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Economic and environmental cost of Trump’s auto rollback could be staggering, new research shows

Wednesday, August 7th, 2019

The Trump administration’s plan to freeze fuel efficiency standards in defiance of California’s stricter, more environmentally friendly rules is set to have dire ramifications for emissions levels and the economy, according to new research out Wednesday.

Rolling back California’s robust vehicle emissions requirements will cost the U.S. economy $400 billion through 2050, an analysis from the environmental policy group Energy Innovation found. President Donald Trump’s efforts to undo Obama-era rules will also increase U.S. gasoline consumption by up to 7.6 billion barrels, subsequently increasing U.S. transport emissions up to 10% by 2035.

Under Trump, the Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) have been engaged in a bitter feud with California over emissions standards.

California has set its own standards for decades under the Clean Air Act’s Section 177 through an EPA waiver, with significant success: 14 states and the District of Columbia have adopted the same standards. Data shows that those “Section 177 states” — which represent more than 35% of the U.S. auto market — have reduced pollution and improved air quality, improving both public health and the environment.

But the Trump administration has targeted California’s waiver, arguing in favor of freezing fuel efficiency standards on new vehicles through 2025 nationally while stripping the state of its exemption. The government is also embroiled in litigation with the Section 177 states, which are fighting to keep their standards.

As California and the White House escalate their feud, Energy Innovation’s new modeling gives a preview of what the Trump administration’s plans would mean long-term.

“Freezing federal fuel economy and [greenhouse gas] emissions standards will harm U.S. consumers, who will pay more money to drive their cars the same distance,” the Energy Innovation report warns, pointing to both economic implications and likely associated climate impacts and poorer air quality.

“The only winners are the oil companies, who stand to sell more gasoline at the expense of American consumers, manufacturers, and the environment,” the group underscores.

Initially, the firm found that there would be economy-wide financial gains, as low-efficiency cars are cheaper to make. But over the years, increasing fuel expenses are projected to cut into those gains, ultimately costing the national economy hundreds of billions.

Using the open-sourced and peer-reviewed Energy Policy Simulator (EPS), the group looked at the economic impact of freezing the standards nationally and revoking California’s waiver, in addition to a scenario in which California retains its waiver following litigation but the rest of the country is held to the frozen standard.

In the first scenario, the economic cost by 2050 is projected to be $400 billion.

The second scenario is more uncertain. However, the report estimates it would affect around 65% of vehicle sales and could create a split market — one where automakers sell more efficient vehicles in Section 177 states and less efficient vehicles elsewhere.

Energy Innovation estimates that scenario would cost between $240 billion and $400 billion by mid-century. Costs on the lower end reflect a situation in which carmakers in non-Section 177 states would still largely comply with California’s standards, while those on the higher end reflect a split market possibility.

In addition to the economic costs, the report also underscores the climate implications. While the growing market for electric vehicles would mitigate climate impacts beginning in the 2040s, Energy Innovation finds that vehicle emissions would spike to their highest point in the 2030s based on current trends.

Under current policy, “transportation sector emissions are projected to be 1,370 million metric tons (MMT) of carbon dioxide equivalent (CO2e)” by 2035, the report notes. But with a nationwide freeze, emissions would increase to 1,510 MMT in 2035 — a 10% increase. If Section 177 states retain their autonomy, that increase would fall between 1,460 and 1,510 MMT.

The report’s authors clarify that all estimates should be viewed as somewhat conservative, however, given that they assume a trend towards purchasing electric vehicles — meaning the actual emissions impact could be much larger.

Energy Innovation policy analyst and report author Megan Mahajan told ThinkProgress that the overall result of a freeze would be rising emissions and increasing costs.

“Although the current administration argues the standards freeze is in Americans’ best interest, we find that it hurts consumers and the climate,” Mahajan said. “Our results show that the economic impacts to consumers will only grow over time as they continue to lose out on the significant fuel savings that come with stronger standards.”

The report also focuses on the international implications of the proposed freeze. Due to the Canada-California fuel economy memorandum of understanding, impacts associated with the move will be felt across the border. Canada’s auto market is closely tied with the United States and the country has indicated it will likely side with California in a split market scenario.

But if that doesn’t happen and Canada follows the U.S. federal freeze, Energy Innovation predicts the move could cost Canadian consumers up to $67 billion through 2050. It could also increase Canadian transport emissions up to 11% by 2035.

“In addition to hurting U.S. consumers, a fuel economy and… emissions standards freeze would have global implications,” the report argues.

Energy Innovation’s findings are only the latest to counter the Trump administration’s push for the freeze. Even the auto industry has expressed deep reservations. Many carmakers had already incorporated the emissions standards into their products, along with Obama-era efficiency efforts. The sudden change could cost companies, and some have made efforts to insulate themselves from any shifts in policy.

At the end of July, California inked a deal with Ford, BMW, Honda, and Volkswagen, with all four major carmakers pledging fuel-efficient cars. At the time, California Gov. Gavin Newsom (D) linked the deal to broader efforts to combat global warming.

“Clean air emissions standards … are perhaps the most significant thing this state can do, and this nation can do, to advance those goals,” the governor said. “The Trump administration is hellbent on rolling them back. They are in complete denialism about climate change.”

But the standoff between California and the White House is only set to escalate. Last Friday, the EPA and NHTSA sent the final proposed rule to the White House for review.

