Wonkbook: The 'recovery' has made inequality worse
Early in the recession, there was some talk that the economic crisis would, among other things, slow or even reverse the run-up in inequality. It didn't. In fact, the recovery, such as it is, has made inequality worse.
The Wall Street Journal reports that new numbers out of the Labor Department show that between the mid-2009 -- the technical end of the recession -- and the first quarter of 2012, workers in the top 10% of the income distribution saw their wages rise by 7% percent. Workers in the bottom 10% only saw their wages rise by 2.5%.
For comparison's sake, between 2003 and 2007, workers in the top 10% saw their incomes grow by 12.9%, and workers in the bottom 10% saw their incomes grow by 8.4%. In both cases, the "growth" gap between the richest Americans and the poorest Americans was 4.5%.
And that's just wages. Financial markets and corporate profits, which many of the richest Americans depend on for their wealth, have recovered far faster than the labor market or the housing sector. So if you're a middle-class American family that owns your home, your main asset likely hasn't recovered, and you may still be out of a job. If you're a wealthy investor, your portfolio has likely reached new heights, or come very near to it. That's exacerbated inequality on the wealth side, which we don't track as closely, but which arguably matters more as it governs the sort of investments families can make in their future.
1) The Senate Budget Committee will take up Bowles-Simpson. "The chairman of the Senate Budget Committee said on Tuesday that he would introduce the blueprint of President Obama’s bipartisan deficit reduction panel to his committee as the starting point for negotiations over a long-term debt plan. But the committee chairman, Senator Kent Conrad, Democrat of North Dakota, made it clear that he would not push the committee to vote on amendments to the plan from the Bowles-Simpson commission or on a final version until a bipartisan consensus was reached...Mr. Conrad’s outline would not touch the president’s health care law, but it would phase out the employer tax deduction for health care and include additional health care cuts. It would lay down parameters to overhaul Social Security to slow its growth. And it would set out prescriptions for a simpler tax code that eliminates or reduces scores of tax deductions, taxes dividends and capital gains as ordinary income, and lowers individual and corporate tax rates." Jonathan Weisman in The New York Times.
2) Income inequality is rising. "The gap between America's highest- and lowest-paid workers is widening. Labor Department figures released Tuesday show that between the end of the recession in mid-2009 and the first quarter of 2012, earnings of Americans at the top--meaning those who earned more than 90% of all workers--rose 7%, before adjusting for inflation. During the same period, wages of those at the bottom--meaning those who earned less than 90% of all workers--rose 2.5%. That pay difference predates the global financial crisis: Between 2003 and 2007, wages grew 12.9% for high earners, compared with 8.4% for the lowest-paid 10% of workers...In the first quarter of 2012, people in the bottom tenth of the work force earned $360 or less a week, the Labor Department said. The typical worker among the top 10% of earners earned $1,858 or more a week. Between 1979 and 1989, wages for top earners rose 75%, while those for the bottom tenth of the work force climbed 54%." Neil Shah in The Wall Street Journal.
3) Appropriators are beginning to fill in the details for the federal government's 2013 spending authority. "NASA would take over authority for acquiring NOAA’s weather satellites. Solar energy funding would be cut in favor of new R&D for oil shale resources. Highway and airport investments are largely frozen while $152 million added for community development block grants. The decisions kept piling up Tuesday as the House and Senate Appropriations Committees began rolling out the first of their 2013 spending bills. But where it all ends, no one knows given the breakdown in the August debt accords that once promised some return to normalcy this summer. Instead of one track, the committees must travel two, destined to collide in September when a stopgap spending resolution will be needed to avert another government shutdown Oct. 1. Thus Tuesday’s rituals had some of the feel of opening day in the baseball season, when two doomed teams take heart from the green grass and warm sun and try to convince themselves that an early start will change their luck. Don’t count on it." David Rogers in Politico.
