Lazy Caturday Reads: Tinderbox America

Good Morning!!

The photos in today’s post are by Chinese photographer Wu Hongli, who has photographed street cats across China and several other countries. Read more about him and his project at National Geographic.

This week the U.S. added 1968-style violent protests to the ongoing Covid-19 pandemic, and the growing madness of the monster in the White House who is doing his very best to make both of these crises so much worse.

Michelle Goldberg: America Is a Tinderbox. Scenes from a country in free fall.

The last two and a half months in America have felt like the opening montage in a dystopian film about a nation come undone. First the pandemic hit and hospitals in New York City were overwhelmed. The national economy froze and unemployment soared; one in four American workers has applied for unemployment benefits since March. Lines of cars stretched for miles at food banks. Heavily armed lockdown protesters demonstrated across the country; in Michigan, they forced the Capitol to close and legislators to cancel their session. Nationwide, at least 100,000 people died of a disease almost no one had heard of last year.

Then, this week, a Minneapolis police officer was filmed kneeling on the neck of a black man named George Floyd. As the life went out of him, Floyd pleaded that he couldn’t breathe, echoing the last words of Eric Garner, whose 2014 death at the hands of New York policemen helped catalyze the Black Lives Matter movement. Floyd’s death came only days after three Georgia men were arrested on charges of pursuing and killing a young black man, Ahmaud Arbery, whom they saw out running. A prosecutor had initially declined to charge the men on the grounds that their actions were legal under the state’s self-defense laws.

In Minneapolis protesters poured into the streets, where they met a far harsher police response than anything faced by the country’s gun-toting anti-lockdown activists. On Wednesday night, peaceful demonstrations turned into riots, and on Thursday Minnesota’s governor called in the National Guard.

For a moment, it seemed as if the blithe brutality of Floyd’s death might check the worst impulses of the president and his Blue Lives Matter supporters. The authorities were forced to act: All four of the policemen involved were fired, police chiefs across the country condemned them and William Barr’s Justice Department promised a federal investigation that would be a “top priority.” Even Donald Trump, who has encouraged police brutality in the past, described what happened to Floyd as a “very, very bad thing.”

But Trump can never allow himself to support human beings against authoritarian power.

But on Thursday night, after a county prosecutor said his office was still determining if the four policemen had committed a crime, the uprising in Minneapolis was reignited, and furious people burned a police precinct. (One of the officers was arrested and charged with third-degree murder on Friday.) On Twitter, an addled Trump threatened military violence against those he called “THUGS,” writing, “When the looting starts, the shooting starts.”

Whether Trump knew it or not, he was quoting a racist phrase from the 1960s used by George Wallace, among others. The president later tried to tamp down outrage by saying he was just warning of danger — the Trump campaign has hoped, after all, to peel off some black voters from the Democrats — but his meaning was obvious enough. This is the same president who on Thursday tweeted out a video of a supporter saying, “The only good Democrat is a dead Democrat.”

The Trump presidency has been marked by shocking spasms of right-wing violence: the white nationalist riot in Charlottesville, Va., the massacre at the Tree of Life synagogue in Pittsburgh, the mass shooting targeting Latinos in El Paso. But even as the country has simmered and seethed, there hasn’t been widespread disorder. Now, though, we might be at the start of a long, hot summer of civil unrest.

It certainly looks that way.

Julie Pace at the Associated Press: Analysis: Trump fuels new tensions in moment of crisis.

Over 48 hours in America, the official death toll from the coronavirus pandemic topped 100,000, the number of people who filed for unemployment during the crisis soared past 40 million, and the streets of a major city erupted in flames after a handcuffed black man was killed by a white police officer.

It’s the kind of frenetic, fractured moment when national leaders are looked to for solutions and solace. President Donald Trump instead threw a rhetorical match into the tinderbox. “When the looting starts, the shooting starts,” he declared ominously in a late-night tweet.

Trump’s words were so jarring that Twitter attached a warning to his post — as well as to an identical message from an official White House account — saying that the president of the United States was “glorifying violence.” It’s the first time the social media giant has taken such a step with any world leader, prompting new claims of bias from Trump and some of his conservative allies.

The episode encapsulated Trump’s approach to the presidency and to this time of national crisis, which has upended nearly every aspect of American life and put his November reelection prospects at risk. He’s latched on to personal grievances and cast himself as a victim, while making only occasional references to the staggering loss of life across the country. He’s willingly stoked partisan divisions over public health, and now racial divisions in the face of a death, rather than seeking opportunities to pull the nation together.

Read the rest at AP.

Matt Zapotosky and Isaac Stanley-Becker at The Washington Post: Gripped by disease, unemployment and outrage at the police, America plunges into crisis.

America’s persistent political dysfunction and racial inequality were laid bare this week, as the coronavirus death toll hit a tragic new milestone and as the country was served yet another reminder of how black people are killed by law enforcement in disproportionately high numbers. Together, the events present a grim tableau of a nation in crisis — one seared by violence against its citizens, plagued by a deadly disease that remains uncontained and rattled by a devastating blow to its economy.

“The threads of our civic life could start unraveling, because everybody’s living in a tinderbox,” said historian and Rice University professor Douglas Brinkley.

Barbara Ransby, a historian at the University of Illinois at Chicago and a longtime political activist, said the toll of the coronavirus outbreak made long-standing racial inequities newly stark. Then, images of police violence made those same disparities visceral.

“People are seething about all kinds of things,” said Ransby, the author of “Making All Black Lives Matter: Reimagining Freedom in the Twenty-First Century.” “There are major turning points and ruptures in history. . . . This is one of these moments, but we’ve not seen how it will fully play out.”

Read more at the WaPo.

This seems really ominous from James LaPorta at the Associated Press: Pentagon puts military police on alert to go to Minneapolis.

As unrest spread across dozens of American cities on Friday, the Pentagon took the rare step of ordering the Army to put several active-duty U.S. military police units on the ready to deploy to Minneapolis, where the police killing of George Floyd sparked the widespread protests.

Soldiers from Fort Bragg in North Carolina and Fort Drum in New York have been ordered to be ready to deploy within four hours if called, according to three people with direct knowledge of the orders. Soldiers in Fort Carson, in Colorado, and Fort Riley in Kansas have been told to be ready within 24 hours. The people did not want their names used because they were not authorized to discuss the preparations.

The get-ready orders were sent verbally on Friday, after President Donald Trump asked Defense Secretary Mark Esper for military options to help quell the unrest in Minneapolis after protests descended into looting and arson in some parts of the city.