That same day, California and New York led a group of states in suing NHTSA, which has reduced the penalties facing automakers who fail to meet Obama-era corporate average fuel economy (CAFE) standards. Under Trump, the penalty has been reduced from $14 to $5.50 per tenth of a mile per gallon.

And on Tuesday, 30 Senate Democrats encouraged 14 major automakers to join the four companies that have already made a deal on emissions with California.

“In the absence of an agreement between the Federal government and states, the California agreement is a commonsense framework that provides flexibility to the industry to meet tailpipe standards while also taking important steps to reduce greenhouse gas emissions and save money on fuel for consumers,” the senators wrote in a letter to the companies, which include Nissan, Toyota, and Volvo.

The letter was signed by several presidential candidates, including frontrunners Sen. Bernie Sanders (I-VT), Elizabeth Warren (D-MA), and Kamala Harris (D-CA).

This article was originally published at Think Progress on August 7, 2019. Reprinted with permission. 

About the Author: E.A. (Ev) Crunden covers climate policy and environmental issues at ThinkProgress. Originally from Texas, Ev has reported from many parts of the country and previously covered world issues for Muftah Magazine, with an emphasis on South Asia and Eastern Europe. Reach them at: ecrunden@thinkprogress.org.

Why Has the U.S. Economy Been Doing So Well?

Monday, June 3rd, 2019

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This question immediately invites a couple of additional questions: What does it mean to say the economy has been “doing so well”? And: Has the U.S. economy really been doing so well?

Long and Slow

The most widely used measure of how well an economy is doing is the growth of gross domestic product (GDP). On the one hand, GDP has been growing for an unusually long time. Since the economic expansion began in June of 2009, it has continued for 118 months, as of April 2019. If the expansion continues into the summer, it will surpass the longest expansion on record, which lasted for 120 months in the 1990s.

On the other hand, it has been an historically slow expansion, with GDP averaging about 2.24% per year. In the two years since Trump took office, GDP grew 2.22% in 2017 and 2.86% in 2018, the latter almost as fast as the 2.88% in 2015. This is quite slow compared to the 3.6% rate in the 1990s, and the 4.8% rate in the 106-month expansion of the 1960s. (All figures are adjusted for inflation.) It is remarkable that, in spite of this comparison with the rates of growth in other long expansions, media reports frequently refer to the economy as “roaring” or “sizzling.”

The employment situation also has its positive and negative aspects. On the one hand, the unemployment rate has fallen almost steadily since its 2009 peak at 10% during the Great Recession. And the rate has been at the historically unusual rate of less than 4% for the past year. Relatively few people who want jobs are unable to get them. On the other hand, in spite of the low unemployment rate, wages have risen quite slowly. Between mid-2009 and today, the average hourly rate for all private employees on private payrolls has gone up by only slightly over 4%; about half of that increase has come in the last two years.

Even with many more people employed than at the time of the Great Recession, the very slow increase in wages has meant a rise in income inequality. In 2007, the average income of households in the top 5% was 25 times as great as the average income of households in the bottom 20%. By 2017, the average income in the top 5% was 29 times that in the bottom 20%. (These figures are for pre-tax income. The after tax distribution was slightly less unequal, but changed in the same way. Moreover, the tax cut at the end of 2017 surely has made the after-tax distribution of income more unequal.)

Perhaps the combination of the slow increase of GDP and the rising income inequality can be summarized as: The economy is doing well, but the people aren’t.

What Keeps the GDP Growing?

In the spring of 2019 it appears that the growth of GDP is slowing. Still, even if the economy tanks soon, the current expansion will be the longest on record. A record requires some explanation. Part of the explanation, ironically, is that the expansion has been so long because it has been so slow. Because growth was slow and the unemployment rate, while falling, came down slowly, wages have risen very slowly. This limited the extent to which wage costs were cutting into firms’ profits.

Another factor, also easing cost pressures on profits, was that commodity prices fell and remained low—that is, prices of basic raw materials, everything from copper and oil to soy beans and corn. In 2017, the Bloomberg index of commodity prices was only 43% of its 2011 peak. While it has gone up and down in recent months, at the beginning of April 2019 the index was still only 46% of its 2011 high. These price changes were partly affected by the large increase of U.S. production of oil, but also by the slowdown in the growth of demand in the United States, relative stagnation in Europe, and even weakening of the Chinese economy. Still another factor keeping businesses’ costs down and the recovery growing, however slowly, was the low interest rate policy of the U.S. Federal Reserve. From the Great Recession until 2018, the real interest rate at which banks could borrow was effectively zero, or even negative. (The “real” interest rate is the nominal rate less the anticipated inflation rate.)

These factors affecting firms’ costs kept the economy growing. However, the government provided only limited stimulus to demand, so the growth has been slow. The federal government provided some stimulus in the American Recovery and Reinvestment Act of early 2009. The Act did help boost the economy out of the recession, but was neither large enough nor lasting enough to sustain strong growth in subsequent years.

Now and Going Forward

The large tax cuts put in place by the Republicans at the end of 2017 do appear to have had some stimulatory impact, as people spent the gain they received. But the tax cut greatly favored the very rich, and the rich tend not to spend at a high rate. So the growth impact was limited. Also, while the Republicans promised that the tax cut for corporations would lead to a surge of investment, the surge never materialized. Instead, major corporations used their windfalls from the tax cut to buy back large amounts of their stock, an action which enhanced the incomes of their executives and other stockholders, but has had created no lasting stimulus for the overall economy.

