A blog about business and economics.

Nov. 15 2015 12:48 AM

Hillary Clinton Was Right in That Minimum Wage Fight and Her Rivals Were Wrong

Who is Alan Krueger and why did his name come up when Bernie Sanders, Hillary Clinton, and Martin O’Malley were arguing over the minimum wage Saturday night at the Democratic debate on CBS? And is he a Wall Street crony like O’Malley suggested, or a progressive economist like Hillary said?

Krueger, the former chair of President Obama’s Council of Economic Advisers and a professor of economics at Princeton University, published a paper in 1994—along with David Card at the University of California, Berkeley—looking at the impact on employment after New Jersey raised its minimum wage in 1992. The two men studied hiring patterns at fast food outlets located near the border between New Jersey and Pennsylvania, a neighboring state that did not raise its minimum wage at the time. The result? No job loss for the New Jersey dining establishments. There was, in fact, a slight move toward more full-time work.

This was an unexpected result, to say the least. Economists believed jobs would be lost when the minimum wage was increased, because employers wouldn’t be able to afford to hire as much labor. Some have since performed other studies to show that raising the minimum wage does result in job losses. (As Annie Lowrey noted in the New York Times a few years back, “As always in economics, nobody seems to agree on anything.”) So, based on these other studies, the idea that job losses go up when the minimum wage does remains the conventional wisdom in conservative and Republican circles. Jeb Bush, for example, claimed a few months ago that an increase in the federal minimum wage would “make it harder and harder” for people to get on the “first rung” of the employment ladder. It was a big issue in the last Republican debate as well, with multiple candidates adamantly opposing minimum wage increases. (There is also the idea that a higher minimum wage will lead companies to send jobs to countries where they can pay employees less, which is what Donald Trump was referring to when he claimed “wages [are] too high,” in that debate).

On the other hand, supporters of the raising the minimum wage now use Krueger and Card’s work, in part, to make their case. Why wouldn’t they? As Matthew Yglesias put it a few years back in Slate, “The David card/Alan Krueger empirical study showing no negative employment impact from a minimum wage increase is famous because it showed what liberals wanted to believe.”

But what is too low and what is too high? Sanders and O’Malley both support the goal of a $15 an hour minimum wage that is being pushed by groups like Fight for $15 and put into practice in cities like Seattle, San Francisco, and Los Angeles. “You have no disposable income when you make 10, 12 bucks an hour,” Sanders argued on Saturday night. “When we put money into the hands of working people, they’re going to go out and buy goods, they’re going to buy services and they’re going to create jobs in doing that.”

But that only works if people remain employed. That’s where Krueger comes back in. Last month, he published an op-ed in the New York Times saying an increase of the minimum wage to $15 an hour could “risk undesirable and unintended consequences.” The reason? There is, Krueger said, “no international comparison” for an increase of that magnitude. We would be sailing into the unknown. “Although some high-wage cities and states could probably absorb a $15 an hour minimum wage with little or no job loss, it is far from clear the same could be said for every state, city and town in the United States,” he added.

Clinton said Krueger’s position is why she supports a $12 an hour minimum wage. “I do take what Alan Krueger said seriously,” she noted, adding that—like Krueger—she supported efforts by individual states and cities to raise their minimum wage. 

That’s when O’Malley jumped in with this attack: “We need to stop taking our advice from economists on Wall Street.” Hillary was quick to respond by defending the primary source for her argument: “He's not Wall Street. That's not fair. He's a progressive economist.” And she’s right! O’Malley might not agree with Krueger, but he is wrong about his work history. No longer a member of the Obama administration, he’s now back at Princeton University. He does not work on Wall Street. And Hillary is right to note that Krueger’s old work formed the basis for the progressive case for increasing the minimum wage, which means it’s fair to ask progressives to listen to him now.

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Nov. 13 2015 2:52 PM

This Startup Wants to Replace Sugar With ... Mushroom Roots?

