Economy

What a $15 Minimum Wage Would Mean in Every State

Washington Post: “The map above shows the real purchasing power of $15 in every state. In Honolulu, the priciest urban area in the United States, a $15 minimum wage is only worth about $12.24; in rural West Virginia, meanwhile, where prices are lower than anywhere else in the country, $15 is worth closer to $20. The only place where $15 is actually worth $15 is Allentown, Pennsylvania, according to Pew.”

Some Good News for the 99 Percent?

James Pethokoukis, in The Week, argues that the economy isn’t as bad as it seems.

“What if things are actually a lot better than we think — or at least better than GDP figures suggest? Think about it: Month after month, the economy is generating about a quarter million net new jobs. The unemployment rate is close to 5 percent. Corporate profit margins are at record highs, with stock values not far behind. And Silicon Valley is on fire.”

“So why then do the all-important GDP numbers — the broadest measures of economic activity — show a perpetual funk? It’s a puzzle for which Goldman Sachs has a simple answer: We are measuring productivity wrong, and therefore we are measuring GDP wrong.”

“U.S. inflation is lower than we think due to sharply falling, ‘quality adjusted’ IT hardware and software prices — and thus real economic growth and productivity are higher. GDP growth might actually be close to 3 percent right now, which would be more in sync with what’s happening in labor markets and the tech sector. Oh, and it also means real incomes are growing faster than we think, which is why the economists are ‘skeptical of confident pronouncements’ that American living standards aren’t improving as fast as they used to. By the way, new analysis by the Peterson Institute suggests worker incomes have pretty much been keeping up with productivity gains. So perhaps more good news for the 99 percent.”

Obamacare Led to Increased Competition

USA Today: “Competition among insurers offering plans on the federal health care exchange rose between last year and this year, tamping down growth in premiums, says a federal report released Thursday.”

“The report says 86% of people eligible for qualified health plans on HealthCare.gov had access to at least three insurers this year, up from 70% in 2014. Nearly 60% of U.S. counties saw a net gain of at least one insurer, 8% saw a loss, and 33% saw their numbers unchanged, the report says.”

“Competition affected how much people paid for their plans, the report says, with premium growth between 2014 and 2015 for benchmark (second-lowest cost) silver plans 8.4 percentage points lower in counties that gained insurers than in other counties. In fact, a net gain of one insurer was associated with a 2.8 percentage point drop in the rate of benchmark premium growth.”

“The average growth rate in the benchmark premium was 2%, the report says.”

The Rent is Too Damn High

Wall Street Journal: “The cost of renting a home is rising faster than wages across wide swaths of the country, a problem that has become especially acute in the past year, putting a big squeeze on many household budgets.”

“The situation is particularly noticeable in long-pricey areas across the West and in big cities like New York, where the average household pays more than 40% of its gross income for rent, according to online real-estate database Zillow. But rising prices also have spilled over into cities like Denver, Atlanta and Nashville.”

“The homeownership rate hit a 48-year low, according to estimates published Tuesday by the Commerce Department, declining to 63.4% in the second quarter from 64.7% in the year-earlier period.”

Don’t Panic About Health Spending Projections

Drew Altman: “Rather like a broken record, I have been warning for years that historically low rates of increase in health-care spending would not last. Now it’s time for a different warning: The higher rates of growth now expected are moderate and should be seen in context. Media outlets–especially headline writers–should take care not to dramatize them.”

“The chart above shows why. Whatever the wishful thinking, the slowed rates of 2008 to 2013 did not represent a watershed period when we had some secret formula for controlling growth in health spending; they were an aberration … But the projected 2014-24 growth rate is moderate by historical standards, and a bounce back to the higher growth rates of the past is unlikely given the many changes in the marketplace and in public programs aimed at restraining costs and producing greater value per health-care dollar. The increases in premiums that employers and most Americans pay for group coverage are likely to remain moderate for the immediate future.”

U.S. Economy Expanded in Second Quarter

Washington Post: “The U.S. on Thursday will release growth figures for the months between April and June, providing a read on the direction of the economy following a contracting in the first quarter.”

“Economists expect that the nation’s gross domestic product grew at an annual rate of 2.5 percent in the second quarter.”

“The Federal Reserve had signaled on Wednesday that it could soon raise interest rates for the first time in nearly seven years, and Thursday’s data will likely influence the decision.”

 

The Widening Wealth Gap Between Young and Old

Washington Post:  A new paper by economists at the St. Louis Fed’s Center for Household Financial Stability shows “evidence of a growing wealth gap that few people are talking about — the gap between the young and the old.”

“Everyone’s income and wealth tend to follow a kind of natural pattern during their life … You can see these trends in this incredible graph below, from their paper. People born in different years (1901, 1904, 1907 and so on) were surveyed at various times between 1989 and 2013 about their median family income. The chart below shows their age on the horizontal axis, and the median family income they reported making at the time on the vertical axis.”

“The period of time in which someone is born can also have a dramatic effect on their wealth compared with other generations. The winners of this historical jackpot appear to be those who were born between 1930 and 1945 and came of age after World War II, who are sometimes called The Silent Generation.”

“In just 25 years, the wealth gap between young and old people has yawned wider. In 1989, old families had 7.6 times as much median wealth as young families. By 2013, it had grown to 14.7 times.”

Employment Growth is Up, But Productivity Down. Why?

