Is Short-Term Unemployment a Better Predictor of Inflation?

Apr 8, 2014Mike Konczal

Alan B. Krueger, Judd Cramer, and David Cho of Princeton recently released a Brookings paper on the state of the labor market titled "Are the Long-Term Unemployed on the Margins of the Labor Market?" Their big headline result is that the long-term unemployed are going to have trouble finding steady work, both as a historical matter and from what we've seen in the Great Recession. It's fascinating work we'll revisit here.

But what does that mean for the job market right now, with its mix of short-term and long-term unemployed? The second takeaway is that if we only look at short-term unemployment, the economy makes more sense than if we look at total unemployment. As Tim Hartford wrote, this research shows that if "we replotted the Phillips curve['s mix of inflation and unemployment]... using statistics on short-term unemployment... it turns out that the old statistical relationships would work just fine." Some are arguing that we should just focus on short-term unemployment for the moment as an indicator of how the economy is doing.

Is that the case? Not really. We should be careful with this argument now, because this is really a matter of 2009-2012. Back then, the question was why inflation was as steady as it was given very high unemployment. In 2014 the question is very different: why is inflation so low given high unemployment and the relationship of the past several years? We need to explain a different problem.

Let's look at a key chart from the Krueger paper (green boxes my addition):

This is the change in core inflation versus unemployment. (There's a similar dynamic with wage inflation in a different chart.) The left graphic is the change in core inflation versus overall unemployment, and the right graphic is the change versus short-term unemployment. As the paper's authors argue, it's a much tighter relationship if you just look at short-term unemployment. But there are three things to note here.

First, as flagged in the green box in the left graphic, the outliers are the years 2009-2012. Looking at their wage inflation version of this in particular, the authors note that they get a higher R-squared and better predictive value using short-term unemployment. But replicating this chart (data), if you simply take out 2009-2011, you also end up with the higher R-squared and better predictive value.

More importantly, as a second matter look at where we are now via the 2013 data point. The total unemployment number for 2013 is right on the line in the left graph. However, as we can see from the green circle on the right, using short-term unemployment shows inflation much lower than anticipated. This is not surprising; one of the more important economic stories of 2013 was the collapse of inflation. Note that if the labor market were actually getting much tighter, inflation should have been increasing during this time period. More broadly, if the problem were the preponderance of long-term unemployed in the general labor market, we wouldn't expect 2013 to go into freefall and hop over the trendline as it did.

I'm very interested in why we didn't collapse into deflation from 2009 to 2011. I imagine the Fed has something to do with it. But as a third point I'd be a little cautious about using just short-term unemployment during that time as an important indicator about the labor market, as job separations collapsed during the crisis. A low short-term unemployment rate reflects people simply not leaving their jobs more than it reflects the idea that the economy was doing better than we'd expect.

But this question is also a historical one. Krueger and his co-authors acknowledge this, using phrasing like "since 2009" as the basis of their paper. But other people might not catch this, and assume that the short-term unemployment rate is crucial for right now. But that doesn't reflect our current situation of low inflation, a falling rate of long-term unemployment, and an unemployment rate that is going to be stuck in the mid-6% range for some time. We shouldn't use a way of adjusting data to examine what was going on in 2010 to argue there's less slack than there actually is out here in 2014.

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Alan B. Krueger, Judd Cramer, and David Cho of Princeton recently released a Brookings paper on the state of the labor market titled "Are the Long-Term Unemployed on the Margins of the Labor Market?" Their big headline result is that the long-term unemployed are going to have trouble finding steady work, both as a historical matter and from what we've seen in the Great Recession. It's fascinating work we'll revisit here.

But what does that mean for the job market right now, with its mix of short-term and long-term unemployed? The second takeaway is that if we only look at short-term unemployment, the economy makes more sense than if we look at total unemployment. As Tim Hartford wrote, this research shows that if "we replotted the Phillips curve['s mix of inflation and unemployment]... using statistics on short-term unemployment... it turns out that the old statistical relationships would work just fine." Some are arguing that we should just focus on short-term unemployment for the moment as an indicator of how the economy is doing.

