Kuttner: Two Cheers For The Deep State [feedly]

Two Cheers For The Deep State
http://www.huffingtonpost.com/entry/two-cheers-for-the-deep-state_us_58f3e970e4b0bb9638e4b2bd

A funny thing happened to Donald Trump in recent weeks. He had an encounter with reality—and reality won. 

It is one thing to dwell in your own reality during the campaign and to persuade your true believers that real is fake and fake is real. But when you actually try to govern, there is a reality to reality, and it pushes back.

It turns out that the budget, and the Syrian civil war, and the North Korean nuclear ambitions, and relations with China, and with Mexico, and with the E.U. are, like health insurance… complicated.

As Trump put it so well, who knew? Evidently, everyone knew but Trump.

And it turns out that the United States can't just insult China willy-nilly because maybe we need China's help to contain North Korea. It turns out that there is a direct connection between the Syrian civil war, the refugee crisis, and the looming collapse of the E.U.

It isn't that NATO got real about the refugee crisis and Russian aspirations in the Baltics and in Ukraine because Trump made a few disparaging comments. The NATO alliance was there all along. Who knew?

Trump also discovered that he could not govern by whim and by decree. The Constitution held.

He realized he could not defy court orders on immigration. He could not compel Republicans in Congress to support him by threatening the likes of Rep. Mark Meadows, head of the Freedom Caucus: "I'm coming after you."

Meadows had his own electoral base over which Trump had no leverage. Who knew?

And he discovered that if he puts forth a budget completely disconnected from reality, even Republicans are going to push back. It was Republicans who pronounced the Trump budget "dead on arrival."

Steve Bannon was basically right about the Deep State, otherwise known as the U.S. Constitution and the permanent establishment.

Once Michael Flynn self-destructed, leaders like National Security Advisor H.R. McMaster and Defense Secretary James Mattis also began injecting an overdue dose of reality into the Trump presidency.

The defense establishment is part of the Deep State. So are the courts. So is the reality of separation of powers.

Likewise the fact that the FBI and the CIA, whatever their other missteps, are not about to become Trump's private secret police. They are part of the Deep State, too

Of course, even if we are spared a Trump dictatorship or an impulsive Trump nuclear war, Trump will do immense damage, by appointing cabinet figures such as Secretary of Education Betsy DeVos and HHS Secretary Tom Price. These are not quite white-nationalist, they are just corporate far right. But that's damaging enough. And he will do immense damage by appointing far right judges.

And while financial industry figures such as chief economic adviser Gary Cohn and Secretary of the Treasury Steve Mnuchin are reigning in Trump's nuttier impulses on the economy, they are of course both from Goldman Sachs. And the permanent lock that Goldman has on the Treasury Department and on catastrophic financialization of the economy is also part of the Deep State.

So, the good news/bad news net-net looks something like this:

Good news: Reality and the Deep State stop Trump well short of fascism.

Bad news: We have, instead, a conventional, far-right Republican presidency, led by a stunningly incompetent sociopath.

Good news: The Republican Party keeps fragmenting, into Tea Party and Main Street factions on domestic policy and Putin-apologist and Putin-abhoring factions on foreign policy, and between white nationalist factions and Wall Street globalist factions on economics. That can only weaken Trump.

Bad news: Despite Trump's faux populism, the Wall Street lock on the political economy has never been stronger. One face of fascism is political dictatorship; the other is a corporate state.

Good news and bad news: Nothing that Trump is likely to do is will change the economic situation of the downtrodden middle and working class Americans who voted for Trump out of disgust with the status quo.

Whether Trump's failure to improve that reality leads to a progressive form of populism or to deeper frustration and white nationalism depends on whether Democrats rise to the occasion—whether they can shed the Wall Street captivity that pervaded both the Clinton and Obama presidencies, and the Hillary Clinton campaign.

