Jim Nichols

As research shows for the typical U.S. worker (in the middle of the national pay scale) unionization raises wages about 14%.

For low-wage workers, unionization raises wages even more – about 21%.  For more on economic impacts or unions you can check out the Center for Economic and Policy Research.

Being in a union has given my wife opportunity and quality of life--not to mention a ticket into the middle class that we wouldn't have had without it. 

Wanted to pass on some recent labor news from activist David Bacon...

         

Click here to download:

Labor_in_the_news_St._Francis_.zip (171 KB)

     

Click here to download:

0Labor_in_the_news_St._Francis_.zip (105 KB)

Loading mentions Retweet

To expand on my US Deficit/Health Care Reform Thread...

My friends on the left support nationalizing the health care system and creating a single payer system like Canada or the UK.  

A position which Obama and Democrat leaders wrote off from the start--another of oh so many examples that show how absurd the claim that the Democratic leadership are controlled by the liberal wing of their party is!

Not to mention the left--Greens, socialists, et al who find the Democratic Parties center-right policies far too conservative.

Though I personally thought a reasonable compromise would be to create a strong public option its useful to look at our long term deficits in this scenario as well for good context.

Here's the US Deficit if health care costs aligned with the UK's health care system---which is very popular in the UK, as was noted earlier this year in the Financial Times: Health Attacks rile Britons.

Loading mentions Retweet

One of the top priorities of the Federal government over the long term is to cut the deficit.  In fact one of the single biggest reasons I opposed the Bush tax cuts was that is took a US budget surplus and turned it into budget deficits leading the US Government to bring in less revenue that was currently committed to by the Federal Government.

One of the key reasons I support health care reform is that the key source of our long term deficits are health care costs and starting the process of cutting costs we begin the serious task of taking on the long term deficit.

The Center for Economic and Policy Research's Health Care Budget Deficit Calculator is a great tool to get a better context on the health care debate...

Former Chair of the Henry County Republican Party Charles Mobley has taken to calling me "The Political Scientist" because I advocate research over political theory.  My degree in political science predisposes me to empirical data--and having watched a lot of nonsense transpire in the past two years working as a legislative aide at the Captiol I can tell you point blank citizens need to do their own homework because our politicians and the media can't be trusted when it comes to giving you "all the facts". 

So here's your "homework" so to speak--go check out the Calculator.

CEPR's calculator does a great job of putting health care reform into context using empirical data in an easily assessable manner.  So take a moment and check out the calculator----sidenote--- I have to use firefox to view it, when I did my last Internet Explorer update the Calculator no long works for me for some reason.  

Here are the long-term deficits with no change to our health care system in yellow and in blue you can see the deficit if health care costs are purely coming from aging within the population rather than the skyrocketing health care inflation we currently face.

Loading mentions Retweet

An infusion of stimulus funding is helping Camden County schools stay afloat financially, saving jobs and programs.

Because of its own budget problems, the state may reduce the more than $6.4 million it had planned to forward to the district, Superintendent Will Hardin said.

So far, the district has received $2.6 million of the $3.7 million it was scheduled to receive from the state to apply toward its overall budget. In addition, the district is set to receive nearly $938,000 in Title I grants, $46,000 for school lunch equipment, $56,000 for preschool programs and about $1.7 million for special education programs.

Some of the stimulus money is used to fund salaries for 19 teachers the next two years, school officials said.

"It's being sent to us piecemeal," Hardin said. "We submit requests, and they reimburse us."

When the school board was preparing its budget for the current year, there were concerns that programs would be cut and teachers could lose their jobs.

Sixteen high-seniority employees, including two principals, 13 teachers and a guidance counselor, accepted early retirements last year as a way to save lower-paying teachers' jobs.

Former St. Marys Middle School Principal Jo Beth Bird said her decision to retire last year - at least four years before she intended - probably saved two or three teaching jobs.

In all, administrators cut 43 positions through retirement, attrition and increased class size. There are now about two additional students in each class.