This post originally appeared in Inc.

Love at first bite. We have all experienced the rush from a forkful of cake, a fresh baked cookie or a bowl full of ice cream. The gratification we feel is the result of dopamine being released and activating the reward system in our brain, much in the same way that sex and drugs do. When you think about it like that, it is no wonder that we are a nation addicted to sugar. But much of the sugar we are consuming isn't the result of eating cake for three meals a day, rather because it is virtually inescapable. Out of 600,000 items found in grocery stores, 80 percent contained added sugar.

Long considered a staple in food processing, sugar is often used to mask naturally occurring bitter tastes. But as sugar's pernicious effects become more widely understood, consumers are becoming resolute in decreasing their intake. Of course, that is not without its challenges for food companies, since creating a tasty product is often at odds with creating a healthy one. "People aren't really willing to compromise on taste," said Alan Hahn, CEO, MycoTechnology. "They want less calories, but they still want it to taste great."

For Denver-based MycoTechnology, it believes the key to reducing added sugars in food can be found in gourmet fungi. Founded in 2013, the company has created an all-natural fermentation process called MycoSmooth whereby mushroom roots (mycelium) are trained to consume bitterness found in foods and in turn infuse the source with immune boosting beta glucans. While the process might sound foreign to us, it is a role that mushrooms know well from nature where they act as the cleanup crew of the forest, pulling toxins out of the soil and giving back nutrients to the roots of trees.

Initially, MycoTechnology is targeting coffee and chocolate, which are two huge markets that rely on sugar to cover up inherent bitterness. The company said it is already in testing phases with several global food companies. For those looking to utilize MycoTechnology's process they will be able to do so through licensing, managed services with onsite support or finished products through private labeling. And with consumers keeping a more watchful eye on their food, Hanh believes big food companies will have no choice but to take notice. "The anti-sugar movement is growing rapidly, and people want options."

Darren Seifer, executive director and food and beverage industry analyst, The NPD Group, echoed those sentiments, "In 2014 sugar became the number one item adults say they are trying to avoid in their diets due to falling concerns around fat. Couple that fact with how simple carbohydrates have been blamed for our obesity epidemic, it would be of high importance for marketers to react appropriately to these shifts in consumer demands."

While grassroots efforts among consumers will have a hand in change, there are also bigger forces at work like the Food and Drug Administration. The agency has proposed updates to the nutrition facts that appear on food labels that would require companies to call out added sugars versus natural ones as well as provide a daily percent value. And just this week, the FDA came down with new recommendations stating that Americans over the age of three should consume no more than 12.5 teaspoons or 50 grams of added sugars per day. This is compared to the 22-30 teaspoons that most Americans ingest daily.

As food companies grapple with the changing market, many are turning to sugar substitutes like Stevia to sweeten products. But plant-based replacements often produce a metallic aftertaste that many consumers find unappealing. To deal with that issue, MycoTechnology developed a separate process called MycoZyme, which uses enzymes from mushroom that act as a natural bitter blocker. In July, the Chinese company and producer of Sucralose and Aspartame, Niutang, announced the launch of NiuVia Stevia, which utilizes the MycoZyme process.

While Hahn sees MycoTechnology's potential to tap into the $600 billion food market, reducing the amount of sugar found in food is an issue that is also personal to him. "We are just trying to make people healthier. I ate myself to type-2 diabetes over five years ago, and I started learning about food, and it really motivated me for this company and to have options for people."

Nov. 12 2015 5:14 PM

General Motors Plans to Sell Chinese-Made Buicks in America

In a move that is almost certainly destined to become a campaign talking point for one Donald Trump, General Motors is reportedly planning to sell Chinese-manufactured Buicks in the United States. There's no evidence that this is a cost-cutting move by the carmaker, and no U.S. jobs are evidently headed overseas, but it could still be a fascinating and controversial test for the auto industry.

