Stiglitz on inequality...again

Nobel Prize-winning Joe Stiglitz addressed the recent AFL-CIO convention:

I'm an economist-- I study how economies work and don't work. It’s been clear to me that our economy has been sick for a long time.  One of the reasons it's been so sick is inequality, and I decided to write an article and a book about it.

Two years ago, I wrote an article for Vanity Fair called, "Of the 1%, by the 1%, for the 1%,” which really got to the gist of it.  For too long, the hardworking and rule-abiding had seen their paychecks shrink or stay the same, while the rule-breakers raked in huge profits and wealth.  It made our economy sick, and our politics sick, too.  

You all know the facts:  while the productivity of America's workers has soared, wages have stagnated. You've worked hard – since 1979, your output per hour has increased 40%, but pay has barely increased. Meanwhile, the top 1% take home more than 20% of the national income.

The Great Recession made things worse.  Some say that the recession ended in 2009.  But for most Americans, that's simply wrong:  95% of the gains from 2009 to 2012 went to the upper 1%.  The rest — the 99% — never really recovered.

Does Walmart create jobs?

Kathleen Grier @ Salon:

Contrary to Walmart’s self-glorifying mythology, the retailer is anything but a job creator — in fact it is a huge job killer. Not only that, destroying jobs is an essential component of Walmart’s anti-worker business model. Let’s put aside Walmart’s happy talk and examine the cold, hard facts.

First, let’s look at the impact of Walmart on local labor markets. The largest, most rigorous study conducted on the subject is this peer-reviewed article from 2008. Its lead author is economist David Neumark, who is no wild-eyed liberal. (See, for example, this anti-minimum wage op-ed he wrote for the Wall Street Journal).

Earlier studies did not adequately deal with selection bias: i.e., the problem that when and where Walmart chooses to open new stores is not random, but tends to be correlated with other variables. Those confounding variables make it difficult to determine whether local employment outcomes are causally related to Walmart‘s entry, or to something else. I’ll skip the technical details, but suffice it to say Neumark and his co-authors devised a sophisticated methodology that accounts for the selection bias. Using data from over 3,000 counties, their results show that when a Walmart store opens, it kills an average 150 retail jobs at the county level, with each Walmart worker replacing about 1.4 retail workers. These results are robust under a variety of models and tests.

Other strong studies found similar results. A 2008 peer-reviewed study that looked at Maryland concluded that Walmart’s presence significantly decreased retail employment, by up to 414 jobs. And a 2009 study by Loyola University found that the opening of a Chicago Walmart store was “a wash,” destroying as many jobs as it created: “There is no evidence that Wal-Mart sparked any significant net growth in economic activity or employment in the area,” according to the report. In short, when Walmart comes to town, it doesn’t “create” anything. All it does is put mom-and-pop stores out of business.

On the lack of serious discussion or an honest opposition

Professor Krugman channels the outrage at alleged GOP "policy wonks" who are little more than ethically-challenged propagandists:

I fairly often receive mail pleading with me to take a more even tone, to have a respectful discussion with people on the other side rather than calling them fools and knaves. And you know, I do when I can. But the truth is that on most of the big issues confronting us, there just isn’t anyone to have a serious discussion with. Ezra Klein offers a nice illustration of this point today, in his takedown of Avik Roy on Obamacare in California.

The thing you want to bear in mind is that Roy is widely considered a good example of a reformist conservative, not to mention a health policy wonk. So what does this reform-minded wonk have to say about Obamacare?

Klein tries really hard to keep his temper even; too hard, I think, because I wonder how many readers will stay with him all the way through. But to cut to the chase, Roy claims that Obamacare will cause soaring insurance rates, using a comparison that is completely fraudulent — and I say fraudulent, not wrong, because he is indeed enough of a policy wonk here to know that he is pulling a fast one.

A Stock Market Boom in the midst of a faltering economy

James Surowiecki  @ The New Yorker takes a look at the stock market boom - driven by a growing disconnect between the welfare of Americans and the profits of "U.S." corporations:

With the stock market setting new highs on a nearly daily basis, even as the

real economy just slogs along, there seems to be one question on everyone’s mind: are we in the middle of yet another market bubble? For a growing chorus of money managers and market analysts, the answer is yes: the market is a house of cards, held up by easy money and investor delusion, and we are rushing all too blithely toward an inevitable crash. Given that we’ve recently lived through two huge asset bubbles, it’s easy to see why they’re worried. But in this case the delusion is theirs.

The bubble believers make their case with a blizzard of charts and historical analogies, all illustrating the same point: the future will look much like the past, and that means we’re headed for trouble. Smithers & Company, a London market-research firm, says that, according to a number of market indicators, stocks are, by historical standards, forty to fifty per cent overvalued. The bears admit that corporate profits are high, which makes the market’s price-to-earnings ratio look quite normal, but they insist that this isn’t sustainable.

