The Trump economy is supposedly roaring; why aren’t Americans feeling it?

Via Washington Monthly

America’s official unemployment rate now stands at 3.9 percent, which has been cause for much crowing by President Donald Trump. New data, however, belie Trump’s triumphalism on the economy and find that many ordinary Americans are far from confident about their personal economic circumstances.

A new survey by Prudential and Morning Consult finds that just 46 percent of Americans are “hopeful” about their financial security, while 48 percent are “worried” or “very worried.” One in four say they’re saving less for retirement because of their current finances, 27 percent say they’ve taken a second job, and 34 percent say they’ve looked for a new job in an effort to increase their pay.

Fears about retirement security in fact loomed large in this survey, with 72 percent of workers saying they were concerned about their retirement and 80 percent ranking it as the top issue they’d like to see Congress tackle. According to the poll, the principal reasons workers gave for having trouble saving were “daily expenses” (29 percent), housing costs (18 percent), elder care (17 percent) and health care (13 percent).

Why so much anxiety despite nothing but positive toplines on the economy?

One reason is wage stagnation. While corporate profits might be reaching record highs, wage growth has been sluggish. According to the Bureau of Labor Statistics, real average weekly earnings in April were just 0.4 percent  higher than they were a year ago. Meanwhile, household expenses have been rising at a much faster pace. Average annual premiums for employer-sponsored health insurance, for instance, have risen 19 percent since 2012 and 55 percent since 55 percent since 2007, according to the Kaiser Family Foundation.

A second reason for Americans’ persistent economic anxieties is escalating levels of debt. This week, the Federal Reserve Bank of New York released new data showing an increase in household debt for the 15thconsecutive quarter. As of March 31, U.S. households owed $13.2 trillion, up $63 billion from the fourth quarter of 2017. Student loans were the largest source of debt behind mortgages, outstripping auto loans and credit cards to total $1.41 trillion in the first quarter of 2018.

A third source of household anxiety is growing job insecurity, as mounting numbers of workers enter the “contingent” or “gig” economy. While the precise size of this new economy is under dispute, the Prudential-Morning Consultsurvey found that 27 percent of workers – including 35 percent of millennials – characterized themselves as gig workers and that 30 percent of respondents said someone in their immediate family worked a gig job. Despite their claimed benefits of flexibility and independence, gig work is also seen as insecure – 64 percent of Americans said gig jobs “fail to provide necessary worker benefits.”

Americans’ worries about their finances should also add to the worries of the GOP, which is already highly vulnerable this fall. The President’s much-touted tax cuts have done little to help average families, who might be starting to see the extent to which they’ve been hoodwinked by Trump and GOP promises. Surveys show, for instance, that voters are beginning to pin higher health care costs on Republican recalcitrance over Obamacare – one late 2017 survey found that 50 percent of Americans would blame Trump and Republicans if costs increase and people lose coverage, versus 37 percent who would blame Democrats and former President Barack Obama.

Progressives, on the other hand, now have a chance to point out the failures of Trump’s economic plan and offer their own prescriptions for change. At the top of that list should be strategies to help Americans earn their way to greater financial security through better jobs, higher wages and greater opportunities for advancement. One promising blueprint is the economic opportunity agenda released this week by the House New Democrat Coalition, which offers a smorgasbord of creative ideas for improving workers’ skills and ensuring they are well-equipped to thrive in a changing economy. Among other things, the Coalition calls for an overhaul of higher education so that students not only emerge from school with immediately marketable skills but have a chance to upgrade themselves throughout their working lives.

By embracing a forward-thinking agenda that gives Americans a clear path forward and upward, progressives can shift the political winds in their favor and help to defeat the underlying forces that propelled the rise of Trumpism and its destructive policies.

Originally published at PPI.

Guaranteed Jobs: Too Big to Succeed

As the party out of power, Democrats have the luxury of thinking big as they consider how to topple President Donald Trump in 2020. Bold, ambitious ideas are what the party sorely needs if it is to capture voters’ attention and woo them from Trump’s corrosive grip.

But if Democrats are to craft a winning agenda for 2020, bigness and boldness alone are insufficient; political feasibility and substantive plausibility are also necessary ingredients. That’s why the latest big and bold idea catching the eye of potential 2020 contenders – a federal jobs guarantee – is ultimately a disappointment.

Touted by advocates as a way to achieve “permanent full employment,” the notion of a federally guaranteed job for anyone who wants one has won support from three rumored presidential hopefuls so far, including New York Sen. Kirsten Gillibrand, Vermont Sen. Bernie Sanders and New Jersey Sen. Cory Booker. Last week, Booker revealed draft legislation3 to pilot a federal jobs guarantee program in up to 15 localities nationwide, while Sanders has floated a much more ambitious national plan4 focused on public works projects at a scale not seen since the Great Depression. Under both proposals, participants would earn wages of up to $15 an hour, along with benefits such as paid family and sick leave and health insurance. “There is great dignity in work – and in America, if you want to provide for your family, you should be able to find a full-time job that pays a fair wage,” said Booker in a press release announcing his effort.