What exactly is GM up to? On its face, nothing very exciting. The company is looking to add a midsize crossover to its U.S. Buick lineup. It already happens to manufacture and sell such a vehicle in China, where, unlike in the United States, Buick is a wildly popular brand. Ergo, it has decided to ship 30,000 to 40,000 of them stateside. If you happen to be in the market for a small sport utility vehicle that screams contented middle age, the Buick Envision could soon be a sensible choice. 

Now, here's why it's interesting.

Car companies rapidly expanded their manufacturing presence in China over the past decade to make vehicles for the country's exploding domestic market. But the conventional wisdom said that Americans would never buy trucks or sedans made there thanks to fears about quality and safety. GM is testing that theory by importing the Envision.

If the move is successful, GM and its competitors could try to move more of their production to China. What would that mean for the United States? It's not totally clear. After all, automakers already build lots of cars and trucks for both the North American and global markets in Mexico, where labor costs for manufacturers may now be cheaper than in China. It seems unlikely that GM or Ford would start moving assembly lines from Detroit to Shandong province when they could just go to San Luis Potosí instead. If any production is headed to the People's Republic, it would logically be work done in formerly low-cost areas of Asia, like South Korea, that aren't as cheap as they used to be.

There might be other reasons for American workers to worry about Chinese production. Let's say, for instance, that China's domestic car market cools down a bit more as the economy slows, and GM suddenly finds itself with lots of excess factory capacity there. The company could theoretically start using it to build more cars for the U.S. rather than open new plants here at home. For now, though, organized labor doesn't seem too alarmed by the Buick move (the Wall Street Journal reports that “the UAW and GM discussed the move during recent labor talks and appear to have come to an understanding”).

Still, it seems safe to bet that we'll be hearing about GM and China at the next Republican debate.

Nov. 12 2015 2:14 PM

Read This Lawyer’s Delightful Response to PETA’s Absurd Monkey Selfie Lawsuit

Back in September, People for the Ethical Treatment of Animals filed a goofy yet vicious copyright-infringement lawsuit against British nature photographer David Slater, claiming he had illegally sold copies of the delightful image that you see above this post. The now-famous monkey selfie was shot by a black-crested macaque that had stolen Slater's camera while he was on an expedition in Indonesia. According to most legal experts, the image belongs in the public domain, because the U.S. government doesn't grant copyrights for artwork created by animals. But PETA claimed otherwise. The picture, it says, is property of the macaque, whose name is Naruto. And Slater owes Naruto some money.

As I've explained, this is an absurd argument, and it's arguably abusive for a large organization like PETA to drag a random photographer into court over such a silly claim. But at the very least, it has generated a funny piece of legal writing. This month, Slater's lawyer filed a motion to dismiss the suit. It begins thusly:


I realize this is only chuckle-level humor. But "monkey see, monkey sue," is the sort of line lawyers spend years dreaming they will one day get to write in a federal court document. The gist of the motion, meanwhile, is pretty simple: Under 9th Circuit precedent, animals (represented by human lawyers, of course) only have standing to sue when Congress explicitly says they do. Copyright laws don't mention any right of action for monkeys. Therefore, this case is for the birds.

Nov. 12 2015 7:42 AM

Is It Possible Donald Trump Was Right About China and the TPP?

After Tuesday's Republican debate on Fox Business Network, I wrote up a squib with the headline "Donald Trump Claims the TPP Is a Nefarious Plot by China. Fact: China Is Not Part of the TPP." It highlighted an odd moment during the night's entertainment when the GOP's most beloved xenophobe seemed to inaccurately suggest that the Trans-Pacific Partnership, the ever-controversial free-trade deal championed by the Obama administration, was either written under China's shady influence or, if not that, at least crafted for the benefit of Beijing.

"The TPP is a horrible deal,” Trump said. "It is a deal that is going to lead to nothing but trouble. It's a deal that's designed for China to come in, as they always do, through the back door and totally take advantage of everyone."

