Friday, December 13, 2013

Minimum Wage, Budget, Austerity, Gov't Spending

A great article in the New York Times (referencing lots of studies and reports) notes that if since 1968, had the minimum wage kept up with inflation, economic growth and labor productivity, it would be $25 an hour today.

Today fast-food and retail workers are asking for $15 an hour. I argued why it should be at least $17 an hour, excluding small businesses (like mom & pop stores, not hedge fund offices.)

In the New York Times article, it also notes than an increase in the minimum wage to $10 an hour (referencing lots of studies and reports) would lift spending, gross domestic product and job creation --- and that a recent poll shows that large majorities of Democratic, independent, and Republican voters support an increase in the minimum wage.

In a recent post Paul Krugman says, "The case for austerity has pretty much collapsed, having been reduced at this point to the Three Stooges Theory: we’re supposed to consider austerity a success because it feels good when you stop." (This should be the quote of the week.)

But then Dean Baker disagrees with Krugman on another topic: "I've got to take some issue with my friend Paul Krugman [when pronouncing] the Trans-Pacific Partnership (TPP) no big deal. As a trade question, he is undoubtedly right. However, it is a misunderstanding to see the TPP as being about trade. This is a deal that focuses on changes in regulatory structures to lock in pro-corporate rules."

I also noticed that Krugman is very pro on the current immigration bill, even despite H-1B visas and other guestworkers provisions in the proposed bill.

But I do agree with Paul Krugman here when he comments on the new budget deal and unemployment:

"Local governments began letting go of hundreds of thousands of teachers. Meanwhile, public investment fell sharply as state and local governments canceled transportation projects and deferred maintenance. Researchers also took large cuts. And there was a major cut in spending on land and water conservation.

The cuts did huge short-term economic damage. Small-government advocates like to claim that reducing government spending encourages private spending. But the recent cuts, however, took place at the worst possible moment, the aftermath of a financial crisis. Under these conditions, government cutbacks simply swelled the ranks of the unemployed — and as family incomes fell, so did consumer spending, compounding the damage.

The result was to deepen and prolong America’s jobs crisis. Those cuts in government spending are the main reason we still have high unemployment, more than five years after Lehman Brothers fell. We aren’t just looking at short-term harm, we’re also looking at a long-term degradation of our prospects, reinforced by the corrosive effects of sustained high unemployment.

But the larger picture is one of years of deeply destructive policy, imposing gratuitous suffering on working Americans. And this deal didn’t do much to change that picture."

Krugman also noted that government spending has been dramatically down (more so than since WWII), but that the GOP keeps banging this drum in their never-ending quest for "smaller government", even though our population continues to grow in leaps and bounds (up about 33% in the past 40 years).

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