While some lawmakers formerly suggested that CIR would make it to the agenda in 2010, skepticism among the media increases. In the meantime, supporters continue to advocate the need for reform by quietly organizing today in a prayer vigil to urge lawmakers to not only seek Comprehensive Immigration Reform, but to also seek "compassionate" immigration reform.
An ecumenical prayer vigil for immigration reform will be held at 6 p.m. today at Las Americas Faith Community/Trinity United Methodist Church, 1548 Eighth St.
The vigil follows a National Day of Prayer coordinated by Interfaith Immigration. Similar prayer vigils are to take place nationwide.
The vigil will have prayers, songs and presentations, and those who attend will write postcards to legislators and call them during the service.
In December, NDN made the decision that the most appropriate term to describe the last decade was as a lost decade for everyday Americans. I blogged on this topic on December 3 and published a white paper on December 17 entitled, A Lost Decade for Everyday Americans.
Since that time, the lost decade narrative has been discussed in a variety of other sources. On Saturday, Neil Irwin in the Washington Post covered the lack of job growth over the last decade:
It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.
There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.
Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 -- and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s.
Thankfully, 2009 ended better than it began. Economists talk about green shoots of recovery taking hold. Consumer confidence has improved. Equity markets have soared. But for all the progress, the American economy remains extremely vulnerable.
To understand those economic risks, it is worth considering Japan’s experience in the 1990s. A bursting housing bubble there sparked a banking crisis that was followed by a decade of economic stagnation.
The Japanese government lacked the resolve to do what was necessary. It failed to fix its banks and stopped its early fiscal stimulus before recovery had taken hold, leaving the economy all too vulnerable to outside shocks, including the Asian currency crisis and the dot-com collapse in 2001. Japan’s annual growth rate — which had averaged 4 percent since 1973 — slowed to less than 1 percent, on average, from 1992 to 2003.
While obvious, it bears repeating that American economic policy must, first, account for fact that the last decade was already lost for everyday Americans, and, second, do everything to avoid another one. The economic, social, and political consequences of back-to-back lost decades would be catastrophic, and such a scenario is a legitimate possibility.
NDN President Simon Rosenberg just sent out this note alerting people to the release of a new paper from NDN:
In recent weeks, policymakers in Washington have begun to take a new look at the American economy and the increasing struggle of everyday people in this new era of globalization.
To help inform this conversation, NDN will be releasing a series of targeted "white papers" over the next few months designed to highlight particularly significant aspects of this important debate.
We proudly release the first in this series, A Lost Decade for Everyday Americans. This new paper, written by Jake Berliner, Deputy Policy Director of NDN’s Globalization Initiative, makes the point that over the last ten years the typical American family has seen their incomes decline; and, that for many, economic hardship had come long before the recent recession began.
To ensure the success of the economic strategy the government adopts next year, it is imperative that the plan accounts for and explains the underlying economic weakness that affected everyday Americans in the years prior to the Great Recession. As this paper illustrates, this past decade in America has been a lost decade for ordinary Americans.
Marked by stagnating wages, declining median household income, rising living costs, abnormally slow job creation, and then capped by the destruction of many trillions of dollars in personal wealth held in housing and stocks, the decade has left most everyday Americans worse off than they were ten years ago. Too little of our national dialogue has focused on the intense struggle of everyday people prior to the Recession, yet understanding that struggle is critical to formulating an adequate response to this great economic challenge.
Friday’s unemployment report of fewer jobs lost than expected surely beats the alternative, but that does not mean that the employment situation will improve significantly anytime soon. What it hopefully means is that things won’t get dramatically worse, although that certainly can’t be ruled out.
Calculated Risk, perhaps the most prolific chart maker and data analyst of all economics blogs, presents an analysis on the potential speed of the employment recovery. These estimates are based on Okun’s Law (an established relationship between GDP growth and job creation):
In the 2010 budget, OMB projects real GDP growth of 3.5 percent from the fourth quarter of this year to next, meaning that, if Okun’s law were still operable, we’d be somewhere in the mid to high 9 percent unemployment range at the end of next year. (The Federal Reserve sees similar numbers.)