Trump made the request on a phone call from the Oval Office on Thursday night that included Esper, National Security Advisor Robert O’ Brien and several others. The president asked Esper for rapid deployment options if the Minneapolis protests continued to spiral out of control, according to one of the people, a senior Pentagon official who was on the call.

I’m not a lawyer, but I thought it was illegal for the U.S. military to police American citizens. More from the AP story:

The person said the military units would be deployed under the Insurrection Act of 1807, which was last used in 1992 during the riots in Los Angeles that followed the Rodney King trial.

“If this is where the president is headed response-wise, it would represent a significant escalation and a determination that the various state and local authorities are not up to the task of responding to the growing unrest,” said Brad Moss, a Washington D.C.-based attorney, who specializes in national security.

Members of the police units were on a 30-minute recall alert early Saturday, meaning they would have to return to their bases inside that time limit in preparation for deployment to Minneapolis inside of four hours. Units at Fort Drum are slated to head to Minneapolis first, according to the three people, including two Defense Department officials. Roughly 800 U.S. soldiers would deploy to the city if called.

One more and I’ll end this catalog of horrors. I read this post at bellingcat a couple of days ago, and Michelle Goldberg discusses it in her NYT op-ed quoted up top: The Boogaloo Movement Is Not What You Think.

As Minneapolis exploded over the death of a another black man at the hands of police, members of a weird political subculture weighed a response.

On the internet, meanwhile, a largely white, and far right movement publicly contended over what risks its members should take to support a black man killed by police.

Wu Hongli and his rescued cat

On the Facebook page, Big Igloo Bois, which at the time of writing had 30,637 followers, an administrator wrote of the protests, “If there was ever a time for bois to stand in solidarity with ALL free men and women in this country, it is now”.

They added, “This is not a race issue. For far too long we have allowed them to murder us in our homes, and in the streets. We need to stand with the people of Minneapolis. We need to support them in this protest against a system that allows police brutality to go unchecked.”

One commenter added, “I’m looking for fellow Minneapolis residents to join me in forming a private, Constitutionally-authorized militia to protect people from the MPD, which has killed too many people within the last two years.”

These exchanges offer a window into an extremely online update of the militia movement, which is gearing up for the northern summer. The “Boogaloo Bois” expect, even hope, that the warmer weather will bring armed confrontations with law enforcement, and will build momentum towards a new civil war in the United States.

Mostly, they’re not even hiding it. And for the last several months, their platform of choice has been Facebook.

Like many other novel extremist movements, the loose network of pro-gun shitposters trace their origins to 4chan. What coherence the movement has comes from their reverence for their newly-minted martyrs and a constellation of in-jokes and memes

The article describes how this subculture has used Facebook to advance its agenda. Facebook is aiding numerous violent right wing movements and actively enabling the campaign of Donald Trump. Read more at these links:

Zeynep Tufekci at The Atlantic: Trump Is Doing All of This for Zuckerberg.

John Stanton at The Daily Beast: Mark Zuckerberg Profits from Rage as Much as Donald Trump Does.

Donnie O’Sullivan at CNN Business: Mark Zuckerberg silent as Trump uses Facebook and Instagram to threaten ‘looting’ will lead to ‘shooting.’

That’s it for me. What do you think? What stories are you following today?


Thursday Reads: Updates from Snowden-Greenwald Land and Other News

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Good Morning!!

The photos in today’s post are from a project by photographer Mark Makela to take pictures of children “learning to read by reading to homeless cats.”

Last February, photographer Mark Makela traveled to Birdsboro, Pennsylvania, to photograph a reading group where the participants were grade-school students and a group of cats. The idea for the group, known as Book Buddies, was hatched at the Animal Rescue League of Berks County when the program coordinator Kristi Rodriguez’s 10-year-old son was struggling with reading. Rodriguez decided to bring him into the shelter, where he could be in what she called a “nonevaluative” environment in order to feel more comfortable practicing his reading skills. It worked.

According to ARL’s website, studies at Tufts University found that the more relaxed, nonjudgmental audience of cats helps students to sustain their focus, maintain a higher state of awareness, and develop an improved attitude toward school. In August of last year, ARL officially started the Book Buddies program, inviting students in first through eighth grades to read to the cats. As an incentive to continue, once the students complete five books, they receive prizes. “It’s one of those opportunities that is unique and humorous and so endearing,” Makela said about the assignment to document the Book Buddies program.

See more marvelous photos at the Slate Magazine link above. Even more at Buzzfeed–including more girls.

Now to the news:

I’ve long suspected that Edward Snowden interacted with Wikileaks’ Julian Assange and others in the hacker community before he made his final decision to steal a massive trove of data from NSA computers and then abscond to Hong Kong at the end of May last year.

We know that Snowden was in touch with Jacob Applebaum and Laura Poitras early on, because they published an interview with him in Der Spiegel that they had conducted by e-mail in Mid-May, before Snowden fled Hawaii. But Snowden could have actually met Applebaum in Hawaii in April 2013 when Applebaum vacationed there by his own admission. Did Snowden and Applebaum discuss Snowden’s plans to steal NSA files? Did Applebaum suggest which items Snowden should take? Note that Applebaum is deeply involved with Wikileaks and has been a long-time, passionate defender of Julian Assange.

Glenn Greenwald revealed in his new book “No Place to Hide” that Snowden had used the code name “Cincinnatus” in early communications between the two. Interestingly enough, a “cyber-party” had been held in Hawaii in December 2012, and the host was someone who called himself “Cincinnatus.” Once this news came out, people began speculating on Twitter that perhaps this wasn’t a coincidence. Suddenly, on May 17, the cyber-party announcement was deleted by someone with the Twitter handle @jskuda. Fortunately Twitter user @ShrillBrigade located it on the Wayback Machine. And check out the title of Cincinnatus’ talk: “Painlessly setting up your own fast exit.” (h/t @catfitz)

Then yesterday, former criminal hacker and technical adviser to Greenwald and Poitras’ Freedom of the Press Foundation Kevin Poulsen published a limited hangout at Wired: Snowden’s First Move Against the NSA Was a Party in Hawaii.

It was December 11, 2012, and in a small art space behind a furniture store in Honolulu, NSA contractor Edward Snowden was working to subvert the machinery of global surveillance.

Snowden was not yet famous. His blockbuster leaks were still six months away, but the man destined to confront world leaders on a global stage was addressing a much smaller audience that Sunday evening. He was leading a local “Crypto Party,” teaching less than two dozen Hawaii residents how to encrypt their hard drives and use the internet anonymously.