Is that the case? Not really. We should be careful with this argument now, because this is really a matter of 2009-2012. Back then, the question was why inflation was as steady as it was given very high unemployment. In 2014 the question is very different: why is inflation so low given high unemployment and the relationship of the past several years? We need to explain a different problem.

Let's look at a key chart from the Krueger paper (green boxes my addition):

This is the change in core inflation versus unemployment. (There's a similar dynamic with wage inflation in a different chart.) The left graphic is the change in core inflation versus overall unemployment, and the right graphic is the change versus short-term unemployment. As the paper's authors argue, it's a much tighter relationship if you just look at short-term unemployment. But there are three things to note here.

First, as flagged in the green box in the left graphic, the outliers are the years 2009-2012. Looking at their wage inflation version of this in particular, the authors note that they get a higher R-squared and better predictive value using short-term unemployment. But replicating this chart (data), if you simply take out 2009-2011, you also end up with the higher R-squared and better predictive value.

More importantly, as a second matter look at where we are now via the 2013 data point. The total unemployment number for 2013 is right on the line in the left graph. However, as we can see from the green circle on the right, using short-term unemployment shows inflation much lower than anticipated. This is not surprising; one of the more important economic stories of 2013 was the collapse of inflation. Note that if the labor market were actually getting much tighter, inflation should have been increasing during this time period. More broadly, if the problem were the preponderance of long-term unemployed in the general labor market, we wouldn't expect 2013 to go into freefall and hop over the trendline as it did.

I'm very interested in why we didn't collapse into deflation from 2009 to 2011. I imagine the Fed has something to do with it. But as a third point I'd be a little cautious about using just short-term unemployment during that time as an important indicator about the labor market, as job separations collapsed during the crisis. A low short-term unemployment rate reflects people simply not leaving their jobs more than it reflects the idea that the economy was doing better than we'd expect.

But this question is also a historical one. Krueger and his co-authors acknowledge this, using phrasing like "since 2009" as the basis of their paper. But other people might not catch this, and assume that the short-term unemployment rate is crucial for right now. But that doesn't reflect our current situation of low inflation, a falling rate of long-term unemployment, and an unemployment rate that is going to be stuck in the mid-6% range for some time. We shouldn't use a way of adjusting data to examine what was going on in 2010 to argue there's less slack than there actually is out here in 2014.

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Money Issue of The New Inquiry is Out

Apr 8, 2014Mike Konczal

I helped edit (curate might be a better word) the latest New Inquiry issue on Money and Finance. Their editor Robert Horning wanted to get some of the vibe of the older financial blogs, when the thing was still a wild west, and so we got a ton of our favorite old-school finance writers like Steve Waldman, Izzy Kaminska, and the Epicurean Dealmaker to contribute. I also helped edit a good explainer of MMT from Rebecca Rojer, and a definitive "disgorge the cash" piece on the rentier takeover of the economy by JW Mason, both which are definitely worth your time. I have my own piece in the article, now also online, about buying the future.

These pieces will eventually be rolled out and available online over the next month, but for now you can read it by subscribing. Hope you check it out!

I helped edit (curate might be a better word) the latest New Inquiry issue on Money and Finance. Their editor Robert Horning wanted to get some of the vibe of the older financial blogs, when the thing was still a wild west, and so we got a ton of our favorite old-school finance writers like Steve Waldman, Izzy Kaminska, and the Epicurean Dealmaker to contribute. I also helped edit a good explainer of MMT from Rebecca Rojer, and a definitive "disgorge the cash" piece on the rentier takeover of the economy by JW Mason, both which are definitely worth your time. I have my own piece in the article, now also online, about buying the future.

These pieces will eventually be rolled out and available online over the next month, but for now you can read it by subscribing. Hope you check it out!

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The Internet Responds to the Voluntarism Fantasy

Apr 8, 2014Mike Konczal

My recent Voluntarism Fantasy piece (pdf) for Democracy Journal has gotten a fair amount of coverage. So I'm going to use this post, which will be updated, to keep track of the links to other people engaging, if only so I can respond in the future.

The piece was also reprinted at The Altantic Monthly.

Reddit thread with comments.

In favor of the piece:

Michael Hiltzik covers the argument in the LA Times' opinion page and EJ Dionne in the Washington Post's opinion page.