Then there is the developing trade war with China. All indications are that this conflict will not be resolved soon and will have a negative impact on economic growth—not only on the U.S. and China, but possibly on the global economy.

We are left, then, in early 2019, with an impending economic slowdown of an already slowly growing economy. While many things can happen in the coming months, it is unlikely that a year from now anyone will be asking, “Why has the U.S. economy been doing so well?”

 is professor emeritus at UMass Boston and a Dollars & Sense Associate.

 Arthur MacEwan and John Miller, “The U.S. Economy: What is Going On?” New Labor Forum, Vol. 27, Issue 2, Spring 2018; Census Bureau, “Income and Poverty in the United States: 2017” (census.gov); Bureau of Economic Analysis, “National Income and Product Accounts” (bea.gov); Investing.com, “Bloomberg Commodity Historical Data” (investing.com); Bureau of Labor Statistics, “Real Earnings Archived” (bls.gov).

This article originally appeared at dollarsandsense.org on May 30, 2019. Reprinted with permission.

 is professor emeritus of economics at UMass-Boston and a Dollars & Sense Associate.

The Reality Behind the ‘Surging’ U.S. Economy

Friday, May 17th, 2019

And yet most of the gains from our growing economy are still going to those who least need a boost. Stock market rallies, for example, further concentrate wealth among the very richest Americans. The top 1% of Americans own more than half of stocks and mutual funds. The bottom 90% own just 7%.

For ordinary Americans, the slight uptick in wages is not enough to make up for many years of stagnation. Average hourly pay rose just 6 cents in April 2019 and 4 cents the month before that.

Workers need a much bigger raise if they are to receive their fair share of economic gains, especially with prices for many essentials rising much faster than wages. For example, compared to the 3.2% increase in average earnings over the past year, spending on prescription drugs is up 7.1%while the average house price rose 5.7%. Average childcare costs jumped 7.5% between 2016 and 2017.

Such small pay increases won’t do much to chip away at the country’s $1.6 trillion in student debt — a burden leading 1 in 15 borrowers to consider suicide, according to a recent survey.

Wages have also lagged far behind the increase in corporate profits (7.8% in 2018). Despite promises that workers would reap huge benefits from the Republican tax cuts, big corporations have used most of their tax windfalls to enrich wealthy shareholders and CEOs, blowing a record-setting $1 trillion on stock buybacks that inflate the value of their shares.

Another reason for the disconnect between the rosy headlines and people’s lived experiences: GDP is a deeply flawed measure of economic well-being. At a recent conference in Washington, D.C. hosted by People’s Action, many grassroots activists told stories that underscored this point.

Sonny Garcia from Illinois People’s Action talked about how his mother’s insulin prescription had just jumped from $100 to $700 per month. Increased profits for pharmaceutical firms contribute to GDP growth, but they can mean extreme hardship for people like Sonny’s mother.

Crystal Murillo, a city council member from Aurora, Colorado talked about how almost all the building going on in her city is for luxury condos. High-end real estate development is also good for the GDP, but not for people who get gentrified out of the housing market.

Laurel Clinton, from Iowa CCI, talked about her fears that her son could get racially profiled and swept into the exploding prison population in her state. New prison construction shows up as a plus for the GDP, but it’s not exactly good news for communities, especially communities of color.

The rosy topline indicators also mask our country’s deep racial divides. The black unemployment rate remains more than twice as high as the rate for whites (6.7% versus 3.1% for whites) and it has increased from 6.5% in April 2018.

People of color are also more likely than whites to be among the more than 27 million Americans who lack health insurance. The uninsured rate is 19% for Latinos and 11% for blacks, compared to 7% for whites. And according to a recent report co-published by the Institute for Policy Studies, 37 percent of black families and 33 percent of Latino families have zero wealth or are in debt, compared to just 15.5 percent of white families.

Despite the overall tightening of the labor market, a large share of U.S. jobs are still “precarious,” with little security in terms of retirement benefits, affordable health insurance, or predictable scheduling.

While presiding over an economic recovery that started under his predecessor, Trump has done nothing on his own to lift up working people.

The president has signed several executive orders to curtail labor union rights and his Labor Department recently announced plans to scale back an Obama policy to expand overtime rights to millions of workers. He has also lent his support to “right to work” laws that undercut unions by prohibiting them from requiring workers who benefit from collective bargaining agreements to pay dues.

Unless workers have more power to negotiate for their fair share of economic awards, even a real economic boom will have limited benefit for those who need it most.

This article was originally published at Our Future on May 14, 2019. Reprinted with permission. 

About the Author: Sarah Anderson directs the Global Economy Project and co-edits Inequality.org at the Institute for Policy Studies. For more of her analysis of the state of the U.S. economy, check out her recent interview on NPR’s 1A

 

Foundations of Inequality are in Wages

Wednesday, May 31st, 2017

While rising capital share and greater concentration of wealth explain some of the story of economic inequality, the largest part of the story is the growth in wage inequality over the last several decades. Available data from the Social Security Administration unfortunately doesn’t go past 1990, overlooking considerable upward distribution of wages beginning in 1980. However, wage distributions from 1990 to 2015 show a clear, and unequal, upward trend.