“He introduced himself as Ed,” says technologist and writer Runa Sandvik, who co-presented with Snowden at the event, and spoke about the experience for the first time with WIRED. “We talked for a bit before everything started. And I remember asking where he worked or what he did, and he didn’t really want to tell.”

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Runa Sandvik is a hacker who works at the TOR project along with Jacob Applebaum. TOR is a site (ironically funded by the U.S. Department of Defense) that provides free encryption software to people who want to hide their on-line activities (including drug dealers and child porn purveyors).

Poulsen writes:

The roots of Snowden’s crypto party were put down on November 18, 2012, when he sent an e-mail to Sandvik, a rising star in privacy circles, who was then a key developer on the anonymous web surfing software Tor.

Tor is free software that lets you go online anonymously. The software is used by a wide swath of people in need of extreme anonymity, including human rights groups, criminals, government agencies, and journalists. It works by accepting connections from the public internet, encrypting the traffic and bouncing it through a winding series of relays before dumping it back on the web through any of more than 1,000 exit nodes.

Most of those relays are run by volunteers, and the pre-leak Edward Snowden, it turns out, was one of them.

How about that? Snowden was already deeply involved with TOR in December 2012–and Jacob Applebaum of TOR just happened to travel to Hawaii a few months later in April! Coincidence? I don’t think so.

In his e-mail, Snowden wrote that he personally ran one of the “major tor exits”–a 2 gbps server named “TheSignal”–and was trying to persuade some unnamed coworkers at his office to set up additional servers. He didn’t say where he worked. But he wanted to know if Sandvik could send him a stack of official Tor stickers. (In some post-leak photos of Snowden you can see the Tor sticker on the back of his laptop, next to the EFF sticker).

Well, well, well. Now we know how Snowden got his TOR sticker. Did Runa give him the EFF sticker too? Read the rest of the Wired piece for more details.

Phew! I hope that made sense. This stuff is difficult to write about.

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Also yesterday, well-known and respected journalist and New Yorker writer George Packer published a no-holds-barred review of Glenn Greenwald’s new book in the UK Prospect: The errors of Edward Snowden and Glenn Greenwald. Among other things, Packer accuses Greenwald of “a pervasive absence of intellectual integrity,” and provides numerous examples. He characterizes Snowden as someone who lives on the internet, detached from the realities of the real world. Here are a few excerpts, but please read the whole thing.

Snowden’s leaks can be seen, in part, as a determined effort to restore the web to its original purity—a project of technology rather than law. “Let us speak no more of faith in man, but bind him down from mischief by the chains of cryptography,” wrote Snowden, in an early message to his collaborators. In March of this year, appearing remotely from Russia on a robotised screen onstage at a TED talk in Vancouver, Snowden said that the single best solution to the NSA’s abuses is stronger encryption: “The internet that we’ve enjoyed in the past has been exactly what we, as not just a nation but as a people around the world, need.” In taking nearly two million highly classified documents from the US, he was grabbing back the key to heaven.

As I’ve written previously, Snowden’s solution to the problem of government interference with its citizens is impenetrable universal encryption–never mind the fact that this would allow vast numbers of vicious criminals to hide their actions from law enforcement.

As I suspected, Packer writes that Greenwald’s book “contains no major scoops.” He does, however, praise Greenwald’s argument for the primacy of privacy as central to a “free society.”

Greenwald also makes a powerful case—all the more so for being uncompromising and absolute—for the central role of privacy in a free society, and against the utilitarian argument that, since the phone companies’ metadata on Americans hasn’t been seriously abused by government officials (not yet, anyway), none of us should be too worried. In a chapter called “The Harm of Surveillance,” he cites Justice Louis Brandeis’s famous opinion on the basic “right to be let alone,” and writes: “The desire for privacy is shared by us all as an essential, not ancillary, part of what it means to be human. We all instinctively understand that the private realm is where we can act, think, speak, write, experiment, and choose how to be, away from the judgemental eyes of others. Privacy is a core condition of being a free person.”

I would argue that these considerations are of vital importance to people like Greenwald who are financially secure. Those Americans who must deal with racial and gender discrimination, long-term unemployment, and especially grinding poverty have other, more urgent concerns. Can one be a “free person” under those conditions?

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Along similar lines, Packer writes:

If Greenwald and others were actually being persecuted for their political beliefs, they would instinctively understand that the rule of law has to protect people regardless of politics. The NSA disclosures are disturbing and even shocking; so is the Obama administration’s hyper-aggressive pursuit of leaks; so is the fact that, for several years, Poitras couldn’t leave or re-enter the US without being questioned at airports. These are abuses, but they don’t quite reach the level of the Stasi. They don’t portend a totalitarian state “beyond the dreams of even the greatest tyrants of the past,” as Greenwald believes is possible. A friend from Iran who was jailed and tortured for having the wrong political beliefs, and who is now an American citizen, observed drily, “I prefer to be spied on by NSA.” The sense of oppression among Greenwald, Poitras, and other American dissenters is only possible to those who have lived their entire lives under the rule of law and have come to take it for granted.

In the year since the first NSA disclosures, Snowden has drifted a long way from the Thoreauvian ideal of the majority of one. He has become an international celebrity, far more championed than reviled. He has praised Russia and Venezuela’s devotion to human rights. His more recent disclosures have nothing to do with the constitutional rights of US citizens. Many of them deal with surveillance of foreign governments, including Germany and Brazil, but also Iran, Russia, and China. These are activities that, wise or unwise, fall well within the NSA’s mandate and the normal ways of espionage. Snowden has attached himself to Wikileaks and to Assange, who has become a tool of Russian foreign policy and has no interest in reforming American democracy—his goal is to embarrass it. Assange and Snowden are not the first radical individualists to end up in thrall to strongmen.

Snowden looked to the internet for liberation, but it turns out that there is no such thing as an entirely free individual. Cryptography can never offer the absolute privacy and liberty that Snowden seeks online. The internet will always be a space controlled by corporations and governments, and the freedom it provides is of a limited, even stunting, kind. No one lives outside the fact of coercion—there is always a state to protect or pursue you, whether it’s Obama’s America or Putin’s Russia.

I’ve barely touched the surface of Packer’s scathing critique of Greenwald’s “journalism”; I enourage you to go to Prospect link to read more.

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I have a few more stories for you that I’ll list link-dump style:

It appears that the prosecution in the Boston Bombing case decided to leak some previously secret information–most likely to counter the defense’s argument that Dzhohar Tsarnaev was illegally questioned by the FBI when he was in the hospital with terrible injuries.

Reuters: Accused Boston bomber admitted role in attack, prosecutors say

NBC News: Government doc shows how closely Boston Marathon bombers followed al Qaeda plans.