In an earlier interview, Board of Education Chairman Herb Rowland said the district's student-teacher ratio is still below the state average.

He said every department made sacrifices to have minimal impact on teachers, students and programs.

Hardin said he and other administrators would have been forced to either raise school taxes or cut more teaching positions without the stimulus money.

"The cuts to personnel would have been deeper," he said. "It has helped us save some jobs."

Loading mentions Retweet

I hope his economic advisers set him straight, though I suppose there's a chance that this nonsense is coming from them. We needed a larger stimulus package to begin with, and the economy could still use more help, labor markets in particular.

Let's hope that this doesn't turn into a call to actually start balancing the budget before the economy has fully recovered as that would increase the chances of the double dip recession that he is so worried about (something we should have learned from the 1937-38 experience where an attempt to balance the budget prematurely plunged the economy back into recession).

These comments also make it sound like any jobs program, if we get one at all, will be limited to (right-wing approved) tax cuts which is, in my opinion, inferior to direct job creation strategies. Tax cuts can be part of the mix, but by themselves are unlikely to do enough to solve the employment problem.

One way to interpret this--which may or may not be wrong--is that right now we are really and truly fracked beyond previous imagining. Let's go back to the old ca. 1960 standard macroeconomic diagram, with the interest rate on the vertical axis and the economy's level of spending on the horizontal axis. We then have:

• A red curve the IS curve, which tells us what the economy's (real) spending level is--the sum of household spending on consumption, business spending on investment, net exports, all functions of this real interest rate, plus government purchases) as a function of the current value of the (real, long-term, risky) interest rate (and also of lots of other stuff that affects the position of the curve)...

• A blue curve, the LM curve, which tells us what the (short-term safe nominal) interest rate is as a function of the (nominal) spending level that is consistent with households' and businesses' being willing to hold the economy's current money stock...

• A double-headed orange arrow, the spread, the difference between the short-term safe nomina interest rate and the long-term risky real interest rate--the difference between the two being the sum of a term premium, an expected inflation rate, and a risk and default premium...

In this framework, the problem with credit easing--the central bank increasing the money supply now and moving the blue curve to the right without changing expectations of what the money stock will be in the long-term future--is that the curve has flat because cash and short-term Treasury bonds are close substitutes, so you expand the money supply by a lot while doing little to boost spending and employment and land yourself with the problem of unwinding the money stock increase in the future in a way that does not hurt spending and employment when you do so:

(Quantitative easing--pouring a whole bunch of cash in the system with the idea of never reversing the money stock expansion could boost spending and employment considerably by creating expectations of inflation and so reducing the spread--but the Federal Reserve is not going there, and regards the idea with horror, shock, and shame.)

In this framework, banking policy--recapitalizing banks further and issuing government guarantees to shrink the spread--boosts spending and employment even when, as now, cash and short-term Treasuries are close substitutes. The problem with banking policy today is that no member of congress of either party of any political persuasion wants to get out in front supporting it.

In this framework, the problem with fiscal expansion--the government purchasing a bunch more things right now and so shifting the red curve to the right--is that it boosts the supply of government bonds in the future and so may raise the double-headed orange arrow that is the spread, getting you absolutely nowhere:

So what can we do? Looks like we are well and truly fracked.

Well. maybe not. My position on further fiscal expansion is twofold:

• The claim that further government purchases would widen the spread might be true. It might now. Let's try it and see. The debt held by the public on Monday was $7,632,033,766,420.46. The debt held by the public a year and a half ago was $5,218,570,776,014.84. We have managed to boost the debt held by the public by $2,413,462,990,405.62 in eighteen months without materially moving the term premium significantly. (The risk premium has moved--there is a financial crisis on, after all.) So let's try it and find out.

• This is an opportunity. We really need to reduce the deficit after 2030. We really need to have more government purchases now. So raise spending now, and raise taxes and impose spending caps starting in 2013 so that by the end of the 20-year budget window the projected debt is unchanged. Thus we move the red line without increasing the spread: there's now increased supply of bonds in the long term to push up the interest rate on them. And we solve both our current near-depression problem and our post-2030 structural deficit problem.