The share of wages earned by the top 0.1 percent of wage earners increased 36 percent in that time period, from 3.5 percent of all wages earned to 4.8 percent. These earners are largely Wall Street bankers and top executives from private companies, as well as hospitals, universities, and other non-profits. Although the data from such a small pool of workers is erratic, they show soaring gains over ordinary workers that coincide with stock market peaks. Wages at this income level are likely paid in part in stock options, so that connection is unsurprising, but the magnitude of wage increases for this group compared to the others supports the argument that wages are part of the inequality picture.

The top 1 percent of wage earners (excluding the 0.1 percent) are largely doctors, dentists, and other highly paid professionals with an average pay of around $333,000 a year. These workers have experienced impressive gains in their share of wages, although they do not compare to those of the 0.1 percent. From 1990 to 2015 the share of wages earned by this group increased 24 percent from 10.7 percent to 13.2 percent.

Lawyers, general practitioners, university professors, and other professionals with advanced degrees make up the top 5 percent of earners (excluding the aforementioned groups). Since 1990 their share of wages earned has grown 18 percent, from 24.0 percent to 28.5 percent. Most of the difference between the share of wages earned by this group and the next lowest, the 90th to the 95th percentile, was gained between 1994 and 2000. Prior to that period both percentile groups’ share of wages grew at a similar rate, and since 2000 the two groups have had similar growth.

The final group of workers included in this analysis adds those who mostly have college degrees but not necessarily advanced degrees. The share of wages earned by the top 10 percent taken as a whole grew 14 percent from 35.5 percent in 1990 to 40.3 percent in 2015.

This blog originally appeared at CEPR.net on May 30, 2017. Reprinted with permission.

About the Authors: Sarah Rawlins is a Domestic Program Intern at the Center for Economic and Policy Research. Dean Baker co-founded CEPR in 1999. His areas of research include housing and macroeconomics, intellectual property, Social Security, Medicare and European labor markets. He is the author of several books, including Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. His blog, “Beat the Press,” provides commentary on economic reporting. He received his B.A. from Swarthmore College and his Ph.D. in Economics from the University of Michigan.

The Fiscal Myth That’s Killing The Economy, In 7 Steps

Saturday, August 13th, 2016

RichardEskowA new economic working paper reinforces an important reality: We need more government spending to repair the economy for millions of working Americans. Unfortunately, our political debate is being held back by an economic myth – one that has yet to be challenged in political debate, despite an ever-growing body of evidence against it.

The paper, by L. John Bivens of the Economic Policy Institute, is called “Why is recovery taking so long – and who’s to blame?

The myth is called “austerity,” and it can be roughly defined as “the persistent but false belief that government spending cuts are always a good idea.”

Here are seven things about austerity worth knowing:

1. Our current recovery is too slow, and isn’t reaching everybody it should.

As Bivens points out, employment took longer to reach its pre-recession levels this time around than it did in the previous three recovery periods. Perhaps even more significantly, the rate of job creation remained slower after the recession officially ended.

What’s more, the jobs created after the 2009 crisis were weighted heavily toward lower-income professions. Labor force participation for people of working age remains low, even though it has improved somewhat.

And, as the Center for Economic and Policy Research recently reported, the percentage of people who are involuntarily working part-time rather than full-time is 25 percent higher now than it was before the recession.

As CEPR’s Nick Buffie notes, “Over 6 million people are working part-time involuntarily, and on average they work 23 hours per week. Because full-time workers are typically employed 42–43 hours per week, this is effectively a wage cut of almost 50 percent for the affected workers.”

2. The weak recovery affects a lot of full-time workers.

It is not just the unemployed and underemployed who are affected by the weak recovery. Many full-time workers are earning less than they would be if the economy had rebounded at a faster pace, creating more and better jobs than it has.

The American middle class needs a raise. But millions of people won’t get their raises until the economy is stronger and the demand for workers goes up. And demand will remain low until there are more jobs to fill.

3. We know what to do about it.

Government has two tools at its disposal in situations like this: monetary policy and fiscal policy. Monetary policy was promptly deployed after the latest crisis, both to bail out Wall Street and to improve the overall economy. The Federal Reserve should have been more attentive to the Main Street economy, using some of the creativity it used to rescue the financial sector, but it did cut interest rates and that helped.

Unfortunately, fiscal policy, in the form of job-creating government spending initiatives, was used only sparingly at the federal level. Over the past seven years there have been spending cuts at the federal, state and local levels. That’s the opposite of what’s needed, especially in an economy like this one.

As Bivens points out, it’s necessary to increase demand under conditions like those we see today. A simplistic overview of the process: The government creates jobs, the people who get those jobs spend more, the economy’s “pump” is primed and growth follows.

We aren’t talking about radical, far-left ideas here. This approach has been mainstream economic thinking for many decades, and was successfully applied under Democratic and Republican administrations alike.

4. We relied on the myth of austerity instead.

But recent years have seen the rise of different ideas – ideas that were tended and nurtured by right-wing institutions like the Peterson Foundation, and by conservative economic thinkers too numerous to mention. “Austerity economics” – the belief that governments can cut their way to growth – became conventional thinking in the halls of academe and the halls of power. It is obsessed with deficit spending, to the exclusion of other concerns that are often more pressing.