NY Daily News: Boston Marathon bombers used ‘sophisticated’ bombs made of parts from Christmas lights, model cars: prosecutors.

Boston Globe: Christmas Lights Used in Boston Marathon Bombs.

KSDK.com: Feds: Boston bomber’s hideout note says he wanted to be martyr.

ABC News: FBI Feared Boston Bombers ‘Received Training’ And Aid From Terror Group, Docs Say.

This is encouraging from the Boston Globe: Oakland Examining Pension of FBI Agent who Shot Todashev

Other News:

The Economic Times of India: Google wants to show ads through your thermostat and car. (You though the NSA was bad?)

Information Week: Google Outlines Advertising Vision. (How would you like targeted Google ads appearing on your refrigerator or watch?)

The Atlantic: It Wasn’t Household Debt That Caused the Great Recession; It was how that debt was disproportionately distributed to America’s most economically fragile communities.

NYT: U.S. Sends Troops to Chad to Aid Hunt for Nigerian Schoolgirls.

USA Today: Thai military declares coup, detains party leaders.

Science Recorder:  ‘Aliens of the sea’ could lead to breakthroughs in regenerative medicine.

What stories are you following today? Please post your links on any topic in the comment thread.


What ever Happened to “We” the People?

images (1)I am writing a post today as an outcropping of my professional pursuits, my status in life, and about the person I love who is mired deep in the kind of long term, blue-collar unemployment that didn’t used to exist in this country. I am underemployed at the moment because I don’t want to jump out of my sustainable life here to something that is risky and might not work out for me at my stage in life. I am trying to set up my end game and feel like I really can’t afford the risk of moving someplace for a job that may or may not pan out or some place where I basically suffer to exist.  I am in a state of perpetual hunker down because of this. It is stressful and eating into my investments which I am fortunate to have but are not inexhaustible. I will not talk about my friend’s situation because, of course, it is personal. But, I will say watching some one so beautiful struggle with self worth issues because this economy only works for a few and because our government persistently sticks to such an untrue narrative about our economy just keeps me on the edge of tears.  I am not an overly emotional person at all.  Living in the USA should not mean living in a state of risk avoidance, depression, poor shaming and poverty creation.

There are many things that I grew up with and assumed would be there when I grew up that I despair frequently at their loss and threatened existence. My kids,as you know, are doing fine. My father got his degrees on the GI Bill and saw to it that my sister and I were educated. As a result, my girls and I never even considered not going to university. Doctor Daughter is now a full-fledged OB-GYN in the process of getting board certified in Washington State where she will undoubtedly become very rich very quickly with her soon-to-be radiologist husband. Youngest daughter just took her GMAT and is headed for her MBA in the fall. She and her boyfriend of three years have very good jobs and make great money. But the deal is, that was the path set before us because our families can now chose further upward mobility through higher education and jobs in the right sectors.  We are all there. For my son-in-law, it is because his parents had access to immigration to the US and US public universities. For us, it was because my father who comes from a railroad worker and Oklahoma/Kansas dirt farmers could go to university.  That happened because my granddad had a great blue collar job that began with digging ditches for the Atchison, Topeka, and the Santa Fe and my dad’s access to the GI bill.  The real success stories of last century come from the many of us who got access to what we did because “we” the people invested in ourselves and each other. We also decided to jointly insure ourselves against personal and community disasters.  All of these accomplishments are under direct assault today and we are failing ourselves and each other in many ways.

There used to be an alternative path through good, stable, well-paying jobs that took training, skill, hard work and experience.  Original socioeconomic status wasn’t all that relevant.  That path has dried up.   The heart wrenching stories told in this NYT article about the crumbling city of Port Clinton, Ohio are typical of many midwestern, formally thriving industrial cities. The article contrasts the life of the author’s grandchildren and those of his blue collar classmates who went to school in the small town.  This narrative is one played out all over the country.  The conclusion is compelling.

The contrast with the egalitarian ethos and reality of the 1950s — the contrast between the upward mobility experienced by J and the bleak prospects of R — vividly captures Port Clinton’s transformation in the last half-century, much like that of the rest of the country. My research team has talked with dozens of R’s from Austin, Tex., to Duluth, Minn., and from Atlanta to Orange County, Calif.

The crumbling of the American dream is a purple problem, obscured by solely red or solely blue lenses. Its economic and cultural roots are entangled, a mixture of government, private sector, community and personal failings. But the deepest root is our radically shriveled sense of
“we.”
Everyone in my parents’ generation thought of J as one of “our kids,” but surprisingly few adults in Port Clinton today are even aware of R’s existence, and even fewer would likely think of her as “our kid.” Until we treat the millions of R’s across America as our own kids, we will pay a major economic price, and talk of the American dream will increasingly seem cynical historical fiction.

Yes. We have a “radically shriveled sense of we” these days and it is killing the economy for all but a few of us.  It is fueling racial resentment.  It is even leading to a zero sum game for the folks reaping the benefits right now even though they adamantly refuse to see that future. Much of the problem is because  The Pay is too Damn Low.  More and more of productivity gains and corporate income gains are going to a small number of passive investors and not to the people involved in producing the gains.  It is upending classical labor theory and actually invigorating the old ideas of Karl Marx as I have written before.  Please remember, I am not a Marxist but I and others see the coming fruition of many of his philosophical points on how capitalism would eventually self-destruct.   The New Deal did not bring about  radical change.  It brought about upward mobility and societal safety nets so we did not get radical change. Nothing fuels revolution like national despair.

The workers’ grievances are simple: low wages, few (if any) benefits, and little full-time work. In inflation-adjusted terms, the minimum wage, though higher than it was a decade ago, is still well below its 1968 peak (when it was worth about $10.70 an hour in today’s dollars), and it’s still poverty-level pay. To make matters worse, most fast-food and retail work is part time, and the weak job market has eroded what little bargaining power low-wage workers had: their earnings actually fell between 2009 and last year, according to the National Employment Law Project.

Still, the reason this has become a big political issue is not that the jobs have changed; it’s that the people doing the jobs have. Historically, low-wage work tended to be done either by the young or by women looking for part-time jobs to supplement family income. As the historian Bethany Moreton has shown, Walmart in its early days sought explicitly to hire underemployed married women. Fast-food workforces, meanwhile, were dominated by teen-agers. Now, though, plenty of family breadwinners are stuck in these jobs. That’s because, over the past three decades, the U.S. economy has done a poor job of creating good middle-class jobs; five of the six fastest-growing job categories today pay less than the median wage. That’s why, as a recent study by the economists John Schmitt and Janelle Jones has shown, low-wage workers are older and better educated than ever. More important, more of them are relying on their paychecks not for pin money or to pay for Friday-night dates but, rather, to support families. Forty years ago, there was no expectation that fast-food or discount-retail jobs would provide a living wage, because these were not jobs that, in the main, adult heads of household did. Today, low-wage workers provide forty-six per cent of their family’s income. It is that change which is driving the demand for higher pay.