4) House Republicans are planning a slew of tax votes. "Republicans want to draw a line in the sand with President Barack Obama and the Democrats on taxes. But the party is already squabbling internally with a question: How bold can they be? Speaker John Boehner (R-Ohio) and top House Republicans are pushing an ambitious summer tax agenda, including a series of politically charged votes on everything from expiring Bush income tax rates to capital gains, while laying out a timeline for broader tax reform, according to several sources familiar with GOP planning. House Republicans will then wrap all those legislative measures together into a single package, and ship it over to the Senate for action -- or inaction, which is more likely with a Democratic Senate in no mood to approve a GOP proposal." Jake Sherman and John Bresnahan in Politico.
5) Obama unveiled a plan to increase oversight of oil markets. "President Obama proposed measures Tuesday to step up oversight of energy markets and boost by tenfold the penalties for market manipulation, in an effort to blunt political pressure over the 20 percent increase in gasoline prices since the beginning of the year. The new measures would, with congressional approval, provide an additional $52 million to the Commodity Futures Trading Commission, boost civil and criminal penalties from $1 million per violation to $10 million a day for violations and give the CFTC greater power to set margin requirements that would force traders to provide more cash and reduce leverage when buying contracts...Lawmakers on both sides of the political divide have alleged that 'speculation' is partly responsible for the jump in oil prices over the past year, but they have not offered any examples, either." Steven Mufson in The Washington Post.
@ObsoleteDogma: I see Obama is "doing something" about high oil prices. That means it'll get cheaper soon, right???
1) ORSZAG: Healthcare progress is happening outside of Washington. "While Washington wonks continue to bicker over health policy, positive change is occurring outside the Beltway. Last week, the Altarum Institute, a research organization based in Ann Arbor, Michigan, reported that the moderation in the growth of health-care costs we have seen over the past few years is continuing: Total health spending rose by less than 4 percent from February 2011 to February 2012. And it’s encouraging to see the progress that doctors, hospitals and other providers are making to improve the value of care -- by cutting back on unnecessary procedures, for example, expanding their use of information technology, and switching from fee-for- service to compensation schemes aimed at maximizing the quality of treatment. Instead of examining these changes and finding ways to encourage them, the Washington policy discussion continues to demonstrate its ability to, well, it’s not clear exactly what it does." Peter Orszag in Bloomberg.
2) SAMUELSON: The Buffett Rule has done more harm than good. "Let me state: I favor the Buffett Rule. Let me also state: The proposal has done more harm than good. With a progressive tax system -- supposedly requiring the rich to pay more of their income than the poor -- it’s indefensible that some wealthy people enjoy preferential treatment. It subverts any sense of fairness. And raising the top rate wouldn’t much hurt the economy if the rate isn’t punitive. To me, 30 percent seems reasonable. It’s lower than today’s top rate, 35 percent; and it roughly equals the top rate on capital gains (mainly profits from stock sales) in the late 1980s. That was 28 percent; the economy did fine. But the Buffett Rule has done more harm than good because the Obama administration has exaggerated its significance and used it to distract attention from more serious problems: huge budget deficits and the sluggish recovery." Robert Samuelson in The Washington Post.
3) JENKINS: Focusing on 'income inequality' is misguided. "If it were learned that the car driven by the average American is 10 times more likely to burst into flames than the car driven by the richest 1%, what should the policy response be? Should it be to mandate that cars driven by the rich burst into flames more often? Income inequality is a strange obsession, at least to the extent the obsessives focus their policy responses on trying to adjust the condition of the top 1% rather than improving the opportunities of everyone else...Tax reform promises to improve the opportunities of all while sponsoring less tax evasion, less distortion of investment priorities and less politically corrupting pursuit of loopholes, all of which are the certain and inevitable corollary of high tax rates enacted to salve inequality neuralgia. One can only wonder how much faster progress on tax reform or school choice would have been if the political capital devoted to income inequality had been devoted to fighting entrenched institutional resistance to useful reforms." Holman Jenkins in The Wall Street Journal.