Robert Kuttner is co-editor of The American Prospect and professor at Brandeis University's Heller School. His latest book is Debtors' Prison: The Politics of Austerity Versus Possibility. http://www.amazon.com/Debtors-Prison-Politics-Austerity-Possibility/dp/0307959805

Like Robert Kuttner on Facebook: http://facebook.co

 -- via my feedly newsfeed

Bernstein: I’m concerned re the lack of nominal acceleration of the blue-collar wage. [feedly]

I'm concerned re the lack of nominal acceleration of the blue-collar wage.
http://jaredbernsteinblog.com/im-concerned-re-the-lack-of-nominal-acceleration-re-the-blue-collar-wage/

I said I'd get back to my tweet from this AM showing the deceleration in real wage growth, particularly for blue-collar workers. This is not exactly the stuff of 140 characters.

One can decompose the change in real weekly earnings for private-sector workers into three parts: changes in nominal hourly earnings, inflation, and average weekly hours worked. As the table below shows, the growth in real weekly earnings equals nominal wage growth – inflation + hours growth. See data note for details, particularly for how to compute the white-collar wage, which, unlike the rest of these data, is not an official BLS series, but a backed-out residual.

Source: BLS, our calculations.

Of course, someone could look at these numbers and declare that the problem is price growth, and that the Fed must continue to tap, if not smack, the brakes. I think that's wrong. What's happened on the price side is that, as energy prices have normalized, inflation has also climbed back to more normal levels. Pursuing deflation to boost real earnings won't work, as it will undercut the demand needed to give middle- and low-wage workers the bargaining clout they otherwise lack.

I don't want to make too much out of this as these data are noisy and the patterns can flip. Also, a lot of my work shows tight labor markets deliver more bargaining clout to less-advantaged workers, so I tend to think that, as we close in on full employment, the nominal pay of lower-wage workers should accelerate. Still, we know that wage inequality is still embedded in our labor market and need to keep a close eye out for the type of divergent trends you see in the table.

In this regard, the key unsettling number in the table is the one in bold showing no acceleration in the blue-collar wage. That bears close watching.

[h/t: Ben Spielberg]

Date note: The wage series for "white-collar" workers is derived from the following relationship:

Emp_a * W_a = Emp_bc * W_bc + Emp_wc * W_wc

Emp represents private employment and W the average wage (either hourly or weekly), with the subscripts a, bc, and wc representing all workers, "blue-collar" workers (production and nonsupervisory workers), and "white-collar" workers (those who are in the private sector but excluded from the production and nonsupervisory series), respectively.  That is, the total hourly wage bill for all private sector workers is equivalent to the total hourly wage bill for "blue-collar" workers plus the total hourly wage bill for "white-collar" workers.  Performing simple algebra and noting that Emp_wc = Emp_a – Emp_bc, we can solve for the average wage for white-collar workers.

Note that "blue-collar" and "white-collar" workers are not perfect descriptions, as which workers are counted in the production and nonsupervisory series varies by industry; a worker in sales in manufacturing might fall in our "white-collar" series, for example, while a worker in sales in a different industry might fall into the "blue-collar" series.

 -- via my feedly newsfeed

IMF Blog: The Hollowing Out of Middle-Skilled Labor Share of Income [feedly]

The Hollowing Out of Middle-Skilled Labor Share of Income
https://blogs.imf.org/2017/04/14/the-hollowing-out-of-middle-skilled-labor-share-of-income/

By Mai Dao, Mitali Das, Zsoka Koczan, and Weicheng Lian

Version in Español (Spanish)

Imagine how a typical factory today operates in many advanced economies. There are no longer many workers lined up along assembly belts. Instead, there are only a few of them—mostly likely engineers—looking at screens of highly sophisticated equipment that does the assembly once done by humans. With technological advancement constantly driving down the cost of capital, firms are increasingly replacing workers with machines.

In the first part of this blog, based on Chapter 3 of the April 2017 World Economic Outlook, we discussed the economic benefits of technological advancement and global integration, and how these forces have impacted labor shares in advanced and emerging economies. In this installment, we discuss more in-depth the phenomenon in advanced economies of the "hollowing out" of the middle-skilled labor income share. This decline is bigger for sectors that are more exposed to automation.

The losing middle

Between 1995 and 2009, the global income share of low- and middle-skilled labor dropped by more than 7 percentage points.

In contrast, the income share of high-skilled labor rose in both advanced and emerging market economies. A benign interpretation would attribute this evolution to the rising skill premium that encourages an upgrading of skills. Over time, therefore, the relative supply of high-skilled labor is greater than that of middle- and low-skilled labor.