They think that earnings will return to historical norms, and that, when they do, stock prices will be hit hard. Today, after-tax corporate profits are more than ten per cent of G.D.P., while their historical average is closer to six per cent. That’s a vast gap, and it’s why bears believe that the market is, in the words of the high-profile money manager John Hussman, “overvalued, overbought, overbullish.”

It’s certainly unusual for corporate profits to soar during a slow recovery. But the argument for a stock-market bubble is flawed: when it comes to the role that corporations play in the U.S. economy, the present looks very different from the past, which means that historical comparisons to the nineteen-fifties, let alone the thirties, tell us little. The four most dangerous words in investing may be “This time, it’s different.” But this time it is different.

Take taxes: one big reason that after-tax corporate profits are much higher than their historical norm is that corporations pay much less in taxes than they used to. In 1951, corporations had to pay almost half of reported profits in taxes. In 1965, they had to pay more than thirty per cent. Today, they pay only around twenty per cent.

"Fixing What's Wrong With Our Economy"

The AFL-CIO's perspective on what's gone wrong and what we can do about it :

The economic policies that led to the financial crash of 2008 and the subsequent Great Recession should have been permanently discredited by their epic failure. Instead, the Republican presidential candidates are now resurrecting the same failed policies and pretending the crash never happened.

America cannot afford to go down this path again. If we want to fix what is wrong with our economy, we have to learn from our mistakes and avoid repeating them.

The crash of 2008 and the Great Recession were inevitable consequences of three decades of economic policies designed by and for Wall Street and the wealthiest Americans. At the heart of the problem was the hollowing out of American manufacturing, the growing dysfunction of our financial sector and a rapid increase in economic inequality, all of which crippled the growth engine of the U.S. economy.
Starting in the 1980s, corporate America decided to boost profits by shipping U.S. jobs overseas.

NAFTA and the admission of China into the World Trade Organization (WTO) accelerated the drive to relocate production to “export platforms” in foreign countries that would ship goods back to the U.S. market. Corporations that sent jobs overseas became forceful proponents of a “strong” (overvalued) dollar, which enhanced the profitability of their overseas operations but at the same time made much of the U.S. manufacturing sector uncompetitive and led to perennial U.S. trade deficits.

Also by the 1980s, the U.S. financial sector was failing to perform its essential function of channeling savings to productive investment in the real economy. Financial firms on Wall Street focused instead on making a quick buck by stripping assets from existing businesses and downsizing their workforces, and on various forms of complex financial engineering that had little economic value. Financial firms also provided critical support for a “strong dollar” policy that diverted productive investment away from the U.S. manufacturing sector toward overseas operations.  By the eve of the crash of 2008, the manufacturing sector had shrunk to half its 1960 size, while the financial sector had doubled in size and accounted for 40 percent of corporate profits.

The deindustrialization of America and the substitution of speculation for productive investment were not accidents, they were not inevitable, and they were not the outcome of natural forces.  They were the predictable results of mistaken policy choices made by politicians of both parties for more than a generation.  These policy choices had victims with first and last names: millions of displaced workers, shuttered factories and hollowed-out communities across the country hobbled by shrinking tax bases that no longer could support vital public services.

The impact of "Occupy Wall Street" on the labor movement

Steven Greenhouse at NYT:

Organized labor’s early flirtation with Occupy Wall Street is starting to get serious.

Union leaders, who were initially cautious in embracing the Occupy movement, have in recent weeks showered the protesters with help — tents, air mattresses, propane heaters and tons of food. The protesters, for their part, have joined in union marches and picket lines across the nation. About 100 protesters from Occupy Wall Street are expected to join a Teamsters picket line at the Sotheby’s auction house in Manhattan on Wednesday night to back the union in a bitter contract fight.

Labor unions, marveling at how the protesters have fired up the public on traditional labor issues like income inequality, are also starting to embrace some of the bold tactics and social media skills of the Occupy movement.

President Obama's Labor Day Speech in Detroit

THE PRESIDENT: Thank you, Detroit! (Applause.) Thank you, Michigan! (Applause.) Oh, this is a --

AUDIENCE: Four more years!

THE PRESIDENT: Thank you. Thank you, everybody...

I am honored, we are honored, to spend this day with you and your families -- the working men and women of America. This day belongs to you. You deserve a little R&R, a little barbecue -- (laughter) -- little grilling -- because you’ve been working hard. (Applause.) You’ve been working hard to make ends meet. You’ve been working hard to build a better life for your kids. You’ve been working hard to build a better Detroit. (Applause.) But that’s not all I’m going to talk to you about.

