Fiscal and Monetary Policy

Third and State This Week: Gloomy Economic News, Trade Agreements and Tracking Salaries

This week, we blogged about the need for a jobs plan, an effort to make labor markets more transparent, and the negligible effect the recently passed trade agreements will have on reducing joblessness. Plus, the Friday Funny is back, with the warm words of everybody's favorite CEO, T. Herman Zweibel (extra points, if you know who that is without looking him up).

IN CASE YOU MISSED IT

  • On the recession and recovery, Mark Price addressed a Patriot-News editorial that calls for passage of the American Jobs Act but misstates the important impact that the Recovery Act of 2009 had on turning the free-falling economy around. Mark also blogged about some of the awkward facts that make it difficult to root for GE and other multinationals.
  • On unemployment and the economy, Mark compared a poll performed by the Mercyhurst College Center for Applied Politics with labor analysis done by the Keystone Research Center — both finding that roughly 1 in 4 Pennsylvania residents have had less paid work than they wanted during the last 12 months.
  • In other economic news, Mark blogged about Congress' failure to address the lack of consumer demand that is keeping unemployment high and its passage of a free trade agreement that will have a negligible impact on U.S. employment.
  • On wages and the workplace, Chris Lilienthal blogged about an online project aimed at creating a more transparent labor market. You can share and compare salaries and wages, understand your rights on the job, and look up the salaries of politicians, CEOs, athletes, and Hollywood stars.
  • Lastly, a bit of humor after a gloomy news week. Chris shared some satire from The Onion's publisher emeritus, T. Herman Zweibel, who is shocked that his repeatedly mistreated employees are in disbelief that he would move their offices to the Yukon.

More blog posts next week. Keep us bookmarked and join the conversation!

Morning Must Reads: Wages Under Pressure and Doing Nothing Is Not an Option

It's hard out here for a cellist!

On the cusp of the opening of the orchestra's 2011-12 season, members of the ensemble approved a contract calling for a 15 percent pay cut, reducing the size of the ensemble, and replacing the defined-benefit pension with a defined-contribution plan. The deal, also ratified by the association's board of directors, was mediated under the supervision of Stephen Raslavich, chief judge of U.S. Bankruptcy Court for the Eastern District of Pennsylvania, and is subject to bankruptcy court approval. The American Federation of Musicians and Employers' Pension Fund, the $1.7 billion national plan that would be jilted by the new deal, has pledged to fight for up to $35 million it says it will be owed if the orchestra association withdraws from the fund.

Morning Must Reads: The Senate Chooses to Do Nothing About the Economy and You Should Root for GE

The economic news this morning makes you feel like you are watching Major Kong (from the movie Dr. Strangelove — the picture on the left) ride the bomb like a mechanical bull to our mutual total economic destruction. But our economic situation is more similar to that of Otto (played by Kevin Kline in A Fish Called Wanda — on the right).  At first we are amused with the idea of being run down by a steamroller moving 2 miles per hour. But then we realize that we have stepped in wet cement and are thus destined to be run down by the U.S. Senate a one-eyed man with ketchup stains round his nostrils.

In short, our problem is a lack of aggregate demand and the solution is well within our grasp, but our politics are paralyzed and millions are destined to be run down by years of needless misery.

Third and State This Week: Strong Revenue Growth in PA, Rising Student Loan Defaults, and Morning Must Reads

This week, we blogged about rising rates of student loan defaults, Pennsylvania's strong revenue growth early in the fiscal year, and rising poverty in the wake of recessions. We also started each day with the "Morning Must Reads," highlighting the must-read economic news and opinion of the day. 

IN CASE YOU MISSED IT

  • On higher education and unemployment, Sean Brandon blogged about the rising number of student loan defaults as young college grads find jobs harder to come by in this economy. 
  • On poverty and recessions, Chris Lilienthal shared a chart showing how the recessions of the last 30 years have driven up poverty rates in their aftermath.
  • On state budget and taxes, Michael Wood wrote about a new Pennsylvania Budget and Policy Center analysis showing that state revenue collections in the first two months of 2011-12 are running well ahead of the same two-month period last year. Mike also shared a chart showing that July-August tax collections have outperformed the same two-month period in the last five fiscal years. September revenue collections will provide a much better idea of what to expect in future months.
  • Lastly, Mark Price greeted you each daybreak with the "Morning Must Reads," highlighting current economic news and opinion. This week, Mark highlighted articles on paid sick leave, public sector employment losses, the challenges of local economic development, local area unemployment rates and the bupkis Congress is doing to spur economic recovery
More blog posts next week. Keep us bookmarked and join the conversation!

Morning Must Reads: The Tall Tales Policymakers Tell to Justify Keeping Unemployment and Profits High

The economy is sick. Unemployment has been rising and private-sector job growth has been very weak in the past few months. WE ARE NOT HEADED FOR A DOUBLE-DIP RECESSION! But with unemployment back over 8% here in Pennsylvania, the risks of financial disaster for people who lose their jobs for reasons beyond their control remain higher than they have been at any point since the early 1980s.

The costs of job loss for individuals and society are well documented (PDF). What we need is aggressive action by Congress and the Federal Reserve to spur job growth. But what we are getting is bupkis from Congress. Meanwhile, a broad range of fiscal and monetary policymakers are making stuff up about what is wrong with the economy.