Booker’s endorsement speaks to the inherent surface appeal of a jobs guarantee. To borrow President Bill Clinton’s famous formulation, Americans who “work hard and play by the rules” deserve a shot at self-sufficiency, and the promise of work for all who want it invokes Americans’ innate sense of fair play. Proponents also rightly point out stark disparities in employment between certain groups, the result of discrimination and other structural barriers that guaranteed access to meaningful employment could arguably remedy.

Unfortunately, the idea also suffers from a variety of fatal defects, including its size, timing and relevance and any number of practical obstacles that make it administratively unworkable as well as politically untenable. For one thing, it rests on the dubious assumption that the American electorate – at a time when public cynicism and distrust toward government remain at all-time highs6 – is ready to embrace a dramatically expanded role for the federal government as the nation’s largest staffing agency and employer. More fundamentally,
the idea betrays a deep lack of faith in the inherent resilience of the American economy and its people to weather disruption and change. Most Americans don’t share the left’s inordinate confidence in government’s ability to engineer shared prosperity from the top down. Aggressive advocacy of a panacea like government guaranteed jobs can only reinforce public impressions that progressives will always default to “big government” as the solution to complex economic problems.

Continue reading at Progressive Policy Institute.

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The Mirage of Full Employment

Low unemployment rates mask soft spots in the job market, especially among rural Americans and minorities.

For the last several months, Republicans have been resting on the laurels of positive job growth and low unemployment — proof, they say, of the Trump economy’s strength. In March, the nation’s official jobless rate stood at 4.1 percent, the lowest it’s been since the peak of the Great Recession and a level that many economists say is at or approaching “full employment.”

Certainly on paper, the labor market looks to be nearly as tight as it was during past expansions, such as during the boom of the late 1990s and early 2000s. In reality, however, the low official unemployment rate masks some serious weaknesses in the economy, including in the parts of the country that are the strongholds of Trump’s support.

Rural job growth, for example, is lackluster in comparison to that of cities. And while college graduates and the highly-skilled are in demand, minorities and lesser-skilled workers are still struggling. The share of people actually participating in the labor market is also significantly lower than in the past, including among “prime-age” adults between the ages of 25 and 54 who are the backbone of the job market. Simply put, fewer Americans are working or even looking for jobs. This means the decline in jobless rates reflects to some extent a shrinking pool of Americans looking for work.

In March, for instance, the total share of Americans participating in the workforce was more than four percentage points lower than it was in February 2000 — the last time the unemployment rate was as low as it is today. The share of prime-age adults in the workforce was also down by more than two percentage points in comparison to 2000.

The decline in workforce participation is in fact the biggest challenge that must be solved if “full employment” will ever be truly achieved. What isn’t yet clear is exactly why this decline has happened and how to fix it.

While some analyses attribute the continuing decline in workforce participation to demographic shifts, such as the retirement of Baby Boomers and extended schooling for young adults, this doesn’t explain why so many prime-age workers are missing from the strongest job market in years. A 2014 analysis by the Council of Economic Advisers concluded that demographics explains only about half of the decline in workforce participation, while as-yet-unexplained “other factors” account for much of the rest.

There are, however, some strong clues about what these “other factors” could be, such as a geographic mismatch between where new jobs are being created and where people live; workers lacking the right skills for the jobs being created; and lingering structural discrimination. These factors are, in fact, evident from an analysis of who is missing out on the benefits of the recovery:

Rural Americans

Many rural Americans, for example, are facing far less rosy job prospects than their urban counterparts. The number of non-metro jobs still hasn’t caught up to pre-recession levels and even dropped in two of the last five years.

Rural areas are moreover suffering from a double whammy of higher-than-average unemployment rates and lower workforce participation. For instance, while the official rural jobless rate stood at 5.4 percent at the end of the second quarter in 2016 (compared to 4.8 percent for metro areas), the USDA estimates that the unemployment rate would have been 7.8 percent had workforce participation rates been the same as in 2010.

Cities, in contrast, are booming, as regional inequality continues to worsen. According to the Bureau of Labor Statistics, 313 of the nation’s 388 metro areas saw net gains in job growth over the last year. More than two dozen cities report official unemployment rates of less than 3 percent. The biggest winners are, predictably, places such as New York, Dallas and Los Angeles, each of which added 100,000 or more jobs in the last year.

