Wage Slaving 101

Former Obama economic adviser and current UC-Berkeley econ professor Christina Romer all but pours cold water on the notion of even having a minimum wage, let alone raising it to $9 an hour as the President suggested in his SOTU speech last month.

First, what’s the argument for having a minimum wage at all? Many of my students assume that government protection is the only thing ensuring decent wages for most American workers. But basic economics shows that competition between employers for workers can be very effective at preventing businesses from misbehaving. If every other store in town is paying workers $9 an hour, one offering $8 will find it hard to hire anyone — perhaps not when unemployment is high, but certainly in normal times. Robust competition is a powerful force helping to ensure that workers are paid what they contribute to their employers’ bottom lines. 

One argument for a minimum wage is that there sometimes isn’t enough competition among employers. In our nation’s history, there have been company towns where one employer truly dominated the local economy. As a result, that employer could affect the going wage for the entire area. In such a situation, a minimum wage can not only make workers better off but can also lead to more efficient levels of production and employment. 

But I suspect that few people, including economists, find this argument compelling today. Company towns are largely a thing of the past in this country; even Wal-Mart Stores, the nation’s largest employer, faces substantial competition for workers in most places. And many employers paying the minimum wage are small businesses that clearly face strong competition for workers. 

Now, I'm not a economics professor, but the problem isn't production, efficiency, or competition.
It's cost of living.  It's the fact that minimum wage doesn't begin to cover a place to live anywhere in America.




And Romer's solution is increasing the Earned Income Tax Credit.

It’s precisely because the redistributive effects of a minimum wage are complicated that most economists prefer other ways to help low-income families. For example, the current tax system already subsidizes work by the poor via an earned-income tax credit. A low-income family with earned income gets a payment from the government that supplements its wages. This approach is very well targeted — the subsidy goes only to poor families — and could easily be made more generous. 

By raising the reward for working, this tax credit also tends to increase the supply of labor. And that puts downward pressure on wages. As a result, some of the benefits go to businesses, as would be the case with any wage subsidy. Though this mutes some of the direct redistributive value of the program — particularly if there’s no constraining minimum wage — it also tends to increase employment. And a job may ultimately be the most valuable thing for a family struggling to escape poverty. 

Not if the job doesn't cover the cost of rent in the first place.  Even here in Kentucky, one of the cheapest states to live in,  you'd need to be pulling down $11+ an hour to afford a two-bedroom apartment.

Ohio's $7.85 a hour minimum wage still means you'd need $13+ an hour, same with Indiana's federal minimum.  The $9 an hour the President is talking about is a solid first step, but more tax credits for the poor isn't going to fix the problem.

Talking about minimum wages without talking about cost of living problems is a ridiculous waste of time and space, and frankly I'm more than a little peeved at Professor Romer for forgetting that:  nowhere in the piece does she mention a living wage.

Just annoying as all hell.

Basic Mathe-Manics On Taxes

Stephen Olemacher at the Associated Press reminds us that you should take some time out of your busy schedule to feel sorry for America's most put upon resource, our obscenely rich one-percenters.

President Barack Obama and Democratic leaders in Congress say the wealthy must pay their fair share if the federal government is ever going to fix its finances and reduce the budget deficit to a manageable level.

A new analysis, however, shows that average tax bills for high-income families rarely have been higher since the Congressional Budget Office began tracking the data in 1979. Middle- and low-income families aren’t paying as much as they used to.

For 2013, families with incomes in the top 20 percent of the nation will pay an average of 27.2 percent of their income in federal taxes, according to projections by the Tax Policy Center, a research organization based in Washington. The top 1 percent of households, those with incomes averaging $1.4 million, will pay an average of 35.5 percent.

Those tax rates, which include income, payroll, corporate and estate taxes, are among the highest since 1979.

The average family in the bottom 20 percent of households won’t pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll taxes. That will give them a negative tax rate.

‘‘My sense is that high-income people feel abused by being targeted always for more taxes,’’ Roberton Williams, a fellow at the Tax Policy Center, said. ‘‘You can understand why they feel that way.’’

Indeed, the top 20% of income earners pay 78% of all income tax according to the article, which in America means we have people earning six figures who have to scrape by.  What the other 80% are supposed to do, well who knows, we don't matter.  As Sam Knight over at Washington Monthly puts it...

...yahoo!

