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CEPR News January 2011 Print
Written by Dawn Lobell   
Friday, 28 January 2011 16:00

The following highlights CEPR's latest research, publications, events and much more.

On January 9th, CEPR released a paper titled “Haiti’s Fatally Flawed Election” that described the results of an independent recount of all 11,181 vote tally sheets from Haiti’s November 28, 2010 presidential election.  CEPR’s review found that based on the number of irregularities in the tally sheets, it is impossible to determine who should advance to second round elections, and that if there were a second round, it would be based on arbitrary assumptions and/or exclusions. The paper received a lot of attention in the press from, e.g, the BBC, The Independent (UK), CBC, and AP and was featured in this article in the Toronto Globe and Mail. It has also been cited by prominent figures such as Rep. Maxine Waters and Haiti’s former Ambassador to the U.S., Raymond Joseph (in a Wall Street Journal op-ed).

On January 11, 2011, CEPR received a copy of a draft of the Organization of American States’ (OAS) “Expert” Mission of the election. CEPR then put out an issue brief that exposed flaws in the OAS Mission’s analysis. Both the initial paper and the issue brief had a great deal of impact in Haiti (Both the paper and the issue brief are available in English, Spanish and French). The U.S., France, UN, and EU have exerted pressure on Haitian President René Préval to accept the OAS recommendations regardless of the OAS Mission report’s flaws, and he has been using CEPR’s report to strengthen his arguments against accepting the OAS’ conclusions.


Labor Market Policy Research Reports, Jan. 22-28, 2011 Print
Written by Sairah Husain and John Schmitt   
Friday, 28 January 2011 14:30
This is the second install of a new weekly feature at the CEPR blog. Every Friday, we'll post a list of labor market related policy research reports from progressive research centers around the country. This week, reports from the Center for American Progress (CAP), the Center on Budget and Policy Priorities (CBPP), the Economic Policy Institute (EPI), the Institute for Women's Policy Research (IWPR), and the Political Economy Research Institute (PERI).


Upward Revision of Deficit Has Nothing to Do With Increased Spending Print
Written by David Rosnick   
Friday, 28 January 2011 13:30
Last August, the Congressional Budget Office projected that the budget deficit in 2011 would be $1.066 trillion. Two days ago, the CBO revised the projection upwards by 39 percent to $1.480 trillion. What drove the projected deficit to rise by $414 billion in the last few months? Has there been a burst of new spending out of Congress? Absolutely not. In fact, projected spending has fallen by $5.5 billion since August. Rather, projected revenues have fallen by $419 billion.

Of the $419 billion decrease in projected revenues, $354 billion of this was directly attributable to the tax cuts enacted during the recent lame-duck session. The deal did include $37 billion in new spending-- $35 billion of which was extension of unemployment benefits—but the fact that total spending fell by $5.5 billion means that falls in projected non-UI spending more than made up for the new spending.

Given that the projection for total spending has fallen, the budget numbers may look a little funny out of context. The "on-budget" numbers—excluding the Social Security surpluses and net cash flow of the Postal Service—show an increase in projected spending of $74.3 billion. This was entirely due to the payroll tax cut. Instead of cheating current beneficiaries by running down the trust fund, Congress moved $84 billion of Social Security spending on-budget. Outside of that accounting change, on-budget spending fell by $10 billion.

In short, it is true that CBO's projected deficit for 2011 has grown since August, but clearly it has nothing to do with increased spending.

Drop in Imports Boosts GDP in 4th Quarter Print
Written by Dean Baker   
Friday, 28 January 2011 11:09

A plunge in imports contributed 2.4 percentage points to the 3.2 percent growth rate in GDP for the fourth quarter of 2010, according to the latest Bureau of Economic Analysis' report on the Gross Domestic Product. With imports falling at a 13.6 percent annual rate in the fourth quarter, the replacement of foreign-produced goods by domestically produced goods was the largest factor propelling growth. Consumption of durable goods, led by a surge in new car purchases, added another 2.26 percentage points to growth for the quarter.

The drop in imports was clearly associated with the slower pace of inventory accumulation. Inventories grew at just a $7.2 billion annual rate, compared to a $121.4 billion rate in the third quarter. Many of the goods that end up in inventories are imported so the two components generally fluctuate together. The slower pace of inventory accumulation subtracted 3.7 percentage points from GDP growth. Final sales of domestic product grew at a 7.3 percent rate in the quarter.

For more info, check out our latest GDP Byte.