I also want to talk about the work you’ve been doing for decades: Work to make sure that folks get an honest day’s pay for an honest day’s work. (Applause.) Work to make sure that families get a fair shake. The work you've done that helped build the greatest middle class the world has ever known. (Applause.) I’m talking about the work that got us a 40-hour workweek and weekends, and paid leave and pensions, and the minimum wage and health insurance, and Social Security and Medicare -- (applause) -- the cornerstones of middle-class security. That's because of your work. (Applause.)

If you want to know who helped lay these cornerstones of an American middle class you just have to look for the union label. (Applause.)

Why we need unions...

 

Via Think Progress

We Are One!

In memoriam, Martin Luther King. Stand up!

Via Digby.

Unionism, perceptions and gender

Natasha Vargas-Cooper has an insightful take in today's New York Times on an underlying gender issue in the ongoing protests of public employees and their supporters in the Midwest - one that is embedded in the current weakened position of the union movement.

"What did you do in the war, Mommy?"

WHEN a couple dozen brawny, uniformed and helmeted firefighters, led by a bagpipe player, marched through a crowd of pro-union protesters in Madison, Wis., last month, I knew, almost to a certainty, that Gov. Scott Walker had picked a fight with the wrong crew.

As the firemen assembled on the Statehouse steps, the swelling, boisterous crowd, which had raucously encircled and occupied the Capitol for days, pushing back against Governor Walker’s plan to strip public employee unions of their collective bargaining rights, all of a sudden slipped into silent reverence.

(pic via proud Dad, Marc Cooper)

While the plan exempts policemen and firemen, the first responders rallied under the oldest first principle of militant unionism: An Injury to One is an Injury to All. And the presence of these mostly white, husky, mustachioed firemen — many with soot still speckling their uniforms — had highlighted a major issue that generally goes undetected by the news media when covering labor conflicts 

In short, it’s what my old union called “the Husband Issue.”

Allow me to explain.

The Radicalism of Today's Republicans

In today's NYT, William Cronon, a professor of history at University of Wisconsin-Madison, provides some historical perspective on the ideological extremism of today's "conservatives" and the destruction of the Republican Party as a responsible partner in our democracy, a moderating influence or even an authentic bastion of conservative principles:

Wisconsin’s Radical Break

NOW that a Wisconsin judge has temporarily blocked a state law that would strip public employee unions of most collective bargaining rights, it’s worth stepping back to place these events in larger historical context.

Republicans in Wisconsin are seeking to reverse civic traditions that for more than a century have been among the most celebrated achievements not just of their state, but of their own party as well.

Unions in Wisconsin - Down But Not Out!

"Working America, an advocacy organization affiliated with the AFL-CIO that provides an outlet for non-union members to support the labor movement, has signed up approximately 20,000 new members (in Wisconsin) since Feb. 15," reports Amanda Terkel.

The Sad But True Story of Wages in America

Economic Policy Institute has it, HERE.

Via Economists View.

Winners (?) and Losers in Madison

Natasha Vargas Cooper, reporting from Madison, in The Atlantic:

"In Wisconsin, despite the biggest protests Madison has seen since the Vietnam War, there is no way getting around the basic fact: The public sector unions lost their toughest fight yet. They may have resisted mightily and sparked a national movement in opposition to Gov. Scott Walker's budget repair bill, which stripped them of most collective bargaining rights, but he was able to sign it into law Friday afternoon, nonetheless. The damage is done...

"Republican National Committee Chair Reince Priebus, the former leader of the Wisconsin GOP, proclaimed Walker's victory a win for the party as a whole. But what happened in Wisconsin wasn't that simple -- for Walker, the GOP or the unions."      

Read her full accounting of the current situation HERE.  It's not an optimistic gloss on the rebirth of Democratic activism, which is why it's a "must read" moving forward.

What Wisconsin is really about...Part deux

Eric Alterman @ The Nation:  The political power of public unions, not their pensions, is the point. Speaking at the recent Conservative Political Action Committee convention, Scott Hagerstrom of (Koch-funded) Americans for Prosperity explained, “We fight these battles on taxes and regulation, but really what we would like to see is to take the unions out at the knees so they don’t have the resources to fight these battles.”

State employee pensions are NOT the problem...

Eric Alterman:

(S)tatistics demonstrate the speciousness of the conservative case for states facing budget crises to default on their public pension obligations. The Center on Budget and Policy Priorities released a report recently demonstrating that, in fact, they have “adequate tools and means to meet their obligations.” To the degree that some states appear to be in real trouble, explains a June report by two Federal Reserve Bank of San Francisco analysts, this is the result of a “profound macroeconomic shock” rather than pension obligations... Yet snowjobs like those promoted by Murdoch, Gingrich and New Jersey Governor Chris Christie are painting a bull’s-eye on the back of public unions.

Update: Mark Thoma has more on this at "Economist's View"