It’s oh so difficult to feel even a subatomic iota of sorrow for the rich here for so many reasons: 1979, of course, marks two years before the start of the Reaganite consensus on executive worship and corporate tax cuts; much of the rich’s income is derived from “unearned” rent-seeking; the elites should be happy to help pay for a society that has helped them prosper; and, due to offshoring and the weakness of organized labor among other factors, lower income workers’ wages haven’t kept pace with their productivity explosion over the past few decades. In short, the wealthy have the money to comfortably pay these “historically high” tax rates — lower still than the high marginal rates that were commonplace throughout the rapid growth post-war era.

Moreover, high tax rates might actually spur growth, in the words of John Judis, by discouraging “the wealthy from rerouting their savings into the kind of speculative activity that helped create the Great Recession,” and, in the words of one small business owner, by encouraging businesses to reinvest their profit before the end of the year.

Or as Duncan Black puts it, America is a country where people are poor if they are making $250,000 a year, but we can't afford to raise the minimum wage to $9 an hour.

StupidiNews!

• Catholic Cardinals will meet today in Vatican City to set a date for the conclave to select the next Pope,  the entire process which could be completed by the end of next week.
• Pediatric doctors at the University of Mississippi are announcing that they have "effectively cured" HIV in a child born with the virus, a major breakthrough.
• Releasing $190 million in aid to Egypt, Secretary of State John Kerry says President Mohammed Morsi must do more to improve rights for women and religious minorities.
• European leaders are putting pressure on Italy to continue with austerity cuts as EU finance ministers meet in Brussels to discuss bailing out Cyprus.
• Sunday's successful Dragon space capsule docking with the ISS means astronauts will transfer a total of 1,750 kg of cargo to and from the capsule before sending Dragon home in 3 weeks.

Last Call

Washington Post columnist Ezra Klein is crazy smart, and runs a good place over at Wonkblog.  But he’s always been one of those “high-INT/low-WIS” types who doesn’t always see the forest for the trees when it comes to Republicans.  This weekend however , he finally removes the scales from his eyes about the way the GOP operates, and to his credit, admits he’s been played:

My column this weekend is about the almost comically poor lines of communication between the White House and the Hill. The opening anecdote was drawn from a background briefing I attended with a respected Republican legislator who thought it would be a gamechanger for President Obama to say he’d be open to chained CPI — a policy that cuts Social Security benefits — as part of a budget deal.
The only problem? Obama has said he’s open to chained CPI as part of a budget deal. And this isn’t one of those times where the admission was in private, and we’re going off of news reports. It’s right there on his Web site. It’s literally in bold type. But key GOP legislators have no idea Obama’s made that concession.

Klein then investigates this further after Jon Chait points out the GOP is being cementheaded on purpose:

If Obama could get hold of Klein’s mystery legislator and inform him of his budget offer, it almost certainly wouldn’t make a difference. He would come up with something – the cuts aren’t real, or the taxes are awful, or they can’t trust Obama to carry them out, or something.

At  this point (as Booman notes), a Twitter exchange between NYT reporter John Harwood and GOP strategist Mike Murphy illuminates young Ezra.

And then GOP consultant Mike Murphy told Time magazine that Obama could get a deal if he uttered the six magic words, “Some beneficiaries pay more and chained CPI.”
When John Harwood noted on Twitter that Murphy seemed unaware that Obama had already offered both of those items, Murphy responded. At first, Murphy insisted that only means-testing had been offered. When corrected, he followed Chait’s prediction to a ‘T.’

1. (Chait: “the cuts aren’t real”) Murphy: “his CCPI offer is small beans gimmick.”
2. (Chait: “the taxes are awful”) Murphy: the CCPI offer is conditional on “big new revenue.”
3. (Chait: “they can’t trust Obama to carry them out”) Murphy retweets a Twitter comment from someone who was listening in to the conversation: “R’s also don’t trust him, and there’s a history to justify this mistrust.”

As Ezra points out, Mike Murphy is not a fire-breather. He’s very much a moderate Republican circa 1990.

No matter what Harwood said when pointing out President Obama is the one compromising here, and has publicly made the exact offers the GOP claims he refuses to make, Murphy rejected those offers as “unserious” or “untrustworthy.”  And it finally dawns on Ezra that all Republicans are behaving this way.

This had led to a lot of Republicans fanning out to explain what the president should be offering if he was serious about making a deal. Then, when it turns out that the president did offer those items, there’s more furious hand-waving about how no, actually, this is what the president needs to offer to make a deal. Then, when it turns out he’s offered most of that, too, the hand-waving stops and the truth comes out: Republicans won’t make a deal that includes further taxes, they just want to get the White House to implement their agenda in return for nothing. Luckily for them, most of the time, the conversation doesn’t get that far, and the initial comments that the president needs to “get serious” on entitlements is met with sage nods.