President’s Speech Said Little About The State of the Union Print
Written by Eileen Appelbaum   
Wednesday, 26 January 2011 22:54

It is disappointing that in a speech intended to help Americans understand the state of the union, President Obama failed to take note of the extent of the country’s economic pain and the role that Wall Street greed and the deregulation of financial markets played in creating the economic crisis. The country continues to confront a relentless mortgage crisis and stubbornly high unemployment. The nation needs seven million new jobs just to get back to where we were in December 2007 – and we need even more jobs than this today because we’ve had three years of growth in the working age population. Solving the jobs crisis – more than 14 million workers are unemployed and the figure rises to 25 million if we include those who are underemployed – needs to be at the top of the national agenda. Yet it received no mention in the President’s description of the State of the Union.

The State of the Union was very much focused on the future, and winning it. The unabashedly optimistic view of America as a country that is open for business and does big things apparently precluded any discussion of the past, of how we got into the recession and financial crisis, and any discussion of unpleasant realities like the millions of people who have lost their homes or their jobs and have plunged from economic stability into extreme economic insecurity.

While unemployment was not addressed, there were two concrete proposals in the SOTU.



Bottom Third of Housing Market Continues to Drag Prices Down Print
Written by Dean Baker   
Tuesday, 25 January 2011 12:00

Home prices continue to fall, dropping a full percentage point in November, according to the Case-Shiller 20-City index. Nineteen of the 20 cities in the index showed a decline in prices, with the sharpest declines occuring in Atlanta, Chicago, Cleveland, Detroit and Minneapolis. San Diego was the only city where prices rose, albeit by only 0.1 percent. The 20-city index has fallen at an annual rate of 11.9 percent over the last three months and is down by 1.9 percent year over year.

The price declines continue to be led by the bottom third of the market, which is in a virtual free fall in several cities. In Atlanta, prices for homes in the bottom tier fell by 9.4 percent in November and have fallen at a 69.6 percent annual rate over the last three months. In Minneapolis, prices for bottom-tier homes fell by 1.7 percent in November and dropped at a 40.9 percent annual rate over the last three months. The annual rate of decline for bottom-tier homes over the last three months was 16.3 percent in New York, 21.7 percent in Boston, 28.8 percent in Chicago and 31.8 percent in Portland.

For more info, check out our latest Housing Market Monitor.

Recession Continues to Take a Toll on Union Membership Print
Written by Ben Zipperer   
Friday, 21 January 2011 14:45

The labor market recession continued to exact a toll on union membership in 2010. According to the latest Bureau of Labor Statistics Union Membership report, the unionized share of the U.S. workforce dropped to 11.9 percent last year from 12.3 percent in 2009. The private sector unionization rate fell to 6.9 percent in 2010, from 7.2 percent in 2009.

Even as employment losses slowed in 2010, unions continued to lose members, compared with 2009 where union membership and overall employment decreased at about the same rate. In 2010, union rolls shrank by about 600,000 members. Over 2009 and 2010, the Great Recession helped to reduce union rolls by more than 1.3 million members. In the absence of federal support for state and local governments, public sector cutbacks will continue to depress the overall union membership rate.

For more info, check out our latest Union Membership Byte.

Labor Market Policy Research Reports, Jan 1-21, 2011 Print
Written by John Schmitt and Sairah Husain   
Friday, 21 January 2011 13:12

A new feature here at the CEPR blog. Once a week, we'll post a list of labor market related policy research reports from progressive research centers around the country. This week's batch includes new reports from CEPR, the Center for American Progress (CAP), the Center on Budget and Policy Priorities (CBPP), Demos, the Economic Policy Institute (EPI), the Institute for Research on Labor (IRLE) and Employment at UCLA, and United for a Fair Economy (UFE).



Distress, Not Success Print
Written by John Schmitt   
Wednesday, 19 January 2011 16:00

On Saturday, the New York Times ran an interesting piece on older workers. According to Bureau of Labor Statistics data cited in the story, the US workforce is a lot older now than it was at the onset of the Great Recession in December 2007. Total employment of workers under the age of 55 is down (way down for 16 to 24 year olds), but the total number of workers age 55 and older is up almost eight percent:

Total employment, by age, 2007-2010

Source: New York Times.

The piece is a good overview of recent developments, but could give readers the misimpression that the labor market is performing well for older workers. In fact, older workers have not been spared in the economic downturn. Indeed, their continued presence in the labor market is more likely a sign of economic stress than of economic success.