There are 12 countries involved in the TPP negotiations. China is not one of them. But to anyone who interpreted the man's remarks as plain English, it sounded as if Trump was suggesting that the People's Republic had some kind of direct hand in designing the pact. After all, the only other coherent reading of his actual words—that a dozen nations, including China’s regional rivals like Japan and Vietnam, had crafted a trade deal specifically "for" (i.e. for the purpose of) allowing China to "come in through the back door and totally take advantage of everyone" (italics mine)—seemed absurd. And so, after Trump went on for a bit, Kentucky Sen. Rand Paul issued a simple and stinging factual correction. “We might want to point out China is not part of this deal,” he said. I called it the most embarrassing moment of the night, since it so plainly showed that Trump, as usual, had no idea what he was talking about.

Since then, however, a number of people have risen to Trump's defense, and the candidate has attempted to explain his remarks.

It's a bit strange that Trump didn't respond this way after Paul rhetorically shanked him onstage. In fact, he was uncharacteristically silent. But I cannot look into the Donald's soul to tell whether he's just saving face now or sincerely trying to clarify his word salad (and, to be fair, the man has been known to prepare a fine word salad from time to time). So rather than harp on whether Trump was making a straightforward error, let's take him at his word and ask: Could he have a point about China and the TPP?

No, probably not.

First, what might Trump mean when he says China will “come in through the back door at a later date”? If the TPP is ratified, it will be open to new signatories who can meet its requirements. And as I noted in my original piece, China's leaders are contemplating whether their country should one day ink the agreement. President Obama said so explicitly in a summer interview with Marketplace, explaining that, “They’ve already started putting out feelers about the possibilities of them participating at some point.” In order for such a thing to happen, however, China would need to dramatically reform its economy in order to conform to the TPP’s terms. That would probably mean clearing away tariffs, enforcing intellectual property laws, dealing with its overwhelming pollution problems, making room for independent labor unions, and reforming its powerful state-owned companies. All of this would take a very long while—likely a decade or more—and would hardly qualify as sneaking in through the rear. That, in the end, is half the point of TPP. The White House wants to set the terms of free trade in Asia and the Pacific before China can, so that Beijing will eventually need to agree to stricter standards

Now let’s suppose that China checked off all the necessary boxes and joined the TPP, giving it greater access to U.S. markets. Why does Trump think that would be a problem? In two words, currency manipulation. Let's go back to the debate transcript:

Moderator: The—the deal, as you say, the terms of the deal were published—were published just last week, the details, 5,000 pages of it, and 80 percent of U.S. trade with countries in the Pacific, these countries, these 11 countries, is actually tariff-free, and these—the trade deal only affects the other 20 percent. Which—are there particular parts of the deal that you think were badly negotiated?
Trump: Yes. Well, the currency manipulation they don’t discuss in the agreement, which is a disaster. If you look at the way China and India and almost everybody takes advantage of the United States—China in particular, because they’re so good. It’s the No. 1 abuser of this country. And if you look at the way they take advantage, it’s through currency manipulation. It’s not even discussed in the almost 6,000-page agreement. It’s not even discussed.

Trump is not totally wrong here. The main TPP agreement does not contain any rules about currency manipulation. (How come, you ask? Well, getting two countries to agree on exactly what counts as manipulation versus straightforward monetary policy maneuvering isn't exactly easy. Plus, Japan, Vietnam, and Malaysia like their national currency fairly cheap.) Instead, the subject is dealt with in a legally unenforceable side declaration that, at best, might help the U.S. Treasury a bit in its ordinary efforts to deter countries from toying with the foreign-exchange markets. Trump seems to be concerned that if China ever joins Club TPP, it'll have a free hand to depress the yuan and flood our shores with cheap, tariff-free goods.