Matt Bruenig notes that the way we discuss this reflects a deep status quo bias at The Week.

Elizabeth Stoker, channeling Niebuhr, makes the strong Christian case that charity and government social insurance go together at The Week.

Sally Steenland of Center for America Progress also addresses the fantasy in this article.

Erik Loomis makes an excellent point that in addition to the rest of the 19th century state, the "federally subsidized westward expansion was also part of this welfare state, as Republicans especially explicitly saw the frontier as a social safety net that would alleviate poverty without directly giving charity to people."

James Kwak agrees that there's "No Substitute for the Government" here.

Jordan Weissmann argues that "Charity Can’t Replace the Safety Net" over at Slate.

I discuss the piece on the Majority Report with Sam Seder (also in-studio video here).

Less in favor:

Marvin Olasky, author of the Tragedy of American Compassion (which is one focal point of the article), responds in World.

Philathrophy Daily ran two articles critical of the piece, both at the forefront of the voluntarism fantasy's worldview. The first is from Hans Zeiger and the second from Martin Morse Wooster, who breaks out the paralipsis "I could argue that Mike Konczal and the Roosevelt Institute has a hidden agenda: to force the U.S. to accept Soviet-style communism ... I won’t make that argument because I know it isn’t true."

Rich Tucker at Townhall says that I do "a better job than Barack Obama did explaining the president’s 'You didn’t build that' philosophy," which I'll take as a compliment.

Reihan Salam has a set of responses at The Agenda.

Howard Husock argues that  charitably-funded, non-governmental programs are better than government at helping help individuals thrive at Forbes.

Don Watkins at the Ayn Rand Institute has a five part (!) critical response; you can work backwards from the fifth part here.

Anarchist Kevin Carson sees "the welfare state nevertheless as an evil necessitated by the state-enforced model of capitalism, and ultimately destined to wither away along with economic privilege and exploitation" in his response.

I'll add any more as they happen. (Last updated April 11th.)

My recent Voluntarism Fantasy piece (pdf) for Democracy Journal has gotten a fair amount of coverage. So I'm going to use this post, which will be updated, to keep track of the links to other people engaging, if only so I can respond in the future.

The piece was also reprinted at The Altantic Monthly.

Reddit thread with comments.

In favor of the piece:

Michael Hiltzik covers the argument in the LA Times' opinion page and EJ Dionne in the Washington Post's opinion page.

Matt Bruenig notes that the way we discuss this reflects a deep status quo bias at The Week.

Elizabeth Stoker, channeling Niebuhr, makes the strong Christian case that charity and government social insurance go together at The Week.

Sally Steenland of Center for America Progress also addresses the fantasy in this article.

Erik Loomis makes an excellent point that in addition to the rest of the 19th century state, the "federally subsidized westward expansion was also part of this welfare state, as Republicans especially explicitly saw the frontier as a social safety net that would alleviate poverty without directly giving charity to people."

James Kwak agrees that there's "No Substitute for the Government" here.

Jordan Weissmann argues that "Charity Can’t Replace the Safety Net" over at Slate.

I discuss the piece on the Majority Report with Sam Seder (also in-studio video here).

Less in favor:

Marvin Olasky, author of the Tragedy of American Compassion (which is one focal point of the article), responds in World.

Philathrophy Daily ran two articles critical of the piece, both at the forefront of the voluntarism fantasy's worldview. The first is from Hans Zeiger and the second from Martin Morse Wooster, who breaks out the paralipsis "I could argue that Mike Konczal and the Roosevelt Institute has a hidden agenda: to force the U.S. to accept Soviet-style communism ... I won’t make that argument because I know it isn’t true."

Rich Tucker at Townhall says that I do "a better job than Barack Obama did explaining the president’s 'You didn’t build that' philosophy," which I'll take as a compliment.

Reihan Salam has a set of responses at The Agenda.

Howard Husock argues that  charitably-funded, non-governmental programs are better than government at helping help individuals thrive at Forbes.

Don Watkins at the Ayn Rand Institute has a five part (!) critical response; you can work backwards from the fifth part here.