The answer, repeated again and again, is that businesses are afraid to expand and create jobs because they fear costly regulations and higher taxes...The first thing you need to know, then, is that there’s no evidence supporting this claim and a lot of evidence showing that it’s false. The starting point for many claims that antibusiness policies are hurting the economy is the assertion that the sluggishness of the economy’s recovery from recession is unprecedented. But, as a new paper by Lawrence Mishel of the Economic Policy Institute documents at length, this is just not true. Extended periods of 'jobless recovery' after recessions have been the rule for the past two decades. Indeed, private-sector job growth since the 2007-2009 recession has been better than it was after the 2001 recession.

Third and State This Week: The Standard and Poor's Downgrade, Public Job Losses, and Energy Investment Bankers and the Marcellus Shale

Programming Note: Third and State will be taking the week of August 15 off. See you back here on August 22.

This week at Third and State, we blogged about the Standard and Poor's downgrade, doubts raised by energy investment bankers about a Marcellus Shale economic impact study, public employment job losses and more.

IN CASE YOU MISSED IT

  • On the economy, Mark Price blogged about the Standard and Poor's downgrade and the other "decidedly grim" economic news of the past couple weeks.
  • On the Marcellus Shale, Michael Wood wrote about doubts being cast by energy investment bankers on the findings in the Marcellus Shale Coalition's recent economic impact study. And, reacting to a recent Bloomberg News story, Mark Price reminded us that 72,000 new hires in the Marcellus industries is not the same as new jobs created.
  • Finally, Chris Lilienthal shared a graphic from the Center on Budget and Policy Priorities highlighting the loss of 611,000 jobs in state and local governments during and after the Great Recession.

See you on August 22, 2011. Keep us bookmarked and join the conversation!

The Standard and Poor's Downgrade

The economic news of the past two weeks has been decidedly grim.

On July 29, new data confirmed that the economy in the first half of 2011 grew much more slowly than necessary to bring down the unemployment rate.

A few days later, the bizarre debt-ceiling fight was resolved with agreement to cut nominal federal spending over the next two years. Economic forecasts prior to this deal put the U.S. unemployment rate at 8% at the end of 2012. Cuts to federal spending mean higher unemployment forecasts are on the way.

By the way, this morning the forecasters at Goldman Sachs increased their unemployment forecast for the end of 2012 to 9.25% — and that assumes Congress will agree to extend the current payroll tax credit before January.

Unless you are living off the grid, you couldn’t have escaped news that last week was brutal for the Stock Market. Then late in the day Friday, credit rating agency Standard and Poor's — after correcting a $2 trillion math error — decided to go ahead and downgrade the full faith and credit of the U.S. taxpayer from AAA to AA+.

So what should we do? To restore confidence in the United States' ability to pay its bills, Congress should take steps now to build a stronger economy, not weaken it as we did with the debt limit deal.

The chief problem in the world economy is both the U.S. and Europe have taken steps to slow rather than boost economic growth. This will have a major impact on the U.S.'s ability to pay down long-term debt.

Unless Congress takes immediate action to create jobs, we face the rising risk that the economy will continue to grow more slowly.

Is that decidedly grim enough for you?

In Case You Missed It: Third and State Blog for Week of March 28

Senator Jeff Piccola expanding school vouchers concept to include Pennsylvanians trapped in low-performing families? A state worker stunned to learn her mid-level administrative job is no pathways to riches? A Corbett speechwriter struck with a rare illness afflicting writers of overwrought clichés?

Either it's a particularly zany news day — or it's the first of April!

In Third and State's Friday Funny, we pass on an April Fool's take on the latest un-news coming out of Harrisburg. (Our thanks to a loyal blog reader for passing this one along.)

In other news this week, we blogged about the taxes gas drillers do (or don't) pay, why the minimum wage matters, imaginative tax avoidance strategies, and much more! 

IN CASE YOU MISSED IT:

  • For much of the week, it was the Mark Price Show at Third and State. On wages, Mark explained just how much the minimum wage matters and why the failure of policymakers to peg it to growth in productivity (or even inflation) has had a wide-ranging impact on American society.
  • On jobs and unemployment, Mark blogged about imaginative tax avoidance strategies at work at General Electric.
  • And on fiscal and monetary policy, Mark wrote about the Federal Reserve's policymaking role and why it is so important to the economic recovery.
  • Finally, Michael Wood has a post on the taxes that natural gas drillers in the Marcellus Shale are (or are not) paying.

More blog posts next week. Keep us bookmarked and join the conversation!

Why the Federal Reserve Matters

David Leonhardt of The New York Times has an article today where he explains bias in policy making at the Federal Reserve:

One group of Fed officials and watchers worries constantly about the prospect of rising inflation, no matter what the economy is doing. Some of them are haunted by the inflation of the 1970s and worry it may return at any time. Others spend much of their time with bank executives or big investors, who generally have more to lose from high inflation than from high unemployment. There is no equivalent group — at least not one as influential — that obsesses over unemployment. Instead, the other side of the debate tends to be dominated by moderates, like Ben Bernanke, the Fed chairman, and [former Fed governor Laurence] Meyer, who sometimes worry about inflation and sometimes about unemployment. The result is a bias that can distort the Fed’s decision-making.

We Need More Action on Jobs and Wages

The evidence is indisputable: aggressive action by the federal government to create jobs worked. 

As of December 2010, federal action on the economy saved 400,000 Pennsylvania jobs and prevented a rise in the state’s unemployment rate to 15%.

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