This isn’t especially realistic. For starters, China isn't really much of a currency manipulator these days, at least in the sense Trump claims. While the country kept the yuan artificially low in order to boost its exports and discourage imports during the 1990s and early 2000s, in 2005 it allowed the redback to start gradually rising in value against the dollar. By May of this year, the International Monetary Fund declared that the currency was no longer undervalued at all. Aside from a small surprise devaluation over the summer, China has mostly struggled as of late to keep the value of the yuan up, not down, in order to prevent investors from yanking their money out of the country as its economy weakens.

But say we were worried that Beijing might relapse into its old forex habits. What then? Well, the United States could always just block it from joining the TPP altogether. Or we could force China to sign its own extra-stringent side agreement on currency manipulation, with rules enforceable through sanctions, as a condition for membership. Given China's history, that might be necessary no matter what. “I think from the U.S. standpoint a currency provision would be required,” Gary Clyde Hufbauer, a senior fellow at the Peterson Institute for International Economics, told me. In other words, if China does ever try to join the TPP, which is at this point only a far-off hypothetical, it might not get quite the same deal as Japan or Vietnam.*

So contra Trump, there isn't really a "back door" into the TPP, China hasn't really been waging a currency war on America for years, and if we thought it might start again, we could keep it out of the trade deal, or make Beijing agree to tougher rules as the price of admission.

Of course, it's possible that China could benefit from the TPP through means that Trump didn't actually articulate. That's David Dayen's argument at the Intercept. He draws attention to the TPP's rules of origin, which govern how much of a product actually has to be produced in Japan, for example, in order for it to be officially considered "Made in Japan" and thus exempt from tariffs. These stipulations matter because products that are manufactured in one country often contain lots of raw materials and parts from abroad. And for some goods, like cars, the rules of origin are loose enough that you can imagine China using them to quietly circumvent some American trade restrictions. Dayen notes, for instance, that the U.S. slaps a tariff as high as 236 percent on Chinese steel. But China could potentially get around that issue by exporting its metal to Vietnam to be turned into car parts, which would then move to Japan to be installed in Toyotas sold, tariff-free, in the United States.

That sort of shell game could certainly help China a bit. But even so, Hufbauer thinks there's a strong chance the country will actually lose more in trade than it gains from the deal. “The TPP's immediate effect on China is that it will divert trade away from them,” he told me. “Our estimates are that over a decade, they will lose approximately $100 billion of exports. It’s not to their advantage, because other TPP countries will have access to each other’s markets on a tariff-free basis. Vietnam would be a more likely place for investment to go, especially in low-wage industries.”

So if the TPP is ratified, China could well end up a big loser—words even Donald Trump might understand. 

*Correction, Nov. 12, 2015: This post originally misidentified the Peterson Institute for International Economics as the Peterson Institute for Global Economics.

Nov. 11 2015 2:23 PM

What Philosophers Want You, Me, and Marco Rubio to Know About How Much They Make

Tuesday night, in the fourth Republican debate, Sen. Marco Rubio decided to make a point about the state of wages, education, and employment in America by comparing welders with philosophers. “For the life of me, I don’t know why we have stigmatized vocational education,” Rubio said. “Welders make more money than philosophers. We need more welders and less philosophers.”

This statement turns out to be incorrect on the most basic factual level. The mean annual salary of postsecondary philosophy and religion teachers—the best proxy for “philosophers” available in Bureau of Labor Statistics data—was $71,350 as of May 2014. For welders, cutters, solderers, and brazers—again, the best proxy for “welders” that the BLS has to offer—the mean annual wage from that same period was $40,040. We put this information in a chart, and served it up to the Internet.


Chart by Alison Griswold

Perhaps not surprisingly, there is a great deal of angst in the philosophy community over attempting to define and quantify what it means to be a philosopher vis-à-vis Labor Department data. This quickly became apparent from my email inbox and Twitter notifications, which over the past 12 hours have exploded with complaints about “disingenuous” and “cherry-picked” figures. As one reader wrote to me, “Your chart is irrelevant since it compares those teaching philosophy and religion at a post secondary level with those employed as welders. To rebut Rubio you would have to compare wages of those who studied philosophy in undergrad.”