Having said that, many leading economists, including NDN’s Rob Shapiro and the Director of the National Economic Council Larry Summers, have argued that Okun’s law has broken down, making the relationship between GDP growth and employment weaker, which means these projections may be - sadly - optimistic.
Health care reform advocates often point out that the costs of reform should be weighed against the costs of doing nothing. Unfortunately, that’s very hard to do, since our health care and tax arrangements mask those costs so well. I suspect that if middle-class Americans had a better grasp of what health care really costs them, and how those costs are shaping their economic futures, the public response might well recall the tax revolt of the 1970s.
These are my thoughts, at least, reading a new piece from Eugene Steuerle, a tax economist at the Urban Institute with a knack for collecting data that can help us see the world in fresh ways. From the data Steuerle presents, we can calculate that within just five or six years, the average middle-class family will have to devote nearly one-third of its income to health care costs. That’s right: one-third. According to the CBO, the average family will earn $54,000 a year in 2016, when a moderate-priced family policy will cost $14,700. Employers will pay much of that insurance bill for most middle-class families; but that’s just a mask, since those employer payments come out of people’s wages, not a company’s profits. In real effect, a middle class family’s earnings in 2016 will come to $68,700 ($54,000 + $14,700), of which $14,700 or 21.4 percent will go for health insurance. And that won’t be their only health-related costs. Their co-payments and other uninsured expenses, on average, will come to another $5,100. They’ll also be paying taxes to help cover other people’s health care – 2.9 percent of their cash wages for Medicare ($1,566), plus perhaps $750 more in federal and state income taxes for Medicaid and for Medicare costs not covered by the 2.9 percent payroll tax. Add up all of that, and it comes to $22,116, or 32.2 percent of the middle-class family’s adjusted income of $68,700.
While Steuerle is concerned – rightly so – about provisions in health care reform that will treat people with the same incomes differently, depending on the rules the legislation applies to employers, I’m more incensed about the current, raw deal for middle-class Americans. Why should an average family expect to pay one-third of its income in 2016 on a health care system which, in that same year, should claim only 16 percent of our GDP? The biggest part of this puzzle lies in the fact that most of the costs are roughly the same for most people, regardless of their income. The worker earning $68,700, a manager who makes $100,000, and the company’s CEO who earns $1 million all will pay the same $14,700 for their families’ health coverage. Their out-of-pocket expenses do rise with income but not by very much; and while the manager and CEO pay more Medicare taxes than our average worker, they all pay at the same 2.9 percent rate. There also are other factors which reduce the burden on other groups – and so tacitly increase it for those middle-class families. For example, people on Medicare and Medicaid bear much lower insurance costs, although they also pay relatively more for their out-of-pocket expenses; and families without children pay relatively less for both insurance and out-of-pocket expenses.
Whatever the causes, the data show clearly that health care costs have become a core economic issue for middle-class Americans. Unless we can contain them, and over time even reduce them, realistic prospects of upward mobility for most middle-class families will simply slip away. Health care, in short, has to be an essential part of a new economic strategy.
The last political upheaval over the economic prospects of the middle class began with Proposition 13 in California and went on to fuel a conservative realignment that held sway for a quarter century. The next one may well have begun already with these unsustainable health care costs. President Obama, whose talent for reading the American mood equals Ronald Reagan’s, has tried to respond quickly with several reasonable ideas for cost containment. His proposals went nowhere when healthcare providers and insurers countered by, in effect, threatening to withhold people’s care. The next time, this issue will be recast in terms that everyone understands – people’s real incomes – and the results could be very different.