The situation is the result of a tectonic shift in the American economy. In 1960, the country’s biggest employer, General Motors, was also its most profitable company and one of its best-paying. It had high profit margins and real pricing power, even as it was paying its workers union wages. And it was not alone: firms like Ford, Standard Oil, and Bethlehem Steel employed huge numbers of well-paid workers while earning big profits. Today, the country’s biggest employers are retailers and fast-food chains, almost all of which have built their businesses on low pay—they’ve striven to keep wages down and unions out—and low prices.


The deal is that big businesses are making record level profits and the record-setting levels of the DJ industrial average show that we are not failing the largest businesses and the richest people in the country.  They do not need to be exempt from more taxation or responsibility from the moral hazard and the social costs they inflict on society.  The benefits of their existence do not trickle down on us.  What trickles down is their costs to society like those of the last financial crisis and that of oil spills, chemical company fires, and toxin produced illnesses.  A strong economy comes from jobs and middle income prosperity and spending.  Many private sector jobs are so bad they no longer do anything but sustain people in intense suffering.

One of the big reasons the U.S. economy is so lousy is the American companies are hoarding cash and “maximizing profits” instead of investing in their people and future projects.

This behavior is contributing to record income inequality in the country and starving the primary engine of U.S. economic growth–the vast American middle class–of purchasing power. (See charts below).

If average Americans don’t get paid living wages, they can’t spend much money buying products and services. And when average Americans can’t buy products and services, the companies that sell products and services to average Americans can’t grow. So the profit obsession of America’s big companies is, ironically, hurting their ability to accelerate revenue growth.

One obvious solution to this problem is to encourage companies to pay their people more — to share more of the vast wealth that they create with the people who create it.

The companies have record profit margins, so they can certainly afford to do this.

But, unfortunately, over the past three decades, what began as a healthy and necessary effort to make our companies more efficient after the malaise of the 1970s has evolved into a warped consensus that the only value that companies should create is financial value (cash) and that the only thing managers and owners should ever worry about it making more of it.

This view is an insult to anyone who has ever dreamed of having a job that is about more than money.

People take risks when they feel they have adequate safety nets to do so.  We are ripping apart the nets that let people try new things and move to do things.  We are losing opportunities to educate and advance our society and our people.

As Jared Bernstein, an economist at the Center for Budget and Policy Priorities, told me, “The best friend that low-wage workers have is a strong economy and a tight job market.” It isn’t enough to make bad jobs better. We need to create better jobs.

That simple statement and the politics of right now have led Robert Reich to suggest that some policy makers actually want high unemployment to suppress wages and keep the profits trickling up to big investors.   All the while, these same politicians fuel racial resentment.  They tell formerly well-off white blue collar workers that it is immigration and and reverse racism in civil rights legislation that has hurt their livelihoods.  Meanwhile, the media keeps up the false narrative that it’s the defict, it’s social security, and it’s medicare that is hurting us.  Putting money into the group of people most likely to spend it is the way to drive the American Economy.  We economists have known that for years.  Hoarding money at the top and refusing to use the governments power to tax and spend is bad economic policy. Our fiscal policy is killing the American Dream instead of driving it.

tumblr_madbelHBtf1rubozqo1_500There are other examples besides our labor market.  Health insurance is just one more market where “we” the people can do right by each other and can actually improve outcomes.  I want to point you to the irascible Andrew Sullivan who uses Hayek–the economic god of the libertarian cult–to explain why social insurance –like Social Security and Medicare–actually stops freeloading off the economy rather than encouraging it.  In this situation, he explains why Obamacare actually forces us to take personal responsibility.  It is a argument from a different perspective on why “we” the people have to act on economic principals to preserve our society and way of life.  In this essay, he criticizes the right wing radical group Freedomworks.  The groupis trying to get 20somethings to burn their Obamacare cards which is in itself pretty crazy because the cards are nonexistent.  Actually, what this does is wreck the risk pool for all of us.  But, here is an argument for the leverage of government on a market that has failed so many people from another vantage point.

It is not being independent; it’s being potentially dependent on others while giving nothing in return. And insurance is an inherently collective endeavor. That’s how it works. It’s one area where going it alone makes very little sense. And, of course, the bigger the insurance pool, the lower the premiums. This is not socialism. It’s a simple insurance principle, used by free countries for centuries. It certainly passed muster with Friedrich Hayek, a man you would think would be an influence on the Tea Party’s political program. I’ve cited this before but it’s worth citing again:

Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. Where, as in the case of sickness and accident, neither the desire to avoid such calamities nor the efforts to overcome their consequences are as a rule weakened by the provision of assistance – where, in short, we deal with genuinely insurable risks – the case for the state’s helping to organize a comprehensive system of social insurance is very strong … Wherever communal action can mitigate disasters against which the individual can neither attempt to guard himself nor make the provision for the consequences, such communal action should undoubtedly be taken.

That’s from The Road To Serfdom, one book of the libertarian and conservative Bible. And it’s common sense. It’s leveraging a simple principle – pooling risk – and extending it as far as possible to guard against the “common hazards of life.” There is nothing leftist or socialist about it. And it demands that each of us be personally responsible for the costs our own encounters with illness or accident impose upon our neighbors, rich and poor, young and old. If FreedomWorks were consistent, it would encourage twentysomethings to “burn their Obamacare card” while simultaneously pledging never to seek medical care under any circumstances. That would be coherent, if bonkers. What’s incoherent is claiming that refusing to contribute to a system you nonetheless intend to use is anything but a scam.

In fact, what FreedomWorks is encouraging is the real socialism. It’s using the 1986 law to force hard-working Americans to pay for free-loaders’ care.

The deal is that when labor markets or social insurance markets or health insurance markets fail a group of us, they fail and cost all of us one way or another.  The cost us through increased crime, mental health issues, drug and alcohol abuse, family instability.  People losing homes costs us.  When houses go on the market at fire sale prices, it drags down the home prices of every one in the neighborhood.  When wages are low, people don’t spend money at the the local businesses who cannot afford to hire more people or order inventory.  Children raised with poor educational opportunities in crime ridden areas most likely become problems that cost us dearly in our incarceration nation.  We fully know that there are places where the government can act and change the momentum. Yet,  our government fails us.  The government of  “we” the people is not using the known and available tools to correct things.  It is, in fact, actively undermining economic health.  Economists known that deficit reduction is impeding the economy yet that is not the conventional wisdom floating around the beltway. Pundits and Policy makers are either being deliberately ignorant or lying.