On the one hand, I feel like the initial chart was pretty upfront about what data it contained. On the other, this is a valid critique. So in the interest of clearing the matter up, I dug into the numbers a little deeper.

Spoiler alert: Rubio is still wrong.

To get a better breakdown, I consulted the Brookings Institution’s Hamilton Project, which helpfully compiles career earnings for 80 different college majors, including “philosophy and religious studies.” You can’t compare the earnings for a particular major to a particular occupation, but I charted the median annual earnings for philosophy majors against that of people with an associate’s degree or a high school degree/GED. The associate’s degree data in particular is similar to the BLS data on mean annual wages for welders. (Associate’s degree holders earn slightly more, but it’s close enough to give you an idea.)

With that in mind, here’s a chart showing the median earnings of philosophy majors over their careers. This excludes anyone with a graduate degree but does account for part-time workers and people who’ve experienced unemployment during the year (click to expand):

Here’s that chart again, but this time including people with graduate degrees:

Having examined this data and at the risk of repeating myself, I’m going to say it again: Sorry, Marco Rubio. Philosophers make more money than welders do. Yes, the earnings gap is more dramatic for philosophy majors who go on to obtain additional degrees. But even for plain old college graduates, the philosophy students are outearning welders over the course of their careers. (Remember, welders actually make slightly less than the median person with an associate’s degree, so you have to mentally shift that green line down a little bit.)

Which of these two professions we actually need more of is a separate matter. As Business Insider pointed out this morning, the U.S. welding industry expects to be short about 400,000 workers by 2024 as aging operators retire and the number of incoming skilled workers declines. At the same time, do we really want to turn the U.S. into a nation of welders? (No offense to welders.) Does even Rubio? Here is a thing that Rubio said about closing the income inequality gap in February 2014:

Why is there an emerging opportunity gap? And the primary answer is because this new economy that we now live in—which is not an industrial economy, it’s a post-industrial economy—is a knowledge-based one.
In order to have middle-income, middle-paying jobs, the kinds of jobs that allow people to get ahead, you have to have higher level of training and skill acquisition and education than ever before. And we have too many people that don’t have those skills. And, in fact, the people who would most benefit from acquiring those skills are the ones least likely to get it because of its cost or because of the way the system is structured.

In other words, Rubio doesn’t seem to actually think we need a nation of philosophers or welders. Too bad!

Nov. 10 2015 11:32 PM

Donald Trump Claims the TPP Is a Nefarious Plot by China. Fact: China Is Not Part of the TPP.

There were a few lowlights during Tuesday night’s Republican debate, some of them retreads. Ted Cruz plugged the gold standard, yet again. Carly Fiorina talked about how she would reduce the tax code to three pages, yet again. In an original twist, John Kasich appeared unaware that bank accounts are backed by the Federal Deposit Insurance Corporation during a discussion about financial industry bailouts.* But the most embarrassingly incoherent moment of the evening probably belonged to Donald Trump, who used a discussion of the ever-controversial Trans-Pacific Partnership trade deal to engage in his favorite activity, China bashing:

The TPP is a horrible deal, a deal that is going to lead to nothing but trouble. It’s a deal that was designed for China to come in, as they always do, through the back door, and totally take advantage of everyone. It’s 5,600 pages long. So complex that nobody’s read it. Like Obamacare. Nobody ever read it. They passed it, nobody read it. And look at mess we have right now, and it will be repealed. But this is one of the worst trade deals, and I would, yes, rather not have it.