Anarchist Kevin Carson sees "the welfare state nevertheless as an evil necessitated by the state-enforced model of capitalism, and ultimately destined to wither away along with economic privilege and exploitation" in his response.

I'll add any more as they happen. (Last updated April 11th.)

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Daily Digest - April 8: Equal Pay Still Isn't a Reality

Apr 8, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

Why the GOP is Wrong About the Pay Gap (MSNBC)

With President Obama signing executive orders to fight the pay gap on Equal Pay Day, Irin Carmon lays out the shortcomings in the current system for fighting pay discrimination.

Click here to receive the Daily Digest via email.

Why the GOP is Wrong About the Pay Gap (MSNBC)

With President Obama signing executive orders to fight the pay gap on Equal Pay Day, Irin Carmon lays out the shortcomings in the current system for fighting pay discrimination.

Cities Advance Their Fight Against Rising Inequality (NYT)

Cities are working to fight inequality locally because they aren't willing to wait on the federal government, writes Annie Lowrey. Seattle, which is debating a $15-an-hour minimum wage, is a prime example.

  • Roosevelt Take: Roosevelt Institute President and CEO Felicia Wong gave the closing remarks at Seattle's Income Inequality Symposium on March 27.

Maryland Set to Increase Its Minimum Wage to $10.10 by 2018 (WaPo)

Jenna Johnson reports on the final agreement on the minimum wage in the Maryland legislature. Maryland is the second state to take President Obama's advice and lead the charge for a $10.10 minimum wage.

Congress May Extend Corporate Tax Breaks But Not Unemployment Benefits (National Priorities Project)

Mattea Kramer points out a case of classic Washington illogic: Congress is preparing to extend corporate tax breaks worth $700 billion, but won't extend unemployment insurance because it would add $10 billion to the deficit.

GOP Grapples With The Unsettling Fear That Obamacare May Succeed (TPM)

Sahil Kapur says the 7 million Americans and potential voters who registered for insurance on the exchanges during open enrollment create a challenge for Republican candidates, whose base still supports repeal.

Yes, Rubio's Antipoverty Plan Would Cut Benefits to Working Parents (TNR)

Danny Vinik writes that it's mathematically impossible for Senator Rubio's plan to increase benefits for childless working adults and remain deficit-neutral, as his office has claimed it will, without reducing benefits to parents.

Workers on the Edge (TAP)

David Bensman looks at the difficulties faced by workers whose employers misclassify them as independent contractors. Employers do this to avoid paying workers' compensation, overtime, and even some taxes.

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Daily Digest - April 7: Monopolies are a Net Loss for Economic Growth

Apr 7, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

How to Build a High-Speed Broadband Network in Seattle (Seattle Times)

Roosevelt Institute Fellow Susan Crawford explains how Internet service provider monopolies limit the Seattle mayor's goals for economic growth, and how the city could go about installing high-speed fiber.

Click here to receive the Daily Digest via email.

How to Build a High-Speed Broadband Network in Seattle (Seattle Times)

Roosevelt Institute Fellow Susan Crawford explains how Internet service provider monopolies limit the Seattle mayor's goals for economic growth, and how the city could go about installing high-speed fiber.

Not Your Grandpa’s Labor Union (Boston Globe)

Leon Neyfakh looks at efforts to reshape labor organizing in light of precarious relationships between employees and employers. He speaks to Roosevelt Institute Fellow Dorian Warren about the approach he and colleagues take with the Future of Work Initiative.

  • Roosevelt Take: The Future of Work Initiative recently released a white paper on labor regulation and enforcement by Fellow Annette Bernhardt, and a report on worker organizing by Senior Fellow Richard Kirsch.

U.S. Adds 192,000 Jobs in March as Unemployment Rate Remains at 6.7% (The Guardian)

Job growth was lower than economists expected, says Heidi Moore, which seems to confirm that the U.S.'s economic recovery is, as Fed Chair Janet Yellen put it, "far from complete."

Labor Secretary: Long-term Unemployment Keeps Me up at Night (Five Thirty Eight)

Ben Casselman speaks to Tom Perez following the release of the March jobs report. Perez says government needs to do more for the long-term unemployed, but the cost of such programs is challenging.