Austerity-driven cuts have hurt the U.S. economy. Austerity’s done even more damage in Europe. When the global financial crisis of 2008 struck, multilateral decision-makers (including the European Central Bank and the International Monetary Fund, or IMF) imposed a harsh austerity regimen on Greece and other struggling European economies. The result, as we now know, was disastrous.

To its credit, the IMF conducted an internal review of its actions during this period. The report found that IMF officials ignored a number of warning signs and had a “strongly optimistic bias” about the effects of austerity. The report also agreed with an earlier investigation that found “a high degree of groupthink, intellectual capture … and incomplete analytical approaches.”

That’s pretty much what happened here, too.

The crisis of 2008, and the events that followed, disproved austerity economics and other hallmarks of conservative economic thought. But it remains popular in powerful circles – perhaps because, as Upton Sinclair said (in the gendered language of his time): “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

5. It’s mostly a Republican problem …

Despite ample evidence to the contrary, Republicans remain steadfast in their opposition to government spending – even for government jobs like teaching, firefighting, and emergency management.

As Bivens explains:

“We are enduring one of the slowest economic recoveries in recent history, and the pace can be entirely explained by the fiscal austerity, particularly with regard to spending, imposed by Republican policymakers, members of Congress primarily but also legislators and governors at the state level.”

The Republican Congress can even take much of the blame for state-level spending cuts, since transfers from the federal government account for more than 20 percent of state and local spending.

Bad economies aren’t an act of God. They are a result of human action – or inaction.

6. … but a lot of Democrats have bought into the myth, too.

A number of top Democrats echoed the rhetoric of austerity, too. That led to weaker political support for the spending we needed, and probably clouded the judgment of Democratic leaders when it came time to make the case for needed spending increases.

President Obama spent far too much time fighting for a “grand bargain” on spending with congressional Republicans that was rooted in austerity thinking, and too little time challenging that thinking. He also had the habit, especially in his first term, of echoing the false economic tropes of the austerity crowd by saying things like “just like every family in America … the Federal government has to live within its means …”

National budgets don’t work like family budgets at all – that is, unless the family in question issues its own sovereign currency.

There are strong hints of austerity-oriented thinking in Hillary Clinton’s rhetoric, too. That puts her at odds with enthusiastic backer Paul Krugman, who wielded a poison pen on her behalf during the Democratic primaries but is currently making the case for borrowing and spending.

Austerity thinking was highlighted at last month’s Democratic National Convention when Gene Sperling, a senior economic advisor to former presidents Clinton and Obama, was featured in a humor-oriented anti-Trump video produced by “Funny or Die.” Whether or not hilarity ensues must remain a matter of personal opinion, but the video clearly relies on austerity economics – specifically, an exaggerated fear of deficits – to scare viewers.

There has never been a better time for the federal government to borrow money and invest in the economy. It can obtain very low interest rates, the economy would respond very well to job creation, and we urgently need to spend money on repairing and expanding our national infrastructure. (The American Society of Civil Engineers says we need to spend $3.6 trillion by 2020.)

7. We need a national debate about austerity economics.

Hillary Clinton has proposed modest levels of infrastructure investment and other government spending – modest, but better than nothing. President Obama put forward similar spending proposals. But these proposals suffer from a fatal flaw that renders them useless in today’s climate: They’re too large to get past the Republicans in Congress and too small to change the political debate.

Democrats have not directly challenged Republicans on government’s proper role in the economy. Too often, they have tried to co-opt the rhetoric (and sometimes the policies) of austerity instead.

Republicans, on the other hand, offer a clearly articulated and internally coherent (if utterly fallacious) economic perspective. Democrats can also offer a coherent perspective, too – one with the added advantage of having been proven by experience. That perspective can make life better for millions of people.

This is the economic debate this country needs. But we won’t get it until someone challenges austerity economics and the conservative philosophy behind it – directly, unambiguously and fearlessly.

This article originally appeared at Ourfuture.org on August 12, 2016. Reprinted with permission.

Richard Eskow is a Senior Fellow with the Campaign for America’s Future and the host of The Zero Hour, a weekly program of news, interviews, and commentary on We Act Radio The Zero Hour is syndicated nationally and is available as a podcast on iTunes. Richard has been a consultant, public policy advisor, and health executive in health financing and social insurance. He was cited as one of “fifty of the world’s leading futurologists” in “The Rough Guide to the Future,” which highlighted his long-range forecasts on health care, evolution, technology, and economic equality. Richard’s writing has been published in print and online. He has also been anthologized three times in book form for “Best Buddhist Writing of the Year.”

What Is “Economic Freedom,” And Who Is It For?

Wednesday, February 3rd, 2016

Terrance Heath

The Heritage Foundation has released its annual “Index of Economic Freedom.” As America enters an election season increasingly influenced by anger at an economy rigged in favor of the wealthy, maybe it’s time to ask: What is “economic freedom,” and who is it for?

What does economic freedom mean to you, personally? Given that we only recently recovered from a serious national bout of “Powerball Fever,” it’s a safe bet that for most people it means not having to worry about having enough money. It means earning a livable wage; enough to meet basic needs, like food, shelter, transportation, and medical care. It means earning enough to support your family, and having leisure time to enjoy your family. It means being able to educate your children — or yourself — without putting yourself in hock with debt. It means having a fair shot at reaching the next rung on the economic ladder, and securing a better future for your children. It means being able to retire with a decent standard of living.

