Economic Well-Being

Among the findings of an annual survey by the Board of Governors of the Federal Reserve System:

To determine individuals’ preparedness for a smaller scale financial disruption, respondents are also asked how they would pay for a hypothetical emergency expense that would cost $400. Just over half (53 percent) report that they could fairly easily handle such an expense, paying for it entirely using cash, money currently in their checking/savings account, or on a credit card that they would pay in full at their next statement (referred to here as “cash or its functional equivalent”). The remaining 47 percent indicate that such an expense would be more challenging to handle. Specifically, respondents indicate that they simply could not cover the expense (14 percent); would sell something (10 percent); or would rely on one or more means of borrowing to pay for at least part of the expense, including paying with a credit card that they pay off over time (18 percent), borrowing from friends or family (13 percent), or using a payday loan (2 percent).

Poverty, Employment and Distress

From the Economic Policy Institute, most people in poverty who are able to work are employed.

It turns out that a fair number of people are underemployed and/or holding low-paying jobs.  And from the Centers for Disease Control, lower income is significantly correlated with psychological distress.

Update (May 31):  Elias Isquith writes about the CDC study and refers to a reality show as an example of the "war on poor people".

Update (June 1):  The middle class is declining and the social safety net is being shredded. Combating poverty is hampered

by the brain’s tendency to “tunnel” in response to scarcity: whatever is most urgent, whatever unmet need is most pressing, fully “captures” the mind and crowds out all other concerns, questions, or tasks that would otherwise compete for attention. What to have for lunch, what to do this weekend, and what bills are due soon are all issues easily ignored when feeling the effects of scarcity.

Social Liberal, Economic Conservative?

A recent Gallup poll shows a trend toward liberal views on social issues while economics remains fairly conservative.

But Greta Christina argues that

You can't separate fiscal issues from social issues. They're deeply intertwined. They affect each other. Economic issues often are social issues. And conservative fiscal policies do enormous social harm. That's true even for the mildest, most generous version of "fiscal conservatism" -- low taxes, small government, reduced regulation, a free market. These policies perpetuate human rights abuses. They make life harder for people who already have hard lives. Even if the people supporting these policies don't intend this, the policies are racist, sexist, classist (obviously), ableist, homophobic, transphobic, and otherwise socially retrograde. In many ways, they do more harm than so-called "social policies" that are supposedly separate from economic ones. Here are seven reasons that "fiscally conservative, socially liberal" is nonsense.

1.  Poverty, and the cycle of poverty. 

2.  Domestic violence, workplace harasment, and other abuse.

3.  Disenfranchisement.

4.  Racist policing.

5.  Drug policy and prison policy.

6.  Deregulation.

7.  "Free" trade. 

The reality of fiscal conservatism in the United States is not cautious, evidence-based attention to which government programs do and don't work. If that were ever true in some misty nostalgic past, it hasn't been true for a long, long time. The reality of fiscal conservatism in the United States means slashing government programs, even when they've been shown to work. The reality means decimating government regulations, even when they've been shown to improve people's lives. The reality means cutting the safety net to ribbons, and letting big businesses do pretty much whatever they want.

Update (May 26):  Catherine Rampell says liberals are making a comeback.

Higher Inequality

A report from the Organization for Economic Cooperation and Development shows that inequality within member countries is the highest ever recorded.  The average income of the top ten percent is nearly 10 times that of the lowest ten percent--up from about seven times the income thirty years ago.

True Cost of Fossil Fuels

A working paper from the International Monetary Fund estimates that direct subsidies and external costs attributed to the fossil fuel industry amounts to $5.3 trillion per year.

Shell Game

An internal business planning document from Royal Dutch Shell assumes global temperature will rise by 4 degrees Celsius in the near term and later by 6 degrees.  The paper notes that

We also do not see governments taking steps now that are consistent with 2 degrees C scenario.

Update (May 18):  Is Shell simply expressing an awful truth, or are we all guilty of ignoring the options we have?