Sorry, Census. Poverty Really Did Increase in 2009. Print
Written by Shawn Fremstad   
Wednesday, 19 January 2011 11:25

Between 2008 and 2009, unemployment increased from 5.8 percent to 9.3 percent, the largest one-year increase on record (which goes back to 1948). Over the same period, the number of Americans without health insurance coverage rose by more than four million—from 46.3 million in 2008 to 50.7 million in 2009—and low-income people lost insurance at a greater rate than Americans overall. Thus, it isn't surprising that the Census Bureau's official poverty estimates show that the number of people who were impoverished in 2009 increased by 3.74 million, and the poverty rate increased from 13.2 percent in 2008 to 14.3 percent in 2009.

More surprising is an "alternative" poverty estimate Census quietly released earlier this month. This estimate, highlighted today in a New York Times editorial, shows no increase in poverty between 2008 and 2009. Given the record increase in unemployment and huge decline in health insurance coverage, especially among low-income people, could this alternative estimate showing no increase in poverty really be correct? 

The short answer is no, but it takes some unbundling of the numbers to understand what's going on. Certain benefits that were expanded in the Recovery Act, particularly food stamps and refundable tax credits, are not currently counted in the official poverty measure. The alternative poverty measure cited by the NYT counts these benefits. Thus, one explanation of the apparent disconnection between unemployment and poverty is that the food stamp and refundable tax credit provisions in the Recovery Act were large enough (and targeted in a way) that prevented any actual increase in poverty.



The Austerity Agenda and the State of the Dream Print
Written by John Schmitt   
Friday, 14 January 2011 13:52

In advance of Martin Luther King Day next Monday, United for a Fair Economy has released its 8th annual "State of the Dream" report, surveying the economic challenges facing workers of color. The 2011 edition focuses on the impact of economic austerity on African American and Latino workers.

The report documents several ways in which the austerity agenda sweeping Washington hurts the African American and Latino middle- and working-class.

(1) Tax cuts for the rich flow overwhelmingly to whites.


(2) "The attack on the public sector through pay freezes, furloughs, layoffs and proposed cuts is an attack on Black workers," who are disproportionately employed in federal, state, and local government.


(CEPR ran the numbers used to produce this chart. The report also cites other numbers from CEPR.)

(3) Because a higher share of African Americans and Latinos are poor, "[c]uts to social safety nets hit Blacks and Latinos hardest."


(4) Because African American and Latino workers also face the highest rates of unemployment, the failure to create a large-scale jobs program hurts them most.


You can download the full report here.

The Tax Deal's Biggest Losers: 40 Million Low-Wage Workers Who Will See their Taxes Go Up This Year Print
Written by Shawn Fremstad   
Monday, 10 January 2011 22:53

On December 6, the President said "there is no reason that ordinary Americans should see their taxes go up next year." Apparently, the Administration staff who negotiated the deal found a reason. According to the Urban-Brookings Tax Policy Center, some 51 million taxpayers will see their taxes go up in 2011.  The vast majority of them—40 million tax units—are low-wage workers with incomes below $35,000. Low-income workers are the only income group that will lose income this year compared to 2010 under the deal. Other groups, including most middle-income families and nearly all high-income ones, will receive a bigger tax cut in 2011 than in 2010.


Although a few news outlets have reported this fact, it is not widely understood by the public, or even by most advocates and analysts working on policy related to low-income families. This is partly due to the White House's failure to acknowledge the hike. Instead, when it announced the deal, the White House Press Secretary touted the extension of some tax cuts for low-income families with children and stated that "working families won't see their tax cuts go away next year."



Job Creation that Both Parties Can Agree On Print
Written by Nicole Woo   
Friday, 07 January 2011 17:45

As Dean Baker pointed out earlier today, the drop in the unemployment rate announced this morning was due in large part to people giving up looking for work and dropping out of the labor force. There don't appear to be any areas of the economy with strong job growth now, nor for the rest of 2011.

One potential bipartisan job creation strategy is work-sharing. Just before the election, the Frum Forum highlighted it as "A New Jobs Stimulus the GOP (and Dems) Can Back." And Dean teamed up with Kevin Hassett of AEI last year in a joint op-ed in the LA Times to explain the good reasons to use work-sharing to create jobs and avoid layoffs.

Work-sharing (a.k.a. short-time compensation) already exists in 18 states. According to the U.S. Department of Labor,* there were over 153,000 participants across the nation in June 2009, a more than 12-fold increase from just over 12,000 participants in January of 2007. With work-sharing claims averaging a bit over 1/4 of a job, that represented about 40,000 full-time equivalent jobs during the peak weeks.


Participation has varied widely from state to state. Rhode Island has seen the highest participation rates, with a peak of close to 7,000 participants, or over 1,800 FTEs, in May 2009. Over 20% of unemployment insurance claims in Rhode Island were from work-sharing when the program was at its peak.