Congrats, Ezra.  You’ve discovered the fact you’re surrounded by Village Centrists.  Now how about helping America see through their “both sides do it” nonsense and lets pin the blame where it belongs, eh?

 

Keep up the good work.

A Useless, Barbaric Relic Of The Past

George F. Will is really sick and tired of minorities acting like there's still any need for Section 5 of the Voting Rights Act, because frankly Republicans are busy trying to actively disenfranchise minority voters in all states, not just historically racist Southern ones.  Why single out them?  In the name of put-upon old rich white men, Will demands that you people let it go already and that the era for the need for Section 5 has passed.

Progressives are remarkably uninterested in progress. Social Security is 78 years old, and myriad social improvements have added 17 years to life expectancy since 1935, yet progressives insist the program remain frozen, like a fly in amber. Medicare is 48 years old, and the competence and role of medicine have been transformed since 1965, yet progressives cling to Medicare “as we know it.” And they say that the Voting Rights Act, another 48-year-old, must remain unchanged, despite dramatic improvements in race relations.

The question concerning which the Supreme Court heard oral arguments Wednesday was whether Section 5 of the act is still constitutional, given the disappearance of the conditions that once made it acceptable as a temporary and emergency truncation of states’ sovereignty under federalism. In 2008, two years after the fourth renewal of the act, Barack Obama won a higher percentage of the white vote than did Al Gore and John Kerry in 2000 and 2004, respectively. Today Mississippi has more black elected officials — not more per capita, more — than any other state. Yet defenders of the continuing necessity of Section 5 merely shrug about the fact that race is no longer a barrier to either the nation’s highest office or to state and local offices in what once was the state most emblematic of resistance to racial equality.

And there we have it.  "How can there be disenfranchisement when we have a black President and black people getting elected in Mississippi?"   Gosh, I dunno.  Maybe the part where we make voter ID laws a de facto poll tax?  Maybe the part where Republicans actually opposed efforts to register more voters, or any effort to increase the number of voters in the US at all, because minorities who traditionally have been barred from voting by dint of long lines at urban polling stations, elimination of early and weekend voting, and faulty voting equipment are assumed to all be criminals anyway?

Will plows on, regardless.

Section 5 was enacted as a temporary response to many measures employed, primarily in the South, to disenfranchise minorities. It requires nine states and some jurisdictions in others to get federal permission — “pre-clearance” — for even minor changes in voting procedures. It has been extended four times, most recently in 2006 for 25 years. The 2006 House vote was 390 to 33, the Senate vote was 98 to 0; obviously, the political class’s piety about the act has extinguished thought about its necessity. But one reason for judicial review — for active judicial engagement in the protection of constitutional rights and arrangements — is that the political class, with its majoritarian temptations, cannot be trusted to do so.

Hey, that's Wario Scalia's argument.   Will buys it wholesale.  After decades of bitching about Congress not being able to agree on anything and not being able to come together for overwhelming bipartisan support, when they came together to renew the Voting Rights Act with overwhelming bipartisan support , that just proves that overwhelming bipartisan support is awful and that you can't trust it.  Why trust legislation to legislators?  (Also see George F. Will on why you can't trust the executive to execute, which is to say any of his columns on our "imperial President" over the last four years.)  But hey, let's just have the Supreme Court make endless 5-4 decisions on turning America into a right-wing utopia, that's a real governance system, dammit.

In 1982, Section 2 of the act was amended to say that the measure is violated whenever nomination and election processes “are not equally open to participation” by minority voters. And equality of participation is said to be denied whenever minority voters “have less opportunity than other members of the electorate to . . . elect representatives of their choice.” And representatives “of their choice” has been construed to mean representatives who are members of the same minority. This expresses two tenets of progressivism’s racialism. One is identity politics: Your race is your political identity. The other is categorical representation: Members of a race can be understood and represented only by members of this race. By this reasoning the Voting Rights Act has become an instrument for what Roberts has hitherto called “a sordid business, this divvying us up by race.” 

Section 5 is racism because African-Americans voting for African-Americans is racism, and liberals are racist for allowing it to continue.  As usual, the rich white guy has now made the call that racism is over, and that anyone who still believes this "racist remedy" is necessary is a racist.  Because George F. Will says so!

Seriously, at this point the barbarous ancient relic in this article is George F. Will, not Section 5.