Hardly a day goes by when either government analysts or the macroeconomists and financial forecasters who advise investors and businesses do not report on the latest signs of economic growth — in housing, consumer spending, business investment. And then they add that things would be better but for the fiscal policy out of Washington. Tax increases and especially spending cuts, these critics say, take money from an economy that still needs some stimulus now, and is getting it only through the expansionary monetary policy of the Federal Reserve.

“Fiscal tightening is hurting,” Ian Shepherdson, chief economist of Pantheon Macroeconomic Advisors, wrote to clients recently. The investment bank Jefferies wrote of “ongoing fiscal mismanagement” in its midyear report on Tuesday, and noted that while the recovery and expansion would be four years old next month, reduced government spending “has detracted from growth in five of past seven quarters.”

We know that insurance is by definition a collective effort because of its pooling of risk.  Its goal is risk mitigation and therefore, cost reduction.  Yet, here we go down the path of bringing down the government for an effort to reign in the dysfunctional health insurance industry.  Not only are some policymakers willing to blow up our social insurance programs, they are doing so at the high risk of blowing up the entire economy when so many folks are still suffering from the last blowup and their inability to do something to stop the suffering.   This kind’ve foolishness really needs to come to an end.  There is nothing to be gained by any of us for this type of incessant nonsense.   Many policymakers and their pundit enablers are putting themselves and their friends’ interests above that of the country’s and that of “we” the people.  It is hurting many of us including a huge number of children whose lives look pretty bleak at the moment.  Spend some time reading the narratives of folks in that top story that these guys poor-shame daily and then think of the possible programs that would actually put the cost of market failure back on the companies and people that caused it to start out with.  It would also put people back to work. Then, start to wonder if our country can ever look like it did when it was truly the land of opportunity instead of the land of “we” the few, powerful, and rich.  It is a very American ideal to think we could have a country where every one can find a well-paying job and join together to pay to insure against and provide for the risk of disasters.


The Media and Policy Makers deliberately misrepresent and ignore Economists

I use to watch PBS a lot. It’s been rather overrun by nutso libertarians and republicans the same way Europe was over run with Bubonic Plague-carrying fleas black_deathduring the middle ages.  Back in the middle ages, the “enlightened” religious and kingdom policy makers decided cats were the problem–since they obviously represent all things witchy–when they were really part of the solution.  Cats ate rats and mice and a lot of the worst of the flea-bearing vermin.  The guilty fleas escaped blame.  Nowdays, pundits, policy preachers, and the political class believe that economists are part of the problem and have created a serious amount of snake oil-based explanations that simply do not hold up to analysis or data.

So, PBS Newshour gets David Brooks–dilettante extraordinaire–and Ruth Marcus–professional effete intellectual snob for hire–to explain the recent employment numbers.  Yup,  why get economists to talk about the consensus in our community when you can have inside-the-beltway surrealism ?  Why is David Brooks given a platform to spew lies, nonsense, and propaganda?  Dr. Baker, I am excerpting you completely.  Forgive me the lapse in fair use.

The PBS Newshour won the gold medal for journalistic malpractice on Friday by having David Brooks and Ruth Marcus tell the countrywhat the Friday jobs report means. Brooks and Marcus got just about everything they said completely wrong.

Starting at the beginning, Brooks noted the slower than projected job growth and told listeners:

“Yes, I think there’s a consensus growing both on left and right that we — the structural problems are becoming super obvious.

“So when the — this recession started a number of years ago, you had 63, something like that, out of 100 Americans in the labor force. Now we’re down, fewer than in [the employment to population ratio is now 58.7 percent] — than when the recession started. And so that suggests we have got some deep structural problems. It probably has a lot to do with technological change. People are not hiring — companies are not hiring human beings. They’re hire machines.”

It’s hard to know what on earth Brooks thinks he is talking about. There is nothing close to a consensus on either the left or right that the economy’s problems are structural, as opposed to a simple lack of demand (i.e. people spending money). This is shown clearly by the overwhelming support on the Federal Reserve Board for its policy of quantitative easing. This policy is about trying to boost demand. A policy that the Republican Chairman, Ben Bernanke, has repeatedly advocated to Congress as well. This policy would not make sense if they viewed the weak demand for labor in the economy as being the result of structural problems. So clearly Brooks’ consensus excludes the Fed.

It also is worth noting the other part of Brooks’ story, that instead of hiring workers firms “hire machines,” is completely contradicted by the data. Investment has actually slowed in the last couples of years. (Non-residential investment is up by just 2.4 percent from its year ago level.) This means that firms are not hiring machines, or at least not as rapidly as they had in prior years. Also the rate of productivity growth has slowed sharply from the pre-recession period. In the last three years productivity growth has averaged less than 1.0 percent a year. This compares to more than 2.5 percent a year from 1995 until the recession in 2007. This means that machines are displacing workers much less rapidly than in a decade when we had much lower unemployment.

How does one get a job speculating on national TV on things one knows nothing about?  I think I would like a job like that.  It has to be easier than actually going to school and become a research specialist in a field. I think I’d be great at astrophysics commentary. Maybe I can replace Dr. Neil DeGrassi who gets all the kewl special effects-based astronomy gigs on PBS.  Hell, there’s a doctor in front of my name too.  Who cares if it’s not in anything germane or relevant to astrophysics?  Certainly not PBS.   But,here’s the shrill one with the facile, data-based debunk.

Indeed: one strong indicator that the problem isn’t structural is that as the economy has (partially) recovered, the recovery has tended to be fastest in precisely the same regions and occupations that were initially hit hardest. Goldman Sachs (no link) looks at unemployment in the “sand states” that had the biggest housing bubbles versus the rest of the country; it looks like this:

So the states that took the biggest hit have recovered faster than the rest of the country, which is what you’d expect if it was all cycle, not structural change.

I’ve done a quick and dirty take on unemployment by occupation, looking at changes in unemployment rates from the 2007 business cycle peak to the unemployment peak in 2009-10, and then the subsequent decline; it looks like this:

It’s the same as the geographical story: the occupations that took the biggest hit have had the strongest recoveries.

In short, the data strongly point toward a cyclical, not a structural story — and there is broad agreement, for once, among economists on this point. Yet somehow, it’s clear, Beltway groupthink has arrived at the opposite conclusion — so much so that the actual economic consensus on this issue wasn’t even represented on the Newshour.