For the Heritage Foundation, “economic freedom” is “the fundamental right of every human to control his or her own labor and property.” Who’d disagree with that? However, the Heritage definition quickly moves from a focus on the individual to a society in which “governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.”

It sounds good, until you realize we’re not talking about the rights or freedoms of persons like you and me, but wealthy people and “corporate persons.” Heritage breaks “economic freedom” down into four pillars: “Rule of Law,” concerning property rights and “freedom from corruption”; “Limited Government,” concerning “fiscal freedom” and government spending; “Regulatory Efficiency,” concerning “business freedom”, “labor freedom”, and “monetary freedom”; and “Open Markets,” concerning “trade freedom”, “investment freedom,” and “financial freedom.” They repeat the word “freedom” as often as possible, but what do all of those things mean in reality?

If you’re an average worker, it means little to no “regulations concerning minimum wages.” So employers can pay you as little as they like. If you can’t live on what they pay, you’re free to try to earn more elsewhere. Good luck with that, because who gets rich paying higher wages than their competitors? Several of the countries in the Heritage’s “economic freedom” top 10 had the lowest hourly minimum wages, including Chile ($2.20) and Estonia ($2.70). Others have no minimum wage.

There are some developed countries with no minimum wage on Heritage’s index, like Switzerland (number 4) and Denmark (number 12, just behind the U.S.), but they tend to rely on strong trade unions to negotiate fair wages for workers.

If you’re an American worker, it means driving down wages with trade agreements like the Trans Pacific Partnership (TPP), that institute what Heritage calls “trade freedom,” defined as “the absence of tariff and non-tariff barriers” on imports and exports of goods and services. The top 10 on Heritage’s index is almost a membership list of TPP countries, including Singapore, New Zealand, Chile, Australia and Canada.

It means there are few, if any, labor laws prescribing maximum working hours. There’s no limit on how many hours your employer can require you to work. It means you don’t even have a right to a two-day weekend.

It means there are few, if any, “laws inhibiting layoffs,” “severance requirements,” or “measurable regulatory restraints on hiring and hours worked.” In other words, forget about “right to work” states. It’s a “right to work” world, in which you have the right to work harder and longer for less.

It means no Social Security as we know it. In fact, it means no government programs, as Heritage’s index uses zero government spending as a benchmark. (So underdeveloped countries with little governmental capacity may receive “artificially high scores” for government spending.) The government won’t have anything to spend anyway, because “fiscal freedom” means a low top marginal income tax rate, and a low top marginal corporate tax rate. The lower the rates, the higher the “fiscal freedom” score. Serving as a tax haven for corporations and wealthy individuals seeking to avoid taxes back home, under the banner of “investment freedom,” can earn countries like Ireland (number eight on Heritage’s index) high “economic freedom” scores.

How does all this “economic freedom,” mostly for the wealthy and “corporate persons,” work out for the rest of society? According to Heritage, more “economic freedom” is supposed to mean less inequality. Yet, some of the highest ranking countries on Heritage’s index have the highest rates of inequality.

? Despite being number one on Heritage’s index, Hong Kong’s yawning gap between rich and poor has fueled protests, despite increasing minimum wages.
? Number two on Heritage’s index, Singapore has one of the highest rates of inequality, leading to calls for the government to take action.
? The “miracle of Chile” (number seven on Heritage’s index), so christened by conservative economist Milton Friedman, has lost its shine as Chile’s plantation economy has made it one of the countries with the most serious inequality problems.

Every year Heritage comes out with a new “economic freedom” index, and every year the questions behind the numbers is the same: What is economic freedom, and who is it for? The answer remains the same, too. Heritage’s “economic freedom” is freedom for the wealthy and giant corporations to further consolidate their wealth and power, and not much else.

This blog originally appeared in ourfuture.org on February 2, 2016. Reprinted with permission.

Terrance Heath is the Online Producer at Campaign for America’s Future. He has consulted on blogging and social media consultant for a number of organizations and agencies. He is a prominent activist on LGBT and HIV/AIDS issues.

The Economy: The New Normal Isn’t

Wednesday, December 9th, 2015

Robert-Borosage_The November jobs report – 211,000 jobs with the headline unemployment rate staying at 5 percent – met “expectations.” It is now virtually inevitable that the Federal Reserve will begin raising interest rates at its December 15-16 meetings, as Fed Chair Janet Yellen indicated in her congressional testimony yesterday.

The Federal Reserve action essentially declares this economy the new normal. The unemployment rate has dropped from its 10 percent depths in the Great Recession to 5 percent. The economy has enjoyed a record 69 months of private sector jobs growth. Fed Chair Janet Yellen suggests the U.S. economy has sufficient momentum to continue to grow.

While inflation remains far below the Fed “target” of 2 percent, Yellen anticipates that the dollar won’t continue to rise in value and oil won’t continue to fall, suggesting that inflation might pick up in future months. So, she argues, it is time for the Fed to begin – in baby steps and very cautiously – to raise interest rates.

But the new normal is neither normal nor acceptable. Nearly 16 million people are still in need of full-time work. The percentage of the civilian population working or actively looking for work remained virtually unchanged at 62.5 percent, near a 40-year low (back to when women began entering the workforce in large numbers).

African-Americans suffer unemployment rates at 9.4 percent, almost twice the national average. Only one in five of young African-Americans – ages 16 to 19 – are employed.