Obama To Sign Executive Orders On Equal Pay (HuffPo)

Laura Bassett reports that the president's orders will mirror the likely-to-fail Paycheck Fairness Act, which is meant to hold contractors more accountable for sex- or race-based salary differences.

Under Pressure, Wal-Mart Upgrades its Policy for Helping Pregnant Workers (WaPo)

Unfortunately, writes Lydia DePillis, while Wal-Mart's new policy is an improvement, it still might not be enough to ensure the company accommodates pregnant workers on the job instead of forcing them out of work.

New on Next New Deal

Labor Law for All Workers: Empowering Workers to Challenge Corporate Decision Making

Roosevelt Institute Senior Fellow Richard Kirsch concludes his series on his new report on labor reform by discussing additional policy proposals that push back on the major challenges of organizing workers in today's economy.

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Labor Law for All Workers: Empowering Workers to Challenge Corporate Decision Making

Apr 4, 2014Richard Kirsch

This is the sixth and last in a series of posts summarizing a new Roosevelt Institute report by Senior Fellow Richard Kirsch, entitled "The Future of Work in America: Policies to Empower American Workers to Ensure Prosperity for All." The report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class.  Today’s post outlines possible policy solut

This is the sixth and last in a series of posts summarizing a new Roosevelt Institute report by Senior Fellow Richard Kirsch, entitled "The Future of Work in America: Policies to Empower American Workers to Ensure Prosperity for All." The report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class.  Today’s post outlines possible policy solutions to several major challenges to organizing workers in today’s economy. Over the next year, the Future of Work project will be exploring many of these ideas in depth. Their inclusion here is to begin surfacing ideas, rather than as final recommendations for reform.

If we are to give American workers the ability to bargain for a fair share of the wealth they create, we need strengthen labor law – as discussed in my last post – and bring in 34 millions workers (one-in-four) who are now excluded from the National Labor Relations Act.  These include domestic workers, farmworkers, front-line workers with minimum supervisory responsibilities, and public employees. The law should also be extended to include many workers now considered “independent contractors, ” even though an employer effectively determines their pay and working conditions. Examples range from truck drivers and cab drivers to adjunct faculty.

Some of the most innovative and effective organizing of low-wage workers is being done by new types of worker organizations. Worker centers and other groups can and often do perform public services, such as job training, occupational safety and health training, monitoring compliance with labor laws and enrolling workers in a variety of public programs. Government funding should be awarded to the worker groups for these services. Public entities could also bargain directly with worker groups, such as those representing home health care workers. And when government directly or indirectly pays for workers – for example home health care workers are funded by Medicare and Medicaid, – it should require that workers have decent wages and benefits, and provide sufficient funding.

We should also imagine broadening the scope of traditional labor law in the United States, to challenge traditional corporate prerogatives in the economy. When corporate growth comes at the expense of workers, it slows down the economy, because workers have less to spend. Corporations hurt communities when they relocate to seek lower paid workforces and lower taxes, or lobby against worker protections. When corporations lobby for lower taxes, they shirk their responsibility to pay for public services – from the roads on which they transport their goods, to the schools that educate their workers – resulting in deteriorating services and higher taxes on individuals and other businesses that do not get tax breaks.

Organized workers can serve as a powerful antidote to the concentration of corporate power. The law should block corporations from transferring jobs from unionized to non-unionized facilities and from making long-term investment decisions that modernize non-union facilities at the expense of union facilities. Under current law, these practices are banned only when the NLRB can prove that the employer was motivated by anti-union bias, a high bar that is difficult to reach.

The law should require unionized employers to recognize the union as the representative of new workers at any new facilities that the employer establishes or acquires. Unionized employers should not be allowed to close their business or specific facilities without first offering them for sale on the market. Bankruptcy courts should not be able to change union contracts without permission from the union.

The scope of subjects over which employers are currently required to bargain with their employees could be expanded to a number of other subjects that impact workers and communities, including the introduction of new products, decisions to invest in new facilities, pricing, and marketing. In that way, the welfare of workers - not just the interests of shareholders and executives – would be considered in business decisions. Strikes could also be allowed over a broader range of corporate policies, including decisions that impact communities and consumers.