Robert Reich thinks that its basically in Republican best interests to keep people unemployed and suffering.  Believe me, people are unemployed and suffering.  I can really offer us some anecdotal evidence on that as well as the numbers.

Job-growth is sputtering. So why, exactly, do regressive Republicans continue to say “no” to every idea for boosting it — even last week’s almost absurdly modest proposal by President Obama to combine corporate tax cuts with increased spending on roads and other public works?

It can’t be because Republicans don’t know what’s happening. The data are indisputable. July’s job growth of 162,000 jobs was the weakest in four months. The average workweek was the shortest in six months. The Bureau of Labor Statistics has also lowered its estimates of hiring during May and June.

It can’t be Republicans really believe further spending cuts will help. They’ve seen the effects of austerity economics on Europe. They know the study they relied on by Carmen Reinhart and Kenneth Rogoff has been debunked. They’re no longer even trying to make the case for austerity.

It could be they just want to continue opposing anything Obama proposes, but that’s beginning to seem like a stretch. Republican leaders and aspiring 2016 presidential candidates are warning against being the “party of ‘no.’” Public support for the GOP continues to plummet.

The real answer, I think, is they and their patrons want unemployment to remain high and job-growth to sputter. Why? Three reasons:

First, high unemployment keeps wages down. Workers who are worried about losing their jobs settle for whatever they can get — which is why hourly earnings keep dropping. The median wage is now 4 percent lower than it was at the start of the recovery. Low wages help boost corporate profits, thereby keeping the regressives’ corporate sponsors happy.

Second, high unemployment fuels the bull market on Wall Street. That’s because the Fed is committed to buying long-term bonds as long as unemployment remains high. This keeps bond yields low and pushes investors into equities — which helps boosts executive pay and Wall Street commissions, thereby keeping regressives’ financial sponsors happy.

Third, high unemployment keeps most Americans economically fearful and financially insecure. This sets them up to believe regressive lies — that their biggest worry should be that “big government” will tax away the little they have and give it to “undeserving” minorities; that they should support low taxes on corporations and wealthy “job creators;” and that new immigrants threaten their jobs.

It appalls me that some one classified as a “liberal”–like Ruth Marcus supposedly is–can be a mouthpiece for lies that support a decidedly illiberal agenda.   I believe Economist Mark Thoma has the correct take on this one.

The arguments serve an ideological goal. Perhaps we shouldn’t assume that the main motivation of many pundits and policymakers is economic rather than political?

True Dat.


Friday Reads: Life’s Labor Lost

lll Good Morning!

I think I’ve mentioned that I’m not a labor economist.  I’m a financial economist.  However, it’s hard to get through any econ program with out learning something about the labor markets given that it’s one of the most basic of all markets.   I wanted to talk about the increased minimum wage proposal in the President’s SOTU address.

You’ll probably hear quite a bit about how minimum wages create unemployment.  This is true under specific conditions.  The minimum wage must be below the going wage or what we call the equilibrium or clearing wage so that it is ‘binding’  or actually creating an excess supply of job seekers for that wage and less jobs than would be available at the clearing wage. You can look at the graph of the US below and see that in many states, the proposed Obama increase to the minimum wage is lower than the going wage in many states.  The poorest states–mostly in the south and middle of the country–are the ones with the lower wages.

However, the basic 101 econ labor market conditions, assumptions and model are very simplistic.  All of these things impact the outcome and can determine if the minimum wage increase creates any excess workers.    Labor economists that look at the real world have found some additional things about minimum wages that suggest that minimum wage can benefit the economy at large and unemployment at large.  They can also help create efficiencies in unexpected places, which is always good for markets.

I’m going to try to give you some background from the popular press, scholarly articles, and a conservative magazine where economists explain why increasing the minimum wage can be good for the economy.  Actually, there’s so much good rationale that even Walmart lobbies congress for increases. That probably will surprise you, but it’s pretty simple.  Minimum wage workers are Walmart shoppers.  Giving them more income turns them into customers. They don’t have any leftover money so they basically spend all they get.  This is good for Walmart.  This isn’t true for richer folks.  They tend to sit on their money and it goes to places that can take time to work through our economy if it actually goes to our economy and not some place else entirely.

So, let me first start with a New Yorker article called “The Case for a Higher Minimum Wage”.  This is, of course, not the scholarly arguments. However, there’s some good background information in the article to get us situated with the stylized facts. Unlike House Republicans and Joe Scarborough,  people that actually want to know abut things rather than opine through their bungholes love them some stylized facts.

While the labor economists and econometricians are still arguing about which of their many studies can be relied upon, there are quite a few things about minimum wages, and their impact on the economy, that we know for sure. Taken together, these things amply justify raising the minimum wage, as President Obama called for in his State of the Union address.

The first statement we can make without fear of contradiction is that, at $7.25 an hour, the current minimum wage is pretty low. In nominal dollars, it’s gone up quite a bit over the past twenty-five years. In 1978, it was $2.65; in 1991, it was $4.25. But these figures don’t take into account rising prices, which eat away at purchasing power. After adjusting for inflation, the minimum wage is about $3.30 less than it was in 1968. Back then—forty-five years ago—the minimum wage was $10.56 an hour, according to a very useful chart from CNNMoney.

We also know that the U.S. minimum wage is low compared to its counterparts in other advanced countries. In France and Ireland, for example, the minimum remuneration level is more than eleven dollars an hour. Even in Great Britain, which is usually regarded as a country with a flexible, U.S.-style labor market, it is close to ten dollars an hour. Another informative chart, this one from Business Insider, shows that the U.S. minimum wage is comparable to ones in places like Greece, Spain, and Slovenia—countries where G.D.P. per capita and labor productivity are markedly lower than here in the United States. We have an advanced economy but a middle-level minimum wage.

A second important and (largely) undisputed finding is that there is no obvious link between the minimum wage and the love's labour's sketch copyunemployment rate. During the nineteen sixties, when the minimum wage was raised sharply, unemployment rates were sharply lower than they were in the nineteen eighties, when the real value of the minimum wage fell dramatically. If you look across the states, some of which set a minimum wage above the federal minimum, you can’t see any sign of higher rates leading to higher unemployment. In Nevada, where the national minimum of $7.25 an hour applies, the jobless rate is 10.2 per cent. In Vermont, where the minimum wage is $8.60 an hour, the unemployment rate is 5.1 per cent. What these figures tell us is that other factors, such as the overall state of the economy and how local industries are doing, matter a lot more for employment than the level of the minimum wage does.