Routine no more

Even so, we find that both routine-biased technology and global integration have been at work as well.

To arrive at our results on routine-biased technology, we construct a new cross-country index covering both advanced and emerging economies. The index measures the share of occupations that are at risk of being automated; technological progress is proxied by the evolution of investment goods prices.

We find that countries (and sectors) with high initial exposure to routinization experience relatively larger subsequent declines in labor income shares. This is true of the manufacturing sector in the United States and Italy, for example.

Countries and sectors with low initial exposure to routine tasks, however, see less decline in labor income shares. This is the case for restaurants and hotels in the United States, where human interaction may be less amenable to automation.

Labor pains

Our analysis shows that technology and global integration have primarily affected the income share of middle-skilled labor. The results are consistent with the notion that exposure to routinization and offshoring lower demands for middle-skilled workers, causing them to accept stagnating wages or to be relocated to low-skill and low-pay occupations.

For emerging market economies, the effect of technology on labor income shares is less pronounced. This reflects not only a much lower initial exposure to automation—which has limited the displacement of labor from routine-biased technology—but also a relatively mild decline in the relative price of investment goods.

Dealing with disruption—further thoughts

Technological advancement and global economic integration have been the key drivers behind falling shares of labor income. Yet these are the very same engines of global prosperity. Policymakers need to figure out how to distribute their benefits more evenly.

In advanced economies, policies should focus on helping workers cope with these disruptions. Skill upgrading throughout workers' careers is one aspect, but so are policies that facilitate the reallocation of displaced workers to new jobs that reduce the cost of job search and transitions.

Safety nets and income support policies could also be considered, though these will need to be tailored to country specific circumstances. Workers losing their jobs to technology instead of trade are likely to be affected more permanently. This will necessitate longer-term redistributive measures to help them cope.

Policymakers in emerging market economies should heed the lessons from the experience in their advanced counterparts. Investment in education and skill deepening will be crucial in preparing their workers to reap the benefits of economic transformation induced by technology and global integration.

The solution lies not in resistance to innovation or retreat from global integration. But rather in embracing them and being prepared for the disruptions—and benefits—that they bring.

 -- via my feedly newsfeed

Mark Levinson and Timothy Shenk: Toward a New Economy: Introduction

Toward a New Economy: Introduction

Mark Levinson and Timothy Shenk ▪ Spring 2017

The International Car Forest of the Last Church, Goldfield, Nevada (Wes Dickinson / Flickr)

Almost a decade has passed since the financial crisis, yet economic debate remains trapped by stale assumptions that led to the calamity. The consequences of this intellectual failure could not be higher. As Hillary Clinton observed of the Democratic Party in a strikingly honest interview with the New Yorker a few weeks before the election: "We have been fighting out elections in general on a lot of noneconomic issues over the past thirty years . . . but we haven't had a coherent, compelling economic case." Liberals still don't have one—and, despite posturing to the contrary, neither do conservatives. The diverse essays assembled here point the way to new ground. They analyze capitalism's past, present, and future—from slavery to the transformations wrought by globalization—and present novel ideas for reform.

James Galbraith examines why Trump is unlikely to fulfill his promises to grow the economy and create jobs. He argues that there are physical, environmental, technological, and institutional obstacles to achieving growth by simply spending more money on infrastructure. He makes the case for a vast expansion of the nonprofit and public sector to support a job guarantee program, providing decent pay for jobs in healthcare, the environment, education, and culture sectors.

Mariana Mazzucato and Michael Jacobs inventory the scale of the 2008 economic crisis and document the tepid economic recovery that has followed. They call for a rethinking of economic policy, stressing the public nature of wealth creation. The role of the state is not simply to regulate private economic activity but rather to play a leading role in investment, innovation, and social care.

Alyssa Battistoni surveys the global debate on universal basic income (UBI). In a clarifying essay she recognizes the liberating potential of UBI, while remaining critical of those who see it as a replacement for the values of the welfare state. For Battistoni, any version of a basic income that would be palatable to Charles Murray is one not worth having.