4) PORTER: Competition will be good for the book market. "To believe publishers and authors, the government just handed Amazon a monopoly over the book market: The price-fixing suit against Apple and the nation’s top publishers filed by the Justice Department last week will free Amazon to offer ruinous discounts in the booming new market of electronic books, drive brick-and-mortar bookstores out of existence and kill off publishers’ lucrative business of ink on paper. Yet there is a different reading to this story. Publishing companies -- like bookstores -- fear they are on the losing end of a technological whirlwind of digital distribution that will make much of what they do obsolete. They would like to stop it. But though publishers may be happy to subvert competition to protect their business, this can entail a heavy cost for the rest of society...What really matters to society is what the case means for the production and consumption of books. That might not be so dreadful." Eduardo Porter in The New York Times.
5) WOLF: There's still hope for the eurozone. "The principal political force is the commitment to the ideal of an integrated Europe, along with the huge investment of the elite in that project. This enormously important motivation is often underestimated by outsiders. While the eurozone is not a country, it is much more than a currency union. For Germany, much the most important member, the eurozone is the capstone of a process of integration with its neighbours that has helped bring stability and prosperity after the disasters of the first half of the 20th century. The stakes for important member countries are huge...Thus, the big idea that brings members together is that of their place within Europe and the world. The political elites of member states and much of their population continue to believe in the postwar agenda, if not as passionately as before. In more narrowly economic terms, few believe that currency flexibility would help. Many continue to believe that devaluations would merely generate higher inflation." Martin Wolf in The Financial Times.
Top long reads
Garrett Epps on why 'corporate personhood' is not the problem with Citizens United "American politics is in trouble. A tsunami of unaccountable, untraceable political money is overwhelming the Republican race for the presidential nomination and threatens to do the same to the fall election. For many people, especially progressives, the culprit is easy to name: the Supreme Court’s 2010 decision in Citizens United v. Federal Election Commission, which swept away any limits on election-advocacy ads by corporations, unions, and 'independent' political-action committees (PACs) and issue groups. Many progressives believe that Citizens United 'made corporations people' and that a constitutional amendment restricting 'corporate personhood' will cure this political ill...The profound problem with our current law is the idea that free speech has neither nuanced variations nor underlying values. The Court in Citizens United claimed that corporations either must have no free-speech rights or must have precisely the same free-speech rights as natural persons do."
80s nostalgia interlude: R.E.M. plays "Radio Free Europe" live on the Late Show with David Letterman.
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Still to come: The Export-Import bank may get its extension; ending Obamacare would bring its own challenges; no for now to fliers advertising workers' rights; higher gas prices drive changes; and a cat wants you to wake up already.
Lawmakers are mulling changes to tax breaks on retirement savings. "The painful trade-offs of tax reform came into sharper focus Tuesday as lawmakers for the first time began considering specific tax breaks to reduce or otherwise change, starting with laws that allow millions of Americans to avoid taxes while saving for retirement. Tax incentives for employer pensions, 401(k) plans, individual retirement accounts and other savings programs rank among the largest breaks in the tax code, costing Washington more than $200 billion a year in lost revenue...On Tuesday, House Ways and Means Committee Chairman Dave Camp (R-Mich.) scheduled a hearing on 'tax-favored retirement accounts' that he said was intended to begin 'framing the debate' in preparation for tax reform. Aides said Camp is planning a first-ever examination of about $30 billion worth of expired tax breaks for individuals and corporations that Congress routinely extends, an effort that is also gaining traction in the Senate." Lori Montgomery in The Washington Post.
@amaeryllis: Stupid that there's an income limit for eligibility for the student loan interest deduction but not the mortgage interest deduction.
HUD may be a top target for cuts. "Republican frontrunner Mitt Romney was overheard earlier this week saying he might eliminate the Housing and Urban Development Department. President Obama’s advisers say he is trying to preserve HUD’s support for housing aid, but advocates for the poor say his budget plans would raise rents on very-low-income Americans and could cause some families to lose assistance. In this age of austerity, whoever wins the presidential election will have to make tough decisions about where to find budget savings, and housing advocates worry that HUD could be a top target, at a time when the agency is already under stress. The agency’s difficulty in meeting needs has grown only tougher with the onset five years ago of a national housing downturn, which pushed unemployment sharply higher...In 2009, 4.6 million poor people received aid while 14.3 million still needed it, according to HUD and the Center on Budget and Policy Priorities, citing the most recent statistics available." Zachary Goldfarb and Brady Dennis in The Washington Post.