We still haven’t returned to the same levels of employment, counting new entrants, that we enjoyed before the recession in 2007. Wages are still stagnant, up barely over 2 percent for the year for non-supervisory workers, not close to keeping up with the cost of health care or college or child care.

Worse, the Fed is tightening against the threat of future inflation that exists only in its imagination. And it does so in a world dangerously close to global downturn. Europe verges on deflation, with the European bank extending extraordinary measures to fend off decline. China is slowing faster than expected or admitted. Japan is back in recession. Brazil is suffering the deepest downturn since the Great Depression, with other emerging market countries in decline.

The U.S. economy is not strong enough to be the buyer of last resort for a world desperate to export its way to recovery. The U.S. dollar has already dramatically increased in value, with the Euro and other currencies weakening. This makes imports cheaper and exports more expensive. Already U.S. manufacturing is getting hit.

The Fed is understandably eager to begin raising rates after keeping them near zero for seven years. Free money feeds the bankers’ casino, inflates bubbles, and makes it easier for corporations to doctor their balance sheets. What is missing is any sensible policy from the Congress to get this economy going. Corporations are parking over two trillion abroad to avoid paying taxes. If Congress weren’t ruled by ideologues and bounders, it would force them to pay their fair share of taxes and use that money to rebuild the country, putting people to work in work that needs to be done.

Both the Fed Chair Yellen and the IMF have been calling for action from the Congress without success. Instead, Congress turns itself inside out to pass a modest highway bill that won’t come close to addressing the continued decline in our infrastructure.

This world is closer to a global recession than to healthy normal economic growth. The Fed’s likely action will be modest. But at a time when we need far bolder action across the globe, the Fed is signaling success when it ought to be raising warning flags.

This blog originally appeared at OurFuture.org on December 4, 2015. Reprinted with permission.

About the Author: Robert Borosage is the Co-Director of the Campaign for America’s Future.

 

Why the Sharing Economy is Hurting the Economy - and What Must Be Done

Sunday, November 29th, 2015

Robert ReichIn this holiday season it’s especially appropriate to acknowledge how many Americans don’t have steady work.

The so-called “share economy” includes independent contractors, temporary workers, the self-employed, part-timers, freelancers, and free agents. Most file 1099s rather than W2s, for tax purposes.

It’s estimated that in five years over 40 percent of the American labor force will be in such uncertain work; in a decade, most of us.

Already two-thirds of American workers are living paycheck to paycheck.

This trend shifts all economic risks onto workers. A downturn in demand, or sudden change in consumer needs, or a personal injury or sickness, can make it impossible to pay the bills.

It eliminates labor protections such as the minimum wage, worker safety, family and medical leave, and overtime.

And it ends employer-financed insurance – Social Security, workers’ compensation, unemployment benefits, and employer-provided health insurance under the Affordable Care Act.

No wonder, according to polls, almost a quarter of American workers worry they won’t be earning enough in the future. That’s up from 15 percent a decade ago.

Such uncertainty can be hard on families, too. Children of parents working unpredictable schedules or outside standard daytime working hours are likely to have lower cognitive skills and more behavioral problems, according to new research.

What to do?

Courts are overflowing with lawsuits over whether companies have misclassified “employees” as “independent contractors,” resulting in a profusion of criteria and definitions.

We should aim instead for simplicity: Whoever pays more than half of someone’s income, or provides more than half their working hours should be responsible for all the labor protections and insurance an employee is entitled to.

In addition, to restore some certainty to people’s lives, we need to move away from unemployment insurance and toward income insurance.

Say, for example, your monthly income dips more than 50 percent below the average monthly income you’ve received from all the jobs you’ve taken over the preceding five years. With income insurance, you’d automatically receive half the difference for up to a year.

It’s possible to have a flexible economy and also provide workers some minimal level of security.

A decent society requires no less.

This blog was posted at RobertReich.org at November 23, 2015. Reprinted with permission.

About the Author: Robert B. Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century.

Economists React to October Jobs Report

Monday, November 16th, 2015

Jackie TortoraOctober provided good news for the economy. The economy added 271,000 jobs, according to the U.S. Bureau of Labor Statistics, a big increase over September’s number of 137,000 jobs. The unemployment rate also fell fractionally from 5% to 5.1%.

Average hourly private-sector earnings were up 9 cents, which, if sustained, will finally start producing real wage gains for ordinary working Americans.

In response to the October jobs report, AFL-CIO Chief Economist William E. Spriggs said:

While this month’s numbers are good, job growth has yet to deliver sustained wage gains that working people need to lead better lives. This means we face the deeper challenge of fashioning policy changes to create the institutional structure for shared prosperity; aggressive, progressive solutions, not corporate driven trade deals. Unfortunately, while our economy remains fragile, the now public TPP text proves our fears of just how damaging it could be to our economy. The fight for full employment and rising wages starts with rejecting this bad deal and embracing economic policies that put people and families first.

 AFL-CIO Senior Economic Policy Adviser Thomas Palley added:

This report is strong, which is good news. But the report also reveals the contradictions in our economy. Good news for Main Street is interpreted as bad news by Wall Street. The challenge for the Federal Reserve, and the standard by which it will be judged, is to ensure this type of news becomes ‘normal’ and not a one month exception that is used to justify hitting the brakes.

This blog originally appeared at AFL-CIO on November 10, 2015. Reprinted with permission.