There are, in fact, many things that impact how the level of the minimum wage will impact an economy. Some economists have found that a “properly functioning minimum wage” can actually improve labor flows in a market.  Lee & Saez (2010) show under which conditions this can happen. This link goes to a theoretical paper so if calculus is not you’re thing, you may want to take my word for it. I’m going to show you the technical result as well as the authors’ story that is much more intuitive so you get an idea of how economists look at these things. This is from the paper’s introduction and conclusion which are the parts without the calculus!!

We show that a binding minimum wage is desirable as long as the government values redistribution from high-to low-wage workers, the demand elasticity of low-skilled labor is finite, the supply elasticity of low-skilled labor is positive, and most importantly, that the unemployment induced by the minimum wage is efficient, i.e. unemployment hits workers with the lowest surplus first. The intuition is extremely simple: starting from the competitive equilibrium, a small binding minimum wage has a first order effect on distribution but only a second order effect on efficiency as only marginal workers initially lose their job.

This is from the employer’s view point.  It basically says they let go of their worst employees first so they really don’t lose much.  Also, it implies it’s probably not a large number that are released.  The problem is that this doesn’t really look at the increased number of people that might enter the work force to get at the higher wage.  This is part of the excess worker phenomenon as  people that wouldn’t be in the market for the lower wage will enter the market if the wage is higher.  Therefore, more people will be looking for jobs than there will be jobs available.  However, this isn’t as big of a problem as job losers for society as a general rule.  It just makes the numbers appear worse.

The second part of the paper considers the more realistic case where the government also uses taxes and transfers for redistribution. In our model, we abstract from the hours of work decision and focus only on the job choice and work participation decisions. Such a model can capture both participation decisions (the extensive margin) as well as decisions whereby individuals can choose higher paying occupations by exerting more effort (the intensive margin). In that context, the government observes only earnings, but not the utility work costs incurred by individuals.1

In such a model, we show that a minimum wage is desirable if unemployment induced by the minimum wage is efficient and the government values redistribution toward low-skilled workers. The intuition for this result is the following. A binding minimum wage enhances the effectiveness of transfers to low-skilled workers as it prevents low-skilled wages from falling through incidence e ffects. Theoretically, the minimum wage under efficient rationing sorts individuals into employment and unemployment based on their unobservable cost of work. Thus, the minimum wage partially reveals costs of work in a way that the tax system cannot.

This is an interesting result since it basically says that it’s a more efficient way of giving poorer folks incomes by keeping the most efficient ones in the labor force instead of being unemployed and relying on government programs.  Their model argues that a minimum wage efficiently rations ‘out of work’ benefits.  So, in this case, yes it creates some unemployment, but generally this means the workers who are the most ‘deserving’ of the job stay in the job and those that aren’t can fall into the safety net and be retrained or schooled to improve their prospects.

One of the primary results of a paper by Dube et al (2o12) is estimating the decrease of what we call “churning” or what you probably know as job-hopping. This behavior costs employers a lot of money since the initial employment and training periods can be expensive for even the lowest wager earners.  Reducing churning means less of these expenses overall and basically coverage of the increased wage. So, in this case, the minimum wage makes the employer think about the total wage bill and not just the portion related to hourly work.

state-minimum-wages

Here’s one of the more interesting set of arguments from the conservative point of view.  This is the idea that by providing a good working wage at the bottom wage earners, you stop the problem of a potential ‘college graduate’ bubble.  Since the majority of jobs in this country still don’t require a college degree, people will be more likely to work jobs and not over-educate themselves. The author also argues that the kinds of jobs that tend to be minimum wage jobs are not out-sourceable so improving the lot of these folks improves a lot more than just the people in the jobs.  Minimum wage jobs tend to be service jobs and the benefits of the incomes and the jobs themselves will stay in the country regardless of the higher wage. We again see the argument that most economists make about ‘trickle-up’ economics.  Giving more income to the lowest wage earners actually creates a stimulus because they spend their money and there are a lot of them.

Although the direct financial benefits to working-class Americans and our economy as a whole are the primary justifications for the proposal, there are a number of subsidiary benefits as well, ranging across both economic and non-economic areas.

First, the net dollar transfers through the labor market in this proposal would generally be from higher to lower income strata, and lower-income individuals tend to pay a much larger fraction of their income in payroll and sales taxes. Thus, a large boost in working-class wages would obviously have a very positive impact on the financial health of Social Security, Medicare and other government programs funded directly from the paycheck. Meanwhile, increased sales tax collections would improve the dismal fiscal picture for state and local governments, and the public school systems they finance.

A final argument for using a minimum wage is that even though it tends to be less efficient and more costly than just supplementing the incomes of low income earners, it tends to be politically easier to get an increase through congress than a subsidy.

Does raising it improve the plight of the worst off, at a reasonable price?

A lot depends on your definitions, but economist Adam Ozimek makes a smart point. According to a 2007 study by the CBO, an increase in the minimum wage to $7.25, like that eventually passed that year, would increase wages by $11 billion, of which $1.6 billion went to poor families.

By contrast, increasing the Earned Income Tax Credit for large families (as happened in the stimulus bill) and for single people would cost $2.4 billion, of which $1.4 billion would go to poor families. The EITC option costs one fifth as much to society but does about as much good for poor families. That suggests that if you want to help families escape poverty, wage subsidies are a more cost-effective option than the minimum wage.

Oddly enough, the conservatives are less interested in the net savings, than the process of doing this, so they prefer minimum wage increases to the EITC option.  This means Boehner should be happier than he is with this proposal.

Furthermore, as large portions of the working-poor became much less poor, the payout of the existing Federal Earned Income Tax Credit (EITC) would be sharply reduced. Although popular among politicians, the EITC is a classic example of economic special interests privatizing profits while socializing costs: employers receive the full benefits of their low-wage workforce while a substantial fraction of the wage expense is pushed onto the taxpayers. Private companies should fund their own payrolls rather than rely upon substantial government subsidies, which produce major distortions in market signals.

So, I hopefully didn’t overwhelm you with too much stuff over coffee, but I would like to remind you that this is basically the mornings read post. So, since I’ve run out of space, it’s now your turn to share the other things. Oh, and it’s okay to ask questions or tell me that something confuses you.  I’m assuming you’re not a labor economist either.  Again, there’s a lot of controversy and a lot of different circumstances and assumptions around all these models.  But, it should let you know that increasing the minimum wage can be good policy for a variety of reasons even though it might impact the number of people looking for or working at those jobs.

What’s on your reading and blogging list today?