The IMF sees Europe beginning to exit its recession. "The International Monetary Fund expects growth to accelerate later this year as Europe begins to exit a 'shallow recession' and U.S. performance improves, the fund reported in a study that helped buoy stock markets worldwide. The newest edition of the World Economic Outlook did not declare an end to Europe’s crisis. Quite the opposite. The IMF said the situation remains uncertain and warned that any number of possible events could reverse recent progress. Among the chief risks: fiscal austerity programs that go too far, too fast and undermine growth; a rapid rise in oil prices; or a 'downward spiral' that forces another bailout of a European country, such as Spain or Italy...Overall world growth in 2012 is expected to be about 3.5 percent -- slightly less than it was in 2011, largely because of the drag that Europe’s problems created beginning in the fall. The forecast, however, is stronger than the one the IMF issued in January." Howard Schneider in The Washington Post.
@justinwolfers: IMF: "markets appear somewhat schizophrenic, asking for fiscal consolidation, but reacting adversely when consolidation leads to lower growth"
Regulators are set to approve broad exemptions to derivatives regulation. "As federal regulators put the finishing touches on an overhaul of the $700 trillion derivatives market, a major provision has been tempered in the face of industry pressure. On Wednesday, the Securities and Exchange Commission and the Commodity Futures Trading Commission are expected to approve a rule that would exempt broad swaths of energy companies, hedge funds and banks from oversight. Firms would not face scrutiny if they annually arrange less than $8 billion worth of swaps, the derivative contracts tied to interest rates and commodities like oil and gas. The threshold is a not-insignificant sum. By one limited set of regulatory data, 85 percent of companies would not be subject to oversight. After five years, the threshold would reset to $3 billion; it is the same amount suggested by a group of energy companies in a February 2011 letter, according to regulatory records." Ben Protess in The New York Times.
The Export-Import Bank may get a long awaited extension. "House talks on funding the Export-Import Bank appeared to accelerate Tuesday with the White House signaling a greater willingness to accept a three-year bill with a loan exposure cap of $130 billion -- less than what Democrats had demanded in the Senate. Majority Leader Eric Cantor (R-Va.) and Democratic Whip Steny Hoyer (D-Md.) are the central players, but Speaker John Boehner (R-Ohio) was described as committed to some resolution before the end of May, when both the bank’s authorization runs out and it is expected to hit its current $100 billion cap...The real challenge is not to get a majority of the House -- the bank likely has that already -- but a majority of the House GOP conference. And Cantor must find that sweet spot where his Republicans can come on board without alienating the Democrats he needs for passage." David Rogers in Politico.
@BetseyStevenson: I am fed up w/ hearing the rich pay the majority of fed inc tax. (a) we have many taxes that non-rich pay (b) the rich have most of the inc
Felines in unexpected places interlude: Cats in space.
Winding down Obamacare would be its own challenge. "If the Supreme Court pulls the plug on health reform, winding it down could be almost as contentious as building it up in the first place. And the hundreds of federal employees in the agencies created or expanded by the health law could find themselves at the center of a new round of fighting. Those positions rely on Affordable Care Act dollars that the court could take away by holding the whole law unconstitutional...There’s little precedent for rolling back federal spending when the law appropriating funds is ruled unconstitutional. A lot could still be left up to the White House and Congress to work out -- and the decisions would affect the new offices and agencies, the livelihood of the men and women who work in them and status of the multiyear contracts and projects they have embarked on." Lester Feder in Politico.