There is one especially major problem with this line of argument, which Trump might have picked up on had he at least bothered to read one of the numerous articles outlining the basics of the deal: China is not part of the TPP negotiations. There are 12 countries involved. None is known as the People’s Republic. One of the biggest arguments in favor of the deal, in fact, is that it will allow the U.S. to set the terms of trade in the Pacific, rather than letting China do so. While Beijing has sort of left open the possibility of eventually joining the pact, it hasn’t had a hand in designing it.

For a moment, it seemed as if this fact would go unremarked upon. But, mercifully, Rand Paul stepped in. “We might want to point out China is not part of this deal,” he said. For some reason, Fox accidentally began playing some brassy outro music behind him as he further discussed his position on trade, which made him sound a tad heroic. And in that moment, Rand Paul was. Truly.

Update, Nov. 12, 9:19 a.m.: Trump has defended himself! (And he says I and others have totally misconstrued his words, of course.) Read more about this kerfuffle, as well as my longer take on Trump, China, and the TPP, here

*Correction, Nov. 11, 2015: This post originally misstated that Bush also seemed unaware during the debate that the FDIC exists. After reviewing the transcript, I realized that I had misremembered, and only Kasich suggested such. My apologies.

Nov. 10 2015 10:18 PM

Marco Rubio Says Welders Make More Money Than Philosophers Do. He’s Wrong.

It was the first question of the GOP debate: Would you raise the minimum wage? And to Sen. Marco Rubio specifically, a few moments later: “Since you aren’t a fan of all [the government’s] giving away, tell us tonight what you would take back.”

Here’s how Rubio responded:

If I thought raising the minimum wage was the best way to help people increase their pay I would be all for it, but it isn’t. In the 21st century, it’s a disaster. If you raise the minimum wage you’re going to make people more expensive than a machine. And that means all this automation that’s replacing jobs and people right now is only going to be accelerated. Here is the best way to raise wages: Make America the best place in the world to start a business or expand an existing business. Tax reform, and regulatory reform. Bring our debt under control. Fully use our energy resources so we can reinvigorate manufacturing. Repeal and replace Obamacare and make higher education faster and easier to access—especially vocational training.

Here’s how he clinched it, to rousing applause:

For the life of me I don’t know why we have stigmatized vocational education. Welders make more money than philosophers. We need more welders and less philosophers.

Here’s the one big problem with that statement:

Nov. 10 2015 8:33 PM

How Insane Are Republicans’ Tax Plans? Just Look at These Charts.

Marco Rubio's tax cuts could cost almost as much as the entire Social Security program.

Photo by Spencer Platt/Getty Images

The Republican primary campaign continues apace Tuesday night with another debate, this time on the Fox Business Network. Theoretically, the subject will once again be the economy, an issue the candidates have primarily dealt with by offering one titanic tax cut after another that would, of course, sink the federal budget unless they made equally massive spending reductions. If you've ever wondered what GOP policymaking might look like in a mathematically unconstrained conservative fantasia, these plans are it.

Take the proposals put forth by the two mainstream Republican favorites, Marco Rubio and Jeb Bush. So far, two notable think tanks, the left-leaning Citizens for Tax Justice and the conservatively inclined Tax Foundation, have scored their plans. They each arrive at vastly different cost estimates of the proposals, in part, from what I've been told, based on the different ways they handle changes to the corporate tax code and whether you factor in the pro-growth effect of lowering rates. But I'm not going to get into which group is more on target here, because they essentially point to the same conclusion: No matter how you run the math, these cuts are gargantuan. And the best way to see that is by comparing them with what the federal government currently spends on its major programs.

Let's start with Rubio. Citizens for Tax Justice believes that his plan will ultimately cost the government $11.8 trillion over 10 years. That's just slightly less than the roughly $12 trillion the entire Social Security program is expected to cost from 2016 through 2025, according to the Congressional Budget Office. It's also more than the $9.1 trillion Medicare will require over the same period.