Simon and Rob have weighed in quite a bit this morning on what the elections mean for the country and the Obama agenda. As they both stress, the biggest thing this election means is that focusing on an economic plan for the country must be the top priority. What's important to note is that this is nothing new. NDN has been arguing since 2006 that the volatility in the electorate was due to economic conditions. Exit polls from that year bear the argument out, even though most pundits at the time thought Iraq was the key issue. Here's NDN's analysis of 2006 exit polls:
- The economy was the most important issue. The exit poll asked voters if they considered various issue important in deciding their vote. If you add up those who responded - where issues were extremely, very, or somewhat important - the economy comes out number one.
Table 1: Which issue was most important?
Issue
Extremely Important
Very Important
Somewhat Important
Total
Economy
39%
43%
14%
96%
Corruption
41%
33%
18%
92%
Iraq
35%
32%
21%
88%
Terrorism
39%
33%
20%
82%
Moral Values
36%
21%
20%
77%
- Economy Crucial in Battleground States. The economy played a critical role in the key battleground states that decided the election. In these areas the results could not be clearer: the economy was the number one issue. The exit poll asked voters in key swing states about Iraq and the Economy. In each swing state more voters thought the economy was either "extremely important" or "very important" in their decision over who to vote for their senator.
Table 2: Economy vs Iraq in Key Senate Races
Economy
Iraq
Missouri
83%
62%
Montana
82%
65%
Ohio
83%
66%
Pennsylvania
81%
68%
Virginia
82%
69%
All this in much better economic times, so it comes as no surprise that exit polls from yesterday show that the economy was the dominant issue. Barack Obama continues poll much better on economic issues than do Republicans (according to a recent Pew poll, 57 percent of Americans are optimistic Obama's policies will improve the economy) and, as Simon pointed out, Republican solutions such as tax caps were voted down in two states last night. So there's little to make me believe that conservative economics is making a comeback and little to make me believe that the cheap populism of Glenn Beck (and his mentee Hoffman in NY-23) works either.
What is clear to me is that the most catastrophic thing for nervous Democrats could do before 2010 is believe that either are paths to success. The fact is that Democrats have a phenomenal historic record on the economy, and Republicans delivered eight years of wage stagnation, median income decline, and exploding health care and energy costs. Focusing on policies that address this issues, which are at the heart of the struggle of everyday Americans, is the key to victory when the polls really matter.
This week, EPI released some polling getting at the very core of the political problem around the economy - Americans feel as though the government has been responsive to the needs of banks and Wall Street, not them. Tom Edsall covers the poll in the Huffington Post and includes this slide from the poll results:
The article goes on to argue that the American people have gotten it about right - quoting James Galbraith who says:
"In relative terms, the perceptions are dead-on: the big winners so far are the bailed-out bankers. Meanwhile on the jobs and housing front, things get worse," says University of Texas economist James Galbraith. "You can make an argument that everyone has been helped by the fact that the economy hasn't collapsed even more completely," Galbraith added, but that does not "cut any ice with the population at the moment. What they see is that a top-down bailout works on the top and doesn't go very far down. And they are right."
This sense, true or not, is a massive political challenge that must be addressed over the next year. We've written a lot about the need to adjust rhetoric to be responsive to the struggles of everyday people. This, by the way, doesn't mean some sort of populism, it means having a big conversation about a 21st century economic strategy for America that focuses on broad-based prosperity.
The American people have a better understanding for the global economy than most in Washington give them credit for - as evidence, take a look at this NDN poll released in November of 2007, just before the recession began. Not only did Americans know that the economy was in very bad shape, they understood the shape of the global economy and America's advantages therein.
Statement from Dr. Robert J. Shapiro, Chair of NDN’s Globalization Initiative, on new economic data released by the Commerce Department:
“While this week’s news on the economy growing in the third quarter is welcome, most of those gains came from the President’s stimulus, so we’re still a long way from a self-sustaining recovery. And today’s news of falling personal incomes last month and a sharp downturn in consumer spending shows how hard this recession has been for most Americans,” said Shapiro, former Under Secretary of Commerce for Economic Affairs in the Clinton Administration. “These developments come on top of what happened to most people in the last expansion – when their wages stagnated even as the economy was growing. Political leaders in Washington shouldn’t let wishful thinking cloud their planning for 2010 – the economy still needs help, and the American people need a government prepared to make serious long-term investments in their future prosperity.”