Ryan Cooper in The Week: “After a huge spike following the Great Recession, productivity growth has fallen to historically low levels. For the first quarter of 2015, the Bureau of Labor Statistics reported that productivity actually fell at a 3.1 percent annual rate.”

“Employment growth has been relatively strong, but output weak — and thus output per hour worked is down.”

Cooper attributes the problem to “weak aggregate demand. In 2015, we are seven years out from the worst economic crisis in 80 years. And though things have improved greatly since 2010, the problem is still not even close to being fixed.”

“Whatever one’s pet theory about how to increase productivity, it almost has to be the case that a tight labor market plays a role. Full employment — in which good employees are scarce and must be paid well — provides a powerful impetus towards increased productivity.”

“Weak aggregate demand … is both one of the most plausible explanations for the drop in productivity and a complete no-brainer to fix. You just dump money into the economy (literally) until inflation starts to kick up, and then back off. It’s really that simple.”

Economic Confidence Slides to New Low

Gallup: “Gallup’s Economic Confidence Index continued its gradual, downward slide, reaching -14 for the week ending July 26. This represents a 10-month low for the index.”

Gallup's U.S. Economic Confidence Index -- Weekly Averages Since July 2014

“Though Americans’ confidence in the national economy has skewed negative for six months now, the recent drop of the current conditions component comes on the heels of a new path for solving the Greek debt crisis and amid a tumultuous period for Chinese stocks. The instability abroad could be fueling Americans’ doubts about the health of the U.S. economy, not to mention that the Dow closed lower several days in a row last week.”

Exposing the Feeble Attacks on Medicare

Paul Krugman: “Medicare turns 50 this week, and it has been a very good half-century. Before the program went into effect, Ronald Reagan warned that it would destroy American freedom; it didn’t, as far as anyone can tell.”

“The real reason conservatives want to do away with Medicare has always been political: It’s the very idea of the government providing a universal safety net that they hate, and they hate it even more when such programs are successful. But when they make their case to the public they usually shy away from making their real case, and have even, incredibly, sometimes posed as the program’s defenders against liberals and their death panels.”

“What Medicare’s would-be killers usually argue, instead, is that the program as we know it is unaffordable … And then a funny thing happened: [Obamcare’s] passage was immediately followed by an unprecedented pause in Medicare cost growth. Indeed, Medicare spending keeps coming in ever further below expectations, to an extent that has revolutionized our views about the sustainability of the program and of government spending as a whole.”

Carbon Pollution is a Business Risk

Vox: “By next year, a quarter of the world’s carbon emissions will be priced in some way. Businesses that now emit carbon pollution for free (or cheap) will soon see their costs rise … In other words, carbon pollution is a business risk. It’s a bubble that’s going to pop, probably soon.”

A new study by Chris Hope of Cambridge University “attempts to put a number on the carbon risk facing the world’s top 20 fossil fuel companies, the ones most directly vulnerable to a price on carbon. The results suggest that those companies are in a perilous situation.”

Hope “multiplied the carbon emissions embedded in the companies’ products by the ‘social cost of carbon,’ i.e., the net economic, health, and environmental cost of a ton of carbon dioxide. He ran the calculation for data from 2008 to 2012 and took the results as a rough proxy for the level of carbon risk facing each company.”

“‘For all companies and all years, the economic cost to society of their CO2 emissions was greater than their after‐tax profit, with the single exception of Exxon Mobil in 2008.’ In other words, if these fossil fuel companies had to pay the full cost of the carbon emissions produced by their products, none of them would be profitable. It’s even worse for pure coal companies, for which ‘the economic cost to society exceeds total revenue in all years.'”

What Entitlements Crisis?

Paul Krugman: “A few years back elite policy discourse in the United States was totally dominated by the supposed entitlements crisis. Serious people all assured each other that history’s greatest menace was the threat posed by the unstoppable growth of Medicaremedicaidandsocialsecurity, which could only be tamed by dismantling the legacy of the New Deal and the Great Society, while of course cutting top marginal tax rates.”

“In 2009 the Trustees projected a gigantic rise in Medicare spending, which was obviously unsupportable (although Social Security never looked like a big problem). But in the most recent report most of that projected rise has gone away.”

The view from 2015

“The truth is that there never was an entitlements crisis. But now there isn’t even an excuse for pretending that such a crisis exists. I know that a large part of the commentariat is professionally and personally invested in fiscal crisis rhetoric — admitting that it’s no longer relevant would suggest that they have, all along, been silly rather than Serious. But next time you see someone solemnly intoning that we must destroy Medicare to save it, remember that there is no there there.”

What is the Real Minimum Wage?

New York Times: “It started in New York City as what seemed a quixotic drive confined to fast-food workers. But the movement to raise the hourly minimum wage took root in other parts of the country, and is emerging as a significant, and divisive, element in the presidential campaign.”

“Led by some large labor unions, the movement to make $15 the floor for hourly wages has revealed how deeply divided Americans are on the issue. It has also raised the prospect of much wider variations in how people are compensated for the same basic work in different parts of the country. And it has infuriated companies large and small, which say it compels hard choices between raising prices and firing workers.”

Washington Post: “Minimum wages … are only as valuable as what they can buy, which also varies by geography, according to an analysis of purchasing power by state. New York ranks among the top 10 states for its minimum wage, but factor in the cost of living, and it falls to the bottom 10. ”