According to the new federal data, the number of people in households that lacked consistent access to adequate nutrition rose to 49 million in 2008, 13 million more than in the previous year and the most since the federal government began keeping the data 14 years ago.

About a third of struggling households had what the researchers called “very low food security,” meaning that members of the household skipped meals, cut portions or passed on food at some point during the year because they lacked money. The other two-thirds managed to feed themselves by eating cheaper or less varied foods, relying on government aid like food stamps or resorting to food pantries and soup kitchens, which have been seeing heavier and heavier traffic in recent years.

Families with inadequate resources typically feed the children first, shielding them from hardship as much as possible. But the new data showed that the number of households in which children were exposed to “very low food security” rose to 506,000 from 323,000 in 2007.

The Bush administration tried to deep-six this annual survey. But President Obama has dealt with it openly and called the danger to children especially troubling.

Mr. Obama, who is traveling in Asia, has set himself the task of wiping out child hunger by 2015. To do that, Congress needs to get busy on a broad plan to expand and fully pay for a whole range of nutritional programs aimed at school-age children and their families. Only then will vulnerable children across the country get the nutrition they need.

Loading mentions Retweet

The situation has a name in the economic jargon - a liquidity trap.  An American – not a Japanese version of a liquidity trap – but a liquidity trap nonetheless.  No matter how much “money” the Fed supplies the public will want to hold it.  Monetary policy is thus useless.  

This is usually made out (by Krugman et al) as an excuse for massive fiscal policy.  And I am not averse to that.  

However there is another approach which I detailed in my lessons from shorting JGBs post.  The argument: if you can’t fix the problem with increasing money supply then maybe you can fix the problem with decreasing money demand.  

You need to convince people not to hold money.  You need to convince them that cash is trash.

And to do that you need to convince the public that there will be inflation (the above gross leverage argument notwithstanding).  

To do that the Federal Reserve has to be credibly irresponsible.  It is not enough to print a couple of trillion dollars (which they have) because everyone thinks (with some justification) that they will suck back the money supply when the crisis is over.

No – you have to be more visibly reckless than that.  You have to really convince people that there will be inflation.  

So the suggestion in my title is literal.  The Federal Reserve should hire a couple of hundred helicopters and load each one 10 million dollars in neatly bound parcels of $1000 each.  Total cost $2 billion plus trivial helicopter hire.

It should fly them over 200 randomly picked American cities and throw the money out the window.  It should press release this – but press coverage will be excessive.  Indeed I suspect that the press coverage would give the Fed’s inflation policy greater awareness than the Coca Cola Company.  (The Coca Cola Company’s annual advertising budget is $2.8 billion – so this is already cheap compared to some private sector alternatives.)  

The press release should be simple.  We are doing this to induce inflation.  If there is no inflation as a result we will simply do it again. 

Of course people will fall of roofs after searching for money that might have landed on their house.  They might die.  Of course people might get trampled in the crush.  They might die too.  

All of this increases the visible recklessness of the policy.

But the charm of this.  It may actually induce mass spending of American dollars for (self-fulfilling fear of inflation)– a massive stimulus.  And it will do it all for $2 billon.  Obama has a stimulus package of $1.2 trillion – or about 600 times as large.  This is relatively cheap.

The real case for throwing money out of helicopters is that it looks like it will work better than anything else that anyone has come up with yet.

And it will be cheap.  Much cheaper than alternatives that are actually being implemented.

The secondary benefit is that most of the losses from inflation will be in the hands of the Chinese who have built huge reserves of soon-to-be-deflated US dollars.  

Hey what better – lets kick start the economy and get the Chinese to pay.

I am serious.  At least serious until I can get a credible explanation as to why this won't work at least as well as any of the alternatives being mooted.

Loading mentions Retweet