Fixing the Economy

A report from The Roosevelt Institute called "Rewriting The Rules Of The American Economy: An Agenda For Growth and Shared Prosperity" offers thirty-seven ways to restore fairness:

Fix The Financial Sector

1. End “too big to fail” by imposing additional capital surcharges on systemically risky financial institutions and breaking up firms that cannot produce credible living wills.

2. Better regulate the shadow banking sector.

3. Bring greater transparency to all financial markets by requiring all alternative asset managers to publicly disclose holdings, returns, and fee structures.

4. Reduce credit and debit card fees through improved regulation of card providers and enhanced competition.

5. Enforce existing rules with stricter penalties for companies and corporate officials that break the law.

6. Reform Federal Reserve governance to reduce conflicts of interest and institute more open and accountable elections.

Incentivize Long-Term Business Growth

7. Restructure CEO pay by closing the performance-pay tax loophole and increasing transparency on the size of compensation packages relative to performance and median worker pay and on the dilution as a result of grants of stock options.

8. Enact a financial transaction tax to reduce short-term trading and encourage more productive long-term investment.

9. Empower long-term stakeholders through the tax code, the use of so-called “loyalty shares,” and greater accountability for managers of retirement funds.

Make Markets Competitive

10. Restore balance to intellectual property rights to encourage innovation and entrepreneurship.

11. Restore balance to global trade agreements by ensuring investor protections are not prioritized above protections on the environment and labor, and increasing transparency in the negotiation process.

12. Provide health care cost controls by allowing government bargaining.

13. Expand a variant of chapter 11 bankruptcy to homeowners and student borrowers.

Rebalance The Tax System

14. Raise the top marginal rate by converting all reductions to tax credits and limiting the use of credits.

15. Raise taxes on capital gains and dividends.

16. Encourage U.S. investment by taxing corporations on global income.

17. Tax undesirable behavior such as short-term trading or polluting and eliminate corporate welfare and other tax expenditures that foster inefficiency and inequality.

Make Full Employement The Goal

18. Reform monetary policy to give higher priority to full employment.

19. Reinvigorate public investment to lay the foundation for long-term economic performance and job growth, including by investing in large-scale infrastructure renovation: a 10-year campaign to make the U.S. a world leader in innovation, manufacturing, and jobs.

20. Invest in large-scale infrastructure renovation with a 10-year campaign to make the U.S. a world infrastructure innovation, manufacturing, and jobs leader.

21. Expand public transportation to promote equal access to jobs and opportunity.

Empower workers

22. Strengthen the right to bargain by easing legal barriers to unionization, imposing stricter penalties on illegal anti-union intimidation tactics, and amending laws to reflect the changing workplace.

23. Have government set the standards by attaching strong pro-worker stipulations to its contracts and development subsidies.

24. Increase funding for enforcement and raise penalties for violating labor standards.

25. Raise the nationwide minimum wage and increase the salary threshold for overtime pay.

Expand Access to Labor Markets and Opportunities For Advancement

26. Reform the criminal justice system to reduce incarceration rates and related financial burdens for the poor.

27. Reform immigration law to provide a pathway to citizenship for undocumented workers.

28. Legislate universal paid sick and family leave.

29. Subsidize child care to benefit children and improve women’s workforce participation.

30. Promote pay equity and eliminate legal obstacles that prevent employees from sharing salary information.

31. Protect women’s access to reproductive health services.

Expand Economic Security And Opportunity

32. Invest in young children through child benefits, early education, and universal pre-K.

33. Increase access to higher education by reforming tuition financing, restoring protections to student loans, and adopting universal income-based repayment.

34. Make health care affordable and universal by opening Medicare to all.

35. Expand access to banking services through a postal savings bank.

36. Create a public option for the supply of mortgages.

37. Expand Social Security with a supplemental public investment program modeled on private Individual Retirement Accounts, and raise the payroll cap to increase revenue.