Via Mark Thoma, Atlanta Fed Senior VP and Research Director David Altig weighs in on the high likelihood of a jobless recovery. He brings to light an interesting number on the permanence of job losses, and the whole post is a good round up what will be a very scary subject:
The percentage of employee separations labeled permanent is at a recorded high.
Underneath the usual total unemployment numbers are the reasons an individual is unemployed: You are on temporary layoff; you quit your job; you have reentered the labor market and have yet to find a job; or you are entering the job market for the first time and have yet to find a job. Or, finally, you have been permanently separated from your previous employer, who has no expectation of hiring you back.
The last category is the dominant reason for unemployment at this time. That might not seem surprising, but it actually is. Never, in the six recessions preceding the latest one, did permanent separations account for more than 45 percent of the unemployed. The current percentage stands at 56 percent as of September and appears to be still climbing:
As Dr. Rob Shapiro tells us, the concept of a jobless recovery is scary, but even worse is that the term may overstate the case. We could be in for what is technically a recovery in which the economy actually loses jobs.
Today, Thomas Friedman writes about the "education breakdown" in America:
“Our education failure is the largest contributing factor to the decline of the American worker’s global competitiveness, particularly at the middle and bottom ranges,” argued Martin, a former global executive with PepsiCo and Kraft Europe and now an international investor. “This loss of competitiveness has weakened the American worker’s production of wealth, precisely when technology brought global competition much closer to home. So over a decade, American workers have maintained their standard of living by borrowing and overconsuming vis-à-vis their real income. When the Great Recession wiped out all the credit and asset bubbles that made that overconsumption possible, it left too many American workers not only deeper in debt than ever, but out of a job and lacking the skills to compete globally.”
This problem will be reversed only when the decline in worker competitiveness reverses — when we create enough new jobs and educated workers that are worth, say, $40-an-hour compared with the global alternatives. If we don’t, there’s no telling how “jobless” this recovery will be.
A Washington lawyer friend recently told me about layoffs at his firm. I asked him who was getting axed. He said it was interesting: lawyers who were used to just showing up and having work handed to them were the first to go because with the bursting of the credit bubble, that flow of work just isn’t there. But those who have the ability to imagine new services, new opportunities and new ways to recruit work were being retained. They are the new untouchables.
That is the key to understanding our full education challenge today. Those who are waiting for this recession to end so someone can again hand them work could have a long wait. Those with the imagination to make themselves untouchables — to invent smarter ways to do old jobs, energy-saving ways to provide new services, new ways to attract old customers or new ways to combine existing technologies — will thrive. Therefore, we not only need a higher percentage of our kids graduating from high school and college — more education — but we need more of them with the right education.
As the Harvard University labor expert Lawrence Katz explains it: “If you think about the labor market today, the top half of the college market, those with the high-end analytical and problem-solving skills who can compete on the world market or game the financial system or deal with new government regulations, have done great. But the bottom half of the top, those engineers and programmers working on more routine tasks and not actively engaged in developing new ideas or recombining existing technologies or thinking about what new customers want, have done poorly. They’ve been much more exposed to global competitors that make them easily substitutable.”
There is no doubt that our education system is badly in need of an upgrade, but we also must be cognizant of fact that much of the current workforce just does not posses the skills to succeed in the globally interconnected, idea-based economy. This isn’t just a phenomenon of this recession; everyday Americans spent much of the Bush era falling behind due to the inability of their government to respond to their struggle and find a way to make the inextricably powerful forces of globalization work for all Americans.
In that spirit, NDN’s Rob Shapiro has proposed a program to provide free computer training to all Americans, which can be found here and recently passed the House of Representatives in H.R. 3221, the Student Aid and Fiscal Responsibility Act.
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