@sarahkliff: You know what would make a really slow news week exciting? SCOTUS randomly issuing the health care opinion months early. #wishfulthinking
GOP Senators are backing a legal challenge to Obama's NLRB recess picks. "Senate Republicans are teaming up with famed GOP lawyer Miguel Estrada to challenge President Barack Obama’s controversial appointments to the National Labor Relations Board. Estrada is a former attorney for the Solicitor General’s office whose 2001 nomination to the D.C. Circuit was ultimately derailed by a Democratic-led filibuster two years later - a battle that became a cause célèbre for conservatives...Aided by Estrada, Republican senators will be filing a friend-of-the-court brief in Noel Canning vs. the National Labor Relations Board -- a Washington state case challenging a ruling from the NLRB that the company violated labor laws. Nearly 40 Senate Republicans said in February that they would join in on a court case, but had declined to identify one at the time...The Obama administration had repeatedly defended its actions as legal, saying the Senate was not actually in session when it was convening a series of brief, pro forma sessions." Seung Min Kim in Politico.
The NLRB's unionization poster rule will be delayed. "The National Labor Relations Board has been barred from from requiring businesses to display a poster informing employees of their right to unionize under a federal appeals court emergency injunction Tuesday. The poster rule was scheduled to be implemented on April 30, but will be delayed pending appeal. The National Association of Manufacturers and other organizations filed a legal challenge to the rule, which would have required businesses to post an 11 x 17 inch notice explaining collective bargaining and unionization rights. At issue in the legal wrangling is whether the NLRB has the authority to order such a rule...The U.S. Court of Appeals for the District of Columbia Circuit reasoned the rule should not go into effect until the court had sorted out the legal challenge before it. Along with Tuesday’s injunction, the court ordered that the National Association of Manufacturer’s appeal be expedited." Tim Mak in Politico.
Adorable animals that wake you up way too early interlude: A cat just wants to hang out.
High gas prices are driving motorists to cut their fuel consumption. "As prices have neared and in some cases topped $4 a gallon, drivers have cut their consumption of gasoline to its lowest levels in a decade, driving less and buying cars that are more fuel-efficient. The adjustment has slowed the climb in gasoline prices, which until last week had risen for 10 consecutive weeks, and could preserve some money for Americans to spend on other items as the economy struggles to recover more convincingly. 'Over the last four weeks, motor gasoline product supplied has averaged 8.6 million barrels per day, down by 4.0 percent from the same period last year,' the Energy Information Administration (EIA) said last week...The response to $4 gasoline is reinforcing a trend toward lower fuel consumption. This will be the third year in the past five with historically high oil prices. Even before the latest price spike, gasoline consumption had dropped 6 percent from 2007 through 2011, the EIA said." Steven Mufson in The Washington Post.
Obama threatened to veto the highway bill over Keystone XL language. "The White House on Tuesday threatened to veto House legislation to extend transportation programs because it contains GOP language that mandates approval of the Keystone XL oil sands pipeline. The House is slated to vote Wednesday on the bill that keeps the transportation programs funded through September, the end of the fiscal year. It would take permitting of the proposed Alberta-to-Texas pipeline away from the State Department and task the Federal Energy Regulatory Commission with approving the project...The threat continues the political thrust-and-parry between the White House and Republicans over the controversial project that is increasingly at the center of election-year energy battles...The White House said that a permitting deadline the GOP demanded in late 2011 payroll tax legislation would short-circuit proper review of Keystone, including the route around ecologically sensitive regions of Nebraska." Ben Geman in The Hill.
House GOP changes to transit funding appear to have died. "Almost everything about the House’s transportation bill seems up in the air except this: The changes to transit funding that Republicans originally proposed have been squashed...In recent history, about 20 percent of gas tax revenues that went to the Highway Trust Fund, which mostly pay for highway infrastructure, have been funneled into federal transit projects. Currently, out of the 18.4 cents per gallon tax on gas, 2.86 cents goes into the transit account. When the House GOP finally revealed its transportation bill earlier this year, it contained a change that would have kicked transit out of its dedicated share of the Highway Trust Fund. Essentially, Republicans wanted to stop shoveling gas tax money to transit and instead fund transit over the five-year life of the transportation bill by making a one-time $40 billion transfer from the general fund. That, in turn, was to be paid for with one-time revenues from changes to federal employee pensions. But that move set off alarm klaxons all along the Beltway." Kathryn Wolfe in Politico.
@drgrist: Political attention to renewables / concern over climate blow away like dry leaves in wind when new fossil fuels are discovered.
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.