About the Author: Jackie Tortora is the blog editor and social media manager at the AFL-CIO.

Taking Pope Francis’ Message Seriously Means Pushing for Worker-Owned, Green Cooperatives

Wednesday, September 23rd, 2015

in these timesThe Pope’s visit to the USA this week comes just two months before pivotal UN climate talks that could lead to a global climate agreement. Climate change will be high on his agenda in planned addresses to the UN and Congress, and it is likely that one of his central concerns will be the economy. Pope Francis did not mince words in his recent encyclical on the theme of climate change and one of the main targets of his searing critique was our current economic system. He bemoaned that “the earth’s resources are … being plundered because of short-sighted approaches to the economy, commerce and production.” He chastised the dominance of the speculative finance sector over the economy, and the folly of looking to market growth to solve all social ills.

His core message is that we are currently locked in an economic growth model based on the premise we have an inexhaustible planet. The way the global economy is currently run will not ensure our long-term physical survival. There are some glaring signals that it won’t ensure our economic survival either. For starters, the financial crisis of 2008 and evidence that patterns of growing inequality are stunting economic growth. Recent admissions from the International Monetary Fund (IMF) that economic trickle down theory doesn’t work have further cast doubt on the logic of the current system.

Alongside experts such as the Nobel laureate Joseph Stiglitz and established economic institutions such as the IMF, the Pope is not alone in raising the alarm on “unbridled capitalism.” So in order to solve the greatest challenges of our time, climate change and inequality, we need an economic system that serves us better. However, it seems that beyond identifying and agreeing upon the problem, we often stop short at imagining solutions.

But there are signs that the seeds of a stronger and more responsible economy may already be taking root. Interest in existing models of enterprises, banks, cooperatives and networks that put social and environmental principles before profit is growing. These businesses have a strong emphasis on collective ownership, management and decision-making. Financial decisions are not left to the power of a few, whether government bureaucrats or corporate CEOs, but overseen more democratically by the main generators and beneficiaries of economic activity: the workers and customers.

This rich and diverse tapestry of economic activity witnessed around the world has been called a number of things: social economy, solidarity economy, local economy, new economy, the next system. Interest in the promise of these approaches has even spurred the UN to form a task force to investigate the potential of the social and solidarity economy in contributing to global development goals.

Sounds like a nice idea, but is this really economically viable? Surprisingly yes, and in many cases these enterprises are much more resilient and successful than current models that can result in job losses, bankruptcy and financial crashes. A recent UN report concluded that worker- and customer-owned banks made less risky decisions and outperformed investor owned banks during the recent global financial crisis. Research reveals that worker-owned cooperatives also have similar economic and social benefits that make them a better business model for communities and the economy as a whole.

One well-known example is that of Mondragon Cooperative Corporation, a highly successful worker-owned company of over 70,000 employees based in Spain. The company operates internationally and has a diverse portfolio, including the manufacture of industrial machinery. The 10th-largest company in Spain in terms of asset turnover, Mondragon had lower levels of unemployment compared to the rest of Spain during the 2008 recession and still remained globally competitive. Instead of firing staff during the economic downturn, employees voted to take pay cuts and top managers took their share of the burden. The Spanish cooperative is not alone. Over 2008, in the midst of the financial crisis, the combined turnover of the world’s 300 largest cooperatives was an impressive $1.6 trillion, comparable to the GDP of the ninth largest economy in the world.

Action to fight climate change could benefit from new economic approaches. Take the two sectors that contribute the most to global carbon emissions: energy and agriculture. In Germany, community-owned energy cooperatives are booming, supporting the rapid uptake of renewable energy without having to depend on the patronage of reluctant utility companies. The impressive success of wind power in Denmark is due largely to the rapid spread of community-owned wind turbines. In the United States, the move away from utility-scale power plants is also happening. Recent studies show that levels of solar power generation in the U.S. have been underestimated by as much as 50 percent. This is due to the exponential growth in rooftop solar, which is not yet systematically recorded. The opportunity to magnify the potential of small-scale energy producers could be immense.

With regards to agriculture, the UN advocates ecologically friendly methods based around small-scale farming, with more local production and consumption. This could lead to higher yields, better protect food systems from the impacts of climate change and reduce emissions from this sector. Agricultural cooperatives are critical to the success of smallholder farming, allowing independent farmers to remain competitive through collective purchasing and distribution networks. Climate action that supports agricultural cooperatives and low-emission, climate-proof farming methods could have positive economic, food security and climate outcomes.

Action on climate change could both support and benefit from a more stable and democratic economy. Climate finance and subsidies currently being swallowed by the fossil fuel industry could be redirected to promote locally owned and managed energy and farming, using socially responsible financial institutions to manage these funds. The result could be a stronger economy that works better for both people and the climate.

In his encyclical, the Pope entreated us to “seek other ways of understanding the economy and progress”. A framework for a more democratic, collectively owned and managed economy could be part of this. The re-imagination of the economy is already in motion. It’s time for the climate movement to get on board.

This Blog originally appeared on In These Times on September 23, 2015. Reprinted here with permission.

About the Author: Gaya Sriskanthan has over a decade of experience working on climate change, environmental protection, and sustainable development with a range of organizations including the United Nations and the UK Department for International Development. She currently focuses on indigenous peoples’ rights and civil society inclusion in climate change action. Follow her on Twitter: @gayasktn.

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