Workers could also be given more of a role in corporate decision-making by requiring employers to allow the formation of “works councils,” an organizational form common in European countries. Works councils are established jointly by employers and worker organizations to represent workers in decisions in the workplace, ranging from personnel and management decisions to policies governing working conditions and major investments and locations. The current provisions in the NLRA, which are designed to block the formation of employer-controlled unions, may need to be amended to clarify that works councils may be set up when the workers approve of the councils and are not objectively dominated by the employer. Another measure would require that corporate boards of directors include representatives of unions, who would have full access to all corporate data.

Local, state, and federal governments could leverage public contracts and subsidies to require employers to comply with workers’ rights to organize. For example, they could prohibit employers from running anti-union campaigns and they could require the recognition of card check elections or other forms of establishing majority support. Government could also require that firms that receive public contracts and subsidies meet standards for pay and benefits, as President Obama has done with his recent executive order establishing a $10.10 minimum wage for workers of federal government contractors.

I’ll conclude with an observation about the politics of the variety of purposely-ambitious policy ideas I’ve outlined in the last two posts in this series. Good ideas can play a key role in organizing workers and in the other ways of making change. It is much easier to get where you want to go if you know where you want to go. Good ideas give people hope that there can be a better world and help them see the way forward.

But the power to win these policies will come through organizing people at work and in their communities, through changing culture and the public’s understanding of the importance of organized workers in moving the economy forward. The most important of these will be organizing workers to demand that they receive a fair share of the wealth they help create.

We hope that the ideas and discussion generated by the Future of Work in America will inspire Americans to ensure that every job respects the dignity and value of every worker, as we build an America of broadly shared prosperity.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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In the Wake of McCutcheon, Can Democracy Tame Capital?

Apr 4, 2014Richard Kirsch

With wealth concentrating in the hands of the few, and the Supreme Court handing even greater political power to those with big money, what can be done to protect democracy?

The Supreme Court’s McCutcheon decision, making it even easier for the rich to buy political power, highlights the big question raised by Thomas Piketty’s new instant economic classic, Capital in the Twenty-First Century. What chance is there for our democracy to stop the relentless accumulation of wealth by the richest few?

With wealth concentrating in the hands of the few, and the Supreme Court handing even greater political power to those with big money, what can be done to protect democracy?

The Supreme Court’s McCutcheon decision, making it even easier for the rich to buy political power, highlights the big question raised by Thomas Piketty’s new instant economic classic, Capital in the Twenty-First Century. What chance is there for our democracy to stop the relentless accumulation of wealth by the richest few?

The core lesson of Piketty’s book, based on extensive analysis of data, is that, as Eduard Porter summarized in the Times, “the economic forces concentrating more and more wealth in the hands of the fortunate few are almost sure to prevail for a very long time.” Piketty says that as the return to capital exceeds economic growth, an ever larger share of national income goes to the owners of capital, the managers of capital and to their heirs.

Economics can’t reverse this, Piketty warns. Only “political action can make this go in the other direction,” he told Porter. The political action he recommends is global taxation of wealth and highly progressive income taxes. As James Galbraith points out in a review of Piketty’s book in Dissent, labor policies like raising the minimum wage and empowering labor unions would also work to share increases in national income more fairly and reduce income inequality, as would robust inheritance taxes.

Policy solutions are easy to come up with. The enormous challenge is that the more wealth is concentrated, the harder it becomes to enact those policies.

That’s not how it is supposed to work in a democracy. In theory, if the great majority of people are doing worse, while a few are doing much better, the majority should be able to change the policy at the voting booth. As just about anyone in America will tell you – from the Tea Partiers who decry crony capitalism to the Occupiers who rail against the 1% (I’m with them) – that’s not happening.

In the last few years, several academic studies by Larry Bartels and others have documented that what the rich believe prevails in politics and what the rest of us think has relatively little impact. The most recent study, released last month, was summarized in Forbes this way:

Those who have assets worth $40 million or more, hold undue sway over the positions politicians take on issues ranging from health care to global warming to defense spending. The wealthiest Americans, contends the paper, are more conservative than the public as a whole on many issues, and U.S. public policy reflects that.