The Tax Foundation is slightly more optimistic. Based on its static scoring approach, which doesn't take into account the feedback effects of economic growth, it thinks Rubio's plan will cost about $6.1 trillion, which is a shade less than what the government expects to spend on defense from 2016 through 2025. Yes, that's all defense. (Also worth noting: The group scored Rubio's plan before he added one additional tax bracket for upper-middle classers, which should add to its expense.)


The Tax Foundation's dynamic score, which does include the theoretical effects of economic growth, is slightly less grisly looking. Over a decade, Rubio's plan would merely cost the combined equivalent of the Supplemental Nutrition Assistance Program (better known as food stamps), family support programs Temporary Assistance for Needy Families (better known as welfare as we now know it), unemployment insurance, Supplemental Security Income (which helps low-income Americans who are elderly, blind, or disabled), and the government's child nutrition efforts. A trivial piece of the safety net, really.


And Bush? Well, according to CTJ his tax agenda would leave the government $7.1 trillion in the hole, which again is more than the entire defense budget.


Because Bush is becoming a bit of an afterthought, we'll skip the Tax Foundation's high-end estimate for the cost of his plan. But the dynamic version, economic growth included, would still come to $1.6 trillion, which is about on par with the entire Social Security Disability Insurance program. Barely anything.


Again, these are the tax plans on offer from the two leading mainstream GOP candidates for president. To make them work while eventually balancing the budget (as these men supposedly want to) would require excising massive chunks of the federal government in a manner that would undoubtedly fall hardest on the poor. Which is to say, a mainstream Republican in no way shape or form means a reasonable Republican.

Nov. 10 2015 4:51 PM

Cuomo Is Giving New York State Workers a $15 Minimum Wage

New York Gov. Andrew Cuomo is using his executive authority to raise the minimum wage for state workers to $15 an hour. The increase will take effect first for state workers in New York City, where the cost of living is highest, fully phasing in by the end of 2018. In the rest of the state, the wage floor will slowly climb to $15 by the end of 2021, with the entire change affecting about 10,000 workers in total. Per the New York Times, jobs that will be covered by the increase include “lifeguards, office assistants, and custodial staff.”

The governor formally shared his plan on a rainy Tuesday afternoon at Foley Square in Manhattan. The announcement came on the same day that fast-food workers and other service providers involved in the “Fight for $15” campaign held rallies across the country in support of a $15 minimum wage. In New York, many of them were gathered at Foley Square.

“We made a decision a long time ago that if you work full time you should have a decent lifestyle for you and your family,” Cuomo said. “Franklin Delano Roosevelt, former governor of this great state, signed a minimum wage law into effect, and he said when he signed the minimum wage law, and I quote, ‘By living wage, I mean more than a bare subsistence level—I mean the wages of a decent living.’ That was 1933 and it’s not a decent living today. And it is simple math. If you earn the minimum wage, it’s about $18,000 a year in New York. And you add up the numbers: You can't pay for food and clothing and housing here on $18,000 a year. Period.”

This is the second big move from New York on the wage front in just two months. In September, the Cuomo administration approved a proposal from the state’s labor commissioner to raise base pay for fast-food workers to $15 an hour.

In Pittsburgh, as in New York, Tuesday’s Fight for $15 protests were accompanied by an executive order from Mayor Bill Peduto that city employees would be paid at least $15 an hour by 2021. All in all, the strikes spanned 270 cities across the United States. The rallies were underscored by the launch of a five-point “Fight for $15 Voter Agenda,” which calls for affordable child care, long-term care, a focus on race relations, and immigration reform, in addition to the $15 wage.

Later Tuesday night, the Republican candidates are slated to address jobs, taxes, and the general state of the economy in the fourth GOP debate. Will the minimum wage factor into that? Tough to say. Rick Santorum briefly broached the topic in mid-September when he offered up an unexpectedly stirring defense of having a wage floor in America. But it seems unlikely that fast-food protests will prompt a serious discussion of those issues. And at any rate, we can all probably predict what they’d have to say about a $15 base.