined by approximately 35 percent over the past decade, and the decline has been disproportionate for corporations and millionaires: In 2011, more than 12 percent of individuals making $1 million or more annually were audited; last year, only 3.2 percent were. Audit revenue declines proportionally to the declining audit rates.

At present, recipients of the earned-income tax credit — all of whom have incomes below $50,000 — are about as likely as those making $500,000 or more to be audited.

Only 5 percent of taxpayers earning above $5 million are audited — even though IRS data demonstrates that an extra auditor-hour spent on their returns raises almost $5,000 on average.

Fewer than 1 percent of corporate returns were audited in 2018 — even though corporate audits on average raised nearly $1 million in additional revenue.

The IRS invests less than a quarter as much in information technology as major banks and still relies on systems from the 1960s. Pilot projects suggest payoff rates on strategic IT investments could approach 50:1.

When third-party income reports exist to compare to individual tax returns, income is correctly reported more than 95 percent of the time. Almost all income earned by individuals who make $200,000 or less annually gets reported in this way. But without such substantiation, between 17 percent and 55 percent of income goes unreported (and so untaxed) — and more than two-thirds of the income of those who earn $10 million or more falls into this category.

There are more facts in this vein. But these should be sufficient to demonstrate that there is plenty of low-hanging fruit in the area of tax enforcement.

What is the overall potential? In a study released this weekend, we conservatively priced out a program of increased auditing, IT investment and greater third-party reporting. We estimated that it would be possible to close 15 percent of the tax gap by spending approximately $100 billion on additional enforcement, as would be necessary to return the IRS to its historical scale. Every $1 that is spent would generate more than $11 in greater tax collection.

Congressional scorekeepers have suggested more modest revenue potential from investment in enforcement; however, our study shows these differences can be reconciled. Their approach is based on a program that is more modest in size (only a quarter as large as our proposed restoration of enforcement effort to previous peak levels) and scope (we consider the revenue potential of targeting audit resources on high-income individuals, as well as increasing information reporting). Critically, the Congressional Budget Office does not account for deterrence effects, which Treasury Department reports suggest greatly magnify the revenue gains from increased enforcement.

Why is the federal government leaving so much money on the table? Part of the answer is that there are powerful interests that want to maintain a system that facilitates evasion.

Likely more important, though, are congressional budget procedures. Historically, it was common for congressional leaders faced with last-hour budget gaps to rely on substance-less "tax compliance initiatives" to plug holes. The practice became discredited, and revenue from increased enforcement came to be excluded from budget scoring.

What's counted counts. When credit is not given for the revenue that will be collected from increased enforcement spending, it can hardly be surprising that tax compliance is neglected.

Restoring the IRS budget would, we believe, pay for itself many times over. It would also create a more progressive tax regime: At a time when working people pay their taxes in full, because of withholding, it would be reassuring for the tax law to be equally well-enforced on high-income earners.

Assuring compliance to the maximum extent feasible is not where tax reform should end, given the many problems with the current system and our need for significantly greater revenue. But it is where it should begin.

Natasha Sarin is an assistant professor of law at the University of Pennsylvania Law School and an assistant professor of finance at the Wharton School.

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