That academics are finding what everyone outside of the five-member conservative majority in the Supreme Court believes – money buys influence, not just access – is gratifying, but hardly surprising. Of course, the political clout of the wealthy is based on more than just campaign cash. It’s control of major media and of much of academia. It’s control of people’s lives, so that corporations can threaten to cut jobs due to pro-labor policies and those threats are too scary for many people to risk challenging. It’s the prevalence and convergence of the conservative narrative, creating the “false consciousness” that leads so many people to vote against their own economic self-interest.

If we look to American history for guidance on whether democracy can rally, the lessons are not clear. For the first three centuries of European settlement of the United States, the opportunities offered by the expanding frontier relieved the pressure for economic justice. But as the frontier closed, the political pressure for policies to rein in corporate concentration and provide basic labor rights intensified. The result was the landmark legislation enacted in the Progressive era, from income and inheritance taxes to child labor laws to trust-busting. But that didn’t stop the huge rise in income inequality that led up to the stock market crash of 1929.

The New Deal provides more positive evidence that if it gets bad enough for enough people, the political system will respond dramatically: regulating finance, establishing labor standards and the right to organize, providing for social insurance, government job creation. Still, it took a world war for the political system to make the all-out investment in jobs and conditions for growth that built the great post World War II middle-class.

So where does that leave us in 2014, after 40 years of slowly stagnating wages and gradual but relentless shrinking of middle-class reality and hopes? My first boss, Ralph Nader, wrote that “pessimism has no survival value” and 39 years after he hired me I continue to follow that advice. I can see many positive signs that we can successfully organize the political will for progressive policies to create an America that works for all of us, not just the wealthy few.

Most encouraging are new movements, by low-wage workers and by people demanding we stop killing the planet. I’m encouraged by the Millennial generation’s belief in community and embracing of diversity. And by the rising American electorate of women and communities of color who share with Millennials a belief in collective action to care for our loved ones and our communities. I’m lifted by the election of a growing number of economic progressives to local and state leadership and most recently to Congress. All of these groups share a deep concern about the state of our democracy, reminding us as well that with a switch of just one vote, the Supreme Court can reverse the disastrous Citizens United and McCutcheon decisions, as well as the damage done by striking down key parts of the Voting Rights Act.

Can the powerful forces Piketty describes by turned back by a resurgent democracy? Two thousand years ago, Plutarch observed, “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.” The stakes in the 21st Century are still that great. Don’t mourn: organize.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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Farewell, Campaign Finance Restrictions, and Hello, Mega-Donors

Apr 4, 2014Jeffrey Raines

Yesterday's decision on McCutcheon v. FEC will radically change the power of individual donors, the amount of money in politics, and how we look at campaign finance reform.

Yesterday's decision on McCutcheon v. FEC will radically change the power of individual donors, the amount of money in politics, and how we look at campaign finance reform.

While he made a few conciliatory gestures to the left-leaning justices in the first page of his decision, the core of Chief Justice John Roberts's decision on McCutcheon v. FEC was simple and explicit: while Congress can regulate money in politics, it "may not, however, regulate contributions simply to reduce the amount ofmoney in politics." After the decision was announced in his favor, the first thing Shaun McCutcheon probably did was get out his checkbook. Meanwhile RNC Chair Reince Preibus, giddy with excitement, probably will be framing the first page of the decision on his office wall. One surprising person who was upset by the decision was Justice Clarence Thomas, who wanted to go farther than the Court and completely destroy all contribution limits.

McCutcheon is relatively simple in terms of its effect on money in politics. It eliminates an individual’s aggregate contribution limit. Or in layman’s terms, no one can stop you from investing millions into campaigns so long as you don’t go over individual limits of $5,200/cycle for each candidate or $10,000/cycle for each PAC.

So what’s still in place? We can look at the major restrictions on campaign finance of the past 40-some years. Much of the Federal Election Campaign Act of 1971 has been overturned or undermined, or proven to be incomplete or ineffective. The 1974 amendments to that act were overturned as well, in Buckley v. Valeo. And the Bipartisan Campaign Reform Act, or McCain-Feingold, has mostly been overturned as well. The exceptions are