That's a lot of folks who have been able to keep their jobs, and most of their pay, during the recession. Just imagine if more states performed as well as Rhode Island. 

And it's not too late. Since employers both hire and fire workers every month, the reported jobs numbers are the net total of jobs created and lost. Work-sharing would help lower the unemployment rate by reducing the extent of layoffs.

*Source: Employment and Training Administration, U.S. Department of Labor.  Please contact CEPR if you'd like to see the data.

Unemployment Falls as the Unemployed Give Up Print
Written by Dean Baker   
Friday, 07 January 2011 11:30

The Bureau of Labor Statistics' latest employment report shows that unemployment dropped to 9.4 percent, the largest percentage-point drop since April of 1998. However, much of the reason for the decline was a drop of 260,000 in the size of the labor force. While the reported gain of 290,000 jobs in BLS' household survey is healthy, it's inconsistent with so many people leaving the labor force and may just be an aberration. It is worth noting that average weekly unemployment claims are still averaging more than 400,000. The economy did not start generating jobs at all following the last recession until weekly claims fell below 400,000 in 2003.

On the whole, this report does not suggest a very positive picture of the labor market going into 2011. The decline in the unemployment rate is certainly positive, but with employment-to-population ratios (EPOPs) hovering near their low point for the downturn, the main story appears to be people giving up looking for work. Furthermore, there is no sector that appears to be experiencing robust job growth at the moment, nor any likely candidates for the near future.

For more info, check out our latest Jobs Byte.

Lumps of Coal from Congress and the White House Print
Written by Nicole Woo   
Thursday, 23 December 2010 16:28

Across the nation, federal employees are getting undeserved lumps of coal in their Christmas stockings this year.  When President Obama signed the 2 1/2-month extension of government operations yesterday, it included a 2-year pay freeze for federal workers.  While the White House argues that the freeze will save $5 billion by the end of 2012, CEPR's Dean Baker points out that this reduction in money that federal workers have to spend will lead to drops in private sector employment in 2011 and 2012 of 7,000 and 18,000 jobs, respectively.

Happy Holidays: GAO Reminds Us Health Care Reform Means Deficit Reduction Print
Written by David Rosnick   
Thursday, 23 December 2010 09:32

If you are truly concerned about the long-term fiscal health of the country, then the 2010 Financial Report of the U.S. Government reminds you of some recent happy news.

As we all should know, the long-run threat to the deficit is health care.  According to the latest numbers, the 75-year shortfall in Medicare has fallen by $15.3 trillion in the last year—from 4.8 percent of GDP to 2.7 percent.

(Actually, calling this a shortfall in Medicare is unfair, because three-quarters of funding for Parts B and D comes out of general revenue.  So long as this is true, Parts B and D will always run deficits totaling 75 percent of spending… even if spending is cut 99 percent!)

From where did such a large deficit reduction come?  According to the report “the decrease is primarily attributable to provisions of the ACA as amended by the Health Care and Educational Responsibility Act of 2010”—that is, the recent health-care reform.  Total costs of running Medicare—Parts A, B, and C-- are projected to be 5.3 percent of GDP over 75 years compared to 7.4 percent last year.  In other words, health-care reform is projected to save Medicare 28 percent.

It is important to realize just how large (2.1 percent of GDP) are the savings that the recent health care legislation has offered.  By comparison, the shortfall in Social Security is $5.8 trillion, or 0.6 percent of GDP.  In other words, the fall in Medicare deficits have fallen by enough to cover that of Social Security more than three times over.

Anyone who frets over the Social Security “crisis” should be overjoyed by the ACA and working to strengthen and extend heath care reform—not aiming to further lower the retirement prospects of current and future retirees.


Fed Lending Shored Up Bank Profits Print
Written by Matt Sherman   
Wednesday, 22 December 2010 15:55

Initiated in late 2007, the Term Auction Facility (TAF) was the first of the Federal Reserve’s many liquidity facilities intended to stem a financial collapse by providing financial institutions with emergency funding. The TAF was intended to alleviate some of the stigma on Wall Street against borrowing from the central bank’s discount window. The program was structured to provide low-interest, short-term loans (set to mature in either 28 or 84 days) to all eligible depository institutions, with investment-grade assets held as collateral. The terms and specific beneficiaries of the facility were kept secret until earlier this month, December 2010, when a Congressional mandate forced disclosure.