Workers without higher education

Workers with the least skills are also failing to prosper in comparison to their better-educated counterparts. In March 2018, the unemployment rate among workers with a bachelor degree was just 2.2 percent, or about half the rate for workers with a high school diploma or less than a high school education. These figures, however, don’t fully convey the disparities in employment between the best- and least-educated workers.

Because the unemployment rate only includes those actively looking for jobs, a better gauge of the prevalence of work is the “employment-to-population ratio,” which also includes individuals not in the workforce. Under this measure, the inequality in work experience between highly educated and less-educated workers is much more stark.

As the following chart shows, just 44.1 percent of Americans without a high school diploma and 55.0 percent of high school graduates work, versus close to three-quarters of workers with a bachelor’s degree or better.

African American men

Another group that could and should be doing better is African-American men. In March 2018, the unemployment rate among black men was nearly double that of whites — 6.1 percent versus 3.3 percent.

Again, however, the true story is in the employment to population ratio, which shows that although both groups have seeing declining employment, lack of work is far more pervasive among African-American men and among prime-age men in particular. While 87.1 percent of prime-age white men were working in March, the equivalent figure among black prime-age men was nearly 10 percentage points lower, at 77.6 percent.


While the official numbers might say the nation is at “full employment,” there’s much more slack in the labor market than the official numbers night suggest. At the same time that some employers have begun to worry about unfilled job openings and upward pressure on wages, millions of Americans are missing out on new opportunities, either because they live in the wrong place or lack the right skills.

One potential result of this patchy recovery is a worsening of the already significant gulf between the economic haves and have-nots, especially if prosperous metro areas continue to grab the lion’s share of new jobs while vast swathes of the country lose out. These disparities in turn will only further inflame the social and political resentments now dividing the country while making it that much harder for the workers falling behind to catch up.

Although continued strong growth could eventually lift more boats, the workers most likely to benefit are the easiest to employ, with adequate access to jobs and enough basic skills to get through the door. The market alone won’t solve the mismatches in skills and geography that are acting as structural barriers to true full employment. Instead, it’s up to policymakers to make that happen.


Originally published at washingtonmonthly.com on April 13, 2018.

Tax Cuts for the Companies That Deserve It

 U.S. companies are  on track to see dramatic reductions in their tax rates, thanks to the $1.5 trillion tax cut package passed by the GOP-led Congress and signed by President Donald Trump in late 2017.

Unfortunately, it’s far more likely that shareholders, not U.S. workers, will reap the biggest benefits from the Trump tax cuts, despite a handful of companies that have handed out “Trump bonuses” and pledged to pay their workers more.

If we really want companies to do right by their workers, we need stronger incentives. One way to do this is to establish a preferential tax rate for companies that organize themselves as “benefit corporations,” a new legal structure that allows corporations to pursue missions other than just profit.

Continue reading at Progressive Policy Institute.

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Why You Can’t Afford to Retire

Expanding Social Security isn’t enough to ensure middle-class retirement security.

Surveys find that barely 1 in 5 Americans are confident of their ability to support a comfortable retirement – and unfortunately for good reason.

In 2014, according to the Federal Reserve, 31 percent of working Americans reported having “no retirement savings or pension whatsoever.”

Many Americans think of savings as a matter of willpower and personal behavior – much like dieting and exercise. It’s one reason why the worsening state of Americans’ retirement security – now approaching crisis proportions – has yet to emerge as an issue that demands extensive government intervention.

In truth, the nation’s retirement savings crisis is as much a problem of public policy as it is about how Americans manage money. Families face massive structural barriers that no amount of personal financial discipline can overcome. Among the reasons retirement is increasingly unaffordable:

1. One in three Americans lacks access to an employer-sponsored retirement savings plan. 

Research finds that people are more likely to save for retirement if they’re enrolled in an employer-sponsored retirement plan (and especially if enrollment is by default). Yet in March 2015, just 49 percent of Americans working in private-sector jobs were participating in an employer-provided retirement plan such as a 401(k), according to the Bureau of Labor Statistics (BLS).

One major problem is lack of access. The workers most likely to be offered an employer-sponsored plan work for large firms (those employing 500 people or more). But the majority of Americans work in smaller companies, including more than a third who work in firms with 100 or fewer employees. Because of administrative burdens and other costs, far fewer of these smaller firms offer retirement benefits to their workers.

 

Continued at the Washington Monthly…

Battling Corporate Short-Termism

Worsening corporate myopia is a threat to long-term growth, say Brookings Institution scholars William Galston and Elaine Kamarck.

In 2014, companies in the S&P 500 spent $914 billion on share buybacks and dividends – or about 95 percent of their earnings, according to BloombergBusiness. At the same time, companies’ capital investments – in equipment, facilities and research – fell.

Such is the consequence of corporate “short-termism,” a phenomenon that Brookings Institution scholars Bill Galston and Elaine Kamarck argue in an important new report poses an increasing threat to long-term economic growth.