Daniel Luban and Michael Ralph each examine aspects of capitalism's history whose reverberations are still felt today. Luban reviews the life and contemporary relevance of Karl Polanyi, whose critique of market society continues to inspire new generations of readers. Ralph uncovers the sordid history of how many corporations benefit (through corporate-owned life insurance) from the deaths of their workers. That practice has roots in the nineteenth century, when mine owners in the booming coal industry took out life insurance policies on their workers—many of whom were also enslaved.

J.W. Mason offers a socialist perspective on globalization and explores how to reconcile conflicting values of internationalism, advancing workers' interests, and political control of the economy. While not giving up on an egalitarian global agenda, he argues that the struggle to preserve social democracy occurs at the national level.

Much like capitalism, the essays in this section cover a diverse array of subjects, but they share a common theme. They deepen our understanding of the forces shaping our economic system and contribute to the ongoing search for alternatives—a search that, after being dismissed for decades as naive and utopian, is now more urgent than ever.

---

Mark Levinson is the chief economist at the Service Employees International Union (SEIU) and co–book review editor at Dissent.

Timothy Shenk is a Carnegie Fellow at the New America foundation and co–book review editor at Dissent. He is the author of Maurice Dobb: Political Economist (Palgrave Macmillan, 2013).

--

John Case
Harpers Ferry, WV

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Bernstein/Thoma: Supply-side, trickle-down nonsense on the NYT oped page [feedly]

Supply-side, trickle-down nonsense on the NYT oped page
http://economistsview.typepad.com/economistsview/2017/04/supply-side-trickle-down-nonsense-on-the-nyt-oped-page.html

Jared Bernstein:

Supply-side, trickle-down nonsense on the NYT oped page: There's a robust debate to be had as to why the NYT published this op-ed on the alleged economic benefits of trickle-down tax cuts, as virtually every paragraph touts an alternative fact. It is the opinion page, I guess, and the authors advise (or at least advised) the president, so I can see why it's there. But it does require debunking, so thanks NYT, for some make work.

Here's much of the article's text, followed by my comments in italics:

A few of the comments:

... Here we have the first in a series of trickle-down claims. The alleged sequencing is: cut taxes of business and the wealthy, they invest more, that raises profits and productivity, and the benefits trickle down to the middle class. Every link in that chain is broken: tax cuts, even on investment income, do not correlate with greater investment, and they certainly are uncorrelated with faster productivity growth. Businesses already receive very favorable tax treatment on their investments; in fact, their tax burden on debt-financed investments can be negative. No question, tax cuts raise after-tax profitability, but absent much more worker bargaining power, those profits stay in the pockets of those at the top of the income scale. ...

Here we have the "money" 'graf: the straight-up claim that trickle down tax cuts will boost the earnings of the working class, which will help offset their cost—the Laffer curve in action. I guess I should give the authors credit for adding "if we are right," though I'll give you very long odds that the editors insisted on this addition. Because there's no reason to ask if they're right. They're not, with the latest exhibit being the state of Kansas, an "experiment" derived by some of these very authors.

BTW, I've endorsed my friend Kevin Hassett for his new job as a voice of economic reason in this administration. But I've been careful to note this flaw in his work and his thinking. In fact, the study they reference here has been thoroughly debunked in various places. ...

Again with the urgency, and "trust us, folks, it's not the zillionaires for whom our hearts bleed—it's 'jobs and the economy.'" Not to mention the stock market, which is getting "jittery" over the possibility that Trump won't deliver a tax plan like the one these guys wrote, which delivers fully half of its goodies to the top 1 percent (or even better, the Ryan plan, which, once fully phased in, delivers 99 percent of its cuts to the top 1 percent).

Puh-lease. How stupid do these people think we are (rhetorical question!)? Their simple scheme—Trump wins, the rich get big tax cut—has turned out to be harder to pull off than they'd hoped. That's a feature, not a bug, of our current political moment, even if it means we have to read a WSJ oped in the NYT.

 -- via my feedly newsfeed

Krugman: Elizabeth Warren Lays Out the Reasons Democrats Should Keep Fighting [feedly]

Finally, Krugman finds hope in Elizabeth Warren. Maybe this means he is tired sucking his thumb over Hillary's loss and ready to return to a progressive agenda he can fight for. It's still "anybody but Bernie" no doubt, but at least its got him to stop whining....