We now know that hundreds of banks, both American and foreign-based firms, accessed short-term funding through the Federal Reserve’s program. In cumulative terms, the Fed auctioned off over $3.8 trillion through the TAF, from late 2007 to early 2010. The top ten participating institutions at the TAF accounted for nearly $1.8 trillion – or nearly half – of cumulative borrowing from the Fed.



CEPR News December 2010 Print
Written by Dawn Lobell   
Tuesday, 21 December 2010 16:26

The following newsletter highlights CEPR's latest research, publications, events and much more.

CEPR on the Road
CEPR Co-Director Dean Baker has been busy speaking about the tax deal and debating the deficit hawks. On December 1st, he was on a panel about the Fiscal Commission and alternative progressive blueprints for economic recovery with Nobel Laureate Joseph Stiglitz at the National Press Club. On December 16th he appeared on a panel on the effects of deficit reduction on the disadvantaged at the Brookings Institution. (You can watch a video of the panel here). And the very next day he was at the Aspen Institute, debating Grover Norquist and Andrew Stern on the “Contours of US Deficit Reduction”. You can hear what Dean had to say about “shared sacrifice” here.

Dean also took to the airwaves as well, talking taxes on Bloomberg TV and about the Deficit Commission on PBS' Nightly Business Report.

CEPR Senior Economist Eileen Appelbaum was at the Department of Labor last week, meeting with top officials to share the results of a study she completed with CUNY’s Ruth Milkman on the effects of California’s Paid Family Leave law, six years after its implementation. Look for the formal release of the paper in mid-January, including events in both Sacramento, CA and Washington, DC.

CEPR Director of Domestic Policy Nicole Woo was a panelist at a conference held by the White House Initiative on Asian Americans and Pacific Islanders (AAPI) on December 10th.  She presented CEPR's research on AAPI workers and recommended improvements to the data collected about AAPIs in the Census Bureau's main data sets.


Health Insurance and Entrepreneurship Print
Written by John Schmitt   
Friday, 17 December 2010 11:41

I’m getting to this late, but the New York Times’ David Leonhardt and Mother Jones’ Kevin Drum started a discussion earlier this week on whether a social safety net –especially the availability of health insurance– could actually promote entrepreneurship in the United States.

Here’s David Leonhardt:

Guaranteeing people a decent retirement and decent health care does more than smooth out the rough edges of capitalism. Those guarantees give people the freedom to take risks. If you know that professional failure won’t leave you penniless and won’t prevent your child from receiving needed medical care, you can leave the comfort of a large corporation and take a chance on your own idea. You can take a shot at becoming the next great American entrepreneur.

And here’s a slightly skeptical Kevin Drum:

Still, I remain curious about the Leonhardt argument, which is a common one in the liberal community. Is it true? Does knowing that you have a safety net make you more likely to get up on the trapeze and try something risky and new? The analogy is wonderful, but that doesn’t make it true. Surely, though, this is a testable hypothesis? Not a provable one, of course, but one where evidence can be amassed on different fronts based on measurements of social safety nets in different times and places vs. risk-taking behavior in different times and places. Has anyone ever done this? It seems like a pretty obvious thing to try to study.

The short answer is yes, economists have looked at this issue, and the evidence generally supports the view that a safety net supports self-employment and small businesses.



A New York State of Inequality Print
Written by John Schmitt   
Wednesday, 15 December 2010 08:59
The New York based Fiscal Policy Insitute has a great new report (pdf) out on rising economic inequality in New York state and New York City. The FPI researchers have used state income tax data to do a state-level analysis of income concentration, modeled on the path-breaking research by Thomas Piketty and Emmanuel Saez, who used IRS data to look at national income inequality in the United States from 1913 to the present.

Here are just a few highlights. First, over the last 30 years, economic inequality increased more rapidly in New York state than it did in the economy as a whole, and more rapidly in New York City than it did in New York state.

Source: Fiscal Policy Institute.

Second, the middle and the bottom saw their share of total New York City income plummet since 1990.

Source: Fiscal Policy Institute.

Third, the increase in income inequality in the United States far outpaced what has happened in other rich economies.

Source: Fiscal Policy Institute.

I particularly like that the report attributes the rise in economic inequality primarily to political processes. FPI specifically rejects the standard economic explanation for rising inequality –a “skills shortage” that drives up wages of highly skilled workers at the top. “Among the well educated, too, there is an enormous degree of income polarization,” they write. “Those with the highest incomes do not simply have the best education. Something else must be at work since education, however important on an individual level, simply cannot serve as a compelling explanation for increased income concentration.” (p. 18)

This article originally appeared on John Schmitt's blog, No Apparent Motive.
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