“There’s nothing wrong with paying investors handsome returns, and a vibrant stock market is something we should wish for,” Galston and Kamarck write. “But when the very few can move stock prices in the short term and reap handsome rewards, and when this cycle becomes standard operating procedure, crowding out investments that boost productivity and wage increases that boost consumption, the macro-economic consequences are debilitating.”

This short-termism, Galston and Kamarck say, distorts corporate behavior and the economy in a variety of destructive ways.

Continued at the Washington Monthly…

French Fries and Free Trade Agreements

Booming U.S. potato exports are an example of how free trade agreements can open markets for U.S. products – and fuel cultural trends abroad.

South Korean consumers have fallen hard for potatoes.

In 2013, a group of teenagers in South Korea made international news when they were booted from a McDonald’s after buying $250 in French fries. The teens had hoped to host a “potato party” – a fad then sweeping South Korea and Japan.

Now the latest Korean food craze is “honey butter” potato chips. Introduced in August 2014 by the Haetae Confectionery & Food Co., the salty-sweet snacks are a national obsession, endorsed by celebrities and K-Pop stars, and sometimes in such scant supply that chip scalpers have created their own market. Vice recently reported that two bags of the coveted chips sold on eBay for $103.50.

Among the chief beneficiaries of the current Korean passion for potatoes are U.S. potato growers and processors, who’ve seen their exports explode in recent years. According to the U.S. Potato Board, U.S. potato exports hit a record high of $1.76 billion in 2014, shipping out 1,643,618 metric tons of potatoes. South Korea is now among the top global destinations for U.S. potatoes, after Japan, Canada and Mexico. The Potato Board reported that exports to Korea grew by 87,000 metric tons – or 13 percent – from 2013 to 2014 alone.

Many variables account for why some food trends take off and others don’t. But U.S. exporters credit one factor in particular for boosting the wide availability of potatoes in the Korean market: free trade.

Continued at the Washington Monthly…

“The Little Agency That Could” – OPIC’s Outsized Role in Global Development

This often-overlooked agency leads U.S. development efforts overseas – while making a profit for taxpayers.

In 2011, the Dominican Republic launched its first-ever wind farm, with the eventual capacity to offset more than 62,500 tons of carbon emissions a year.

In sub-Saharan Africa, “micro-irrigation” kits allow small farmers to grow onions, tomatoes and other cash crops throughout the dry season, boosting production and incomes.

And in rural India, 300,000 people a day have access to clean drinking water from 500 new water-treatment facilities built in villages throughout Punjab.

These initiatives are among the thousands of projects financed over the years by the federal Overseas Private Investment Corporation (OPIC). Though often overlooked, this agency has long been at the forefront of U.S. efforts to boost the economies and living standards of developing countries while also supporting U.S. foreign policy aims.

Continued at the Washington Monthly…

Why America Needs an Arctic Ambassador

New legislation would help America protect important interests in the Arctic.

New government data finds that the amount of Arctic sea ice this year is at its lowest level ever – another possible indicator of climate change and rising sea levels around the world.

The accelerating melt also poses another risk: a potential global battle – that America may be ill-equipped to win – for the vast natural resources once buried under the now-disappearing Arctic ice.

Continued at the Washington Monthly…

The Invention of Index Funds and the Growth of the Middle Class

The S&P® 500 is a household name. But few Americans may realize its profound impact on how Americans build wealth.

If you own a 401(k) retirement savings account or are entitled to a pension from your company, the odds are high that your portfolio or company’s pension fund includes shares in an “index fund.”

Index funds “track” a particular index – such as the S&P 500® – by holding stocks that mirror the makeup of the index. Since their invention in the mid-1970s, index funds have become popular investments for Americans looking for a relatively low-risk, inexpensive way to invest in the market.

Among the best known index funds, for example, are the Vanguard 500, which was the world’s first index mutual fund and still among the world’s largest, and the SPDR® S&P500® – an “exchange-traded fund” (ETF) that trades like a stock.

But what made these investment products possible is the invention of the index itself. In 1923, Standard Statistics (now Standard & Poor’s) published its first stock market index, which covered 233 U.S. companies and was computed weekly. Today, S&P publishes one million different indices, including the S&P 500®. Other countries have also developed their own benchmark indices, such as the Nikkei Index in Japan and the British FTSE 100.

Alex Matturri, Chief Executive Officer of S&P Dow Jones Indices, argues that the concept of indexing is a transformational innovation in the history of finance. Indexed investment products, he says, opened up the stock market to ordinary Americans and “democratized” opportunities to build wealth. According to Matturri, index funds now account for about 12 percent – or more than $2 trillion – of the value of the publicly traded companies in the S&P 500®.

Continued at Republic 3.0…