***********************************

Krugman: Elizabeth Warren Lays Out the Reasons Democrats Should Keep Fighting
http://economistsview.typepad.com/economistsview/2017/04/krugman-elizabeth-warren-lays-out-the-reasons-democrats-should-keep-fighting.html

Paul Krugman reviews This is Our Fight: The Battle to Save America's Middle Class, By Elizabeth Warren, Metropolitan Books/Henry Holt & Company:

Elizabeth Warren Lays Out the Reasons Democrats Should Keep Fighting: ...Elizabeth Warren ... brings an edge to her advocacy that many Democrats have shied away from... Even the Obama administration, while doing much more to fight inequality than many realize, balked at making inequality reduction an explicit goal.

Furthermore, Warren comes down forcefully on the left side of an ongoing debate over both the causes of inequality and the ways it can be reduced.

One view, which was dominant even among Democratic-leaning economists in the 1990s, saw rising inequality mainly as a result of ineluctable market forces. Technology, in particular... Given this view, even liberals generally favored free-market policies. ...

The alternative view, which Warren clearly endorses, is all for taxing the rich and strengthening the safety net, but it also argues that public policy can do a lot to increase workers' bargaining power — and that inequality has soared in large part because policy has, in fact, gone the other way.

This view has gained much more prominence over the past couple of decades, mainly because it's now backed by a lot of evidence...

But why has actual policy gone the other way? ...

Consider ... West Virginia, where Obamacare cut the number of uninsured by about 60 percent, where minimum wage hikes and revived unions could do wonders for workers in health care and social services, the state's largest industry. That is, it's a perfect example of a state that would benefit hugely from an enlightened-populist agenda.

But last November West Virginia went almost three-to-one for a very unenlightened populist...

But maybe it's a matter of time, and what Democrats need right now is a reason to keep fighting. And that's something Warren's muscular, unapologetic book definitely offers. It's an important contribution, even if it isn't the last word.

 -- via my feedly newsfeed

Krugman: Elizabeth Warren Lays Out the Reasons Democrats Should Keep Fighting [feedly]

Krugman: Elizabeth Warren Lays Out the Reasons Democrats Should Keep Fighting
http://economistsview.typepad.com/economistsview/2017/04/krugman-elizabeth-warren-lays-out-the-reasons-democrats-should-keep-fighting.html

Paul Krugman reviews This is Our Fight: The Battle to Save America's Middle Class, By Elizabeth Warren, Metropolitan Books/Henry Holt & Company:

Elizabeth Warren Lays Out the Reasons Democrats Should Keep Fighting: ...Elizabeth Warren ... brings an edge to her advocacy that many Democrats have shied away from... Even the Obama administration, while doing much more to fight inequality than many realize, balked at making inequality reduction an explicit goal.

Furthermore, Warren comes down forcefully on the left side of an ongoing debate over both the causes of inequality and the ways it can be reduced.

One view, which was dominant even among Democratic-leaning economists in the 1990s, saw rising inequality mainly as a result of ineluctable market forces. Technology, in particular... Given this view, even liberals generally favored free-market policies. ...

The alternative view, which Warren clearly endorses, is all for taxing the rich and strengthening the safety net, but it also argues that public policy can do a lot to increase workers' bargaining power — and that inequality has soared in large part because policy has, in fact, gone the other way.

This view has gained much more prominence over the past couple of decades, mainly because it's now backed by a lot of evidence...

But why has actual policy gone the other way? ...

Consider ... West Virginia, where Obamacare cut the number of uninsured by about 60 percent, where minimum wage hikes and revived unions could do wonders for workers in health care and social services, the state's largest industry. That is, it's a perfect example of a state that would benefit hugely from an enlightened-populist agenda.

But last November West Virginia went almost three-to-one for a very unenlightened populist...

But maybe it's a matter of time, and what Democrats need right now is a reason to keep fighting. And that's something Warren's muscular, unapologetic book definitely offers. It's an important contribution, even if it isn't the last word.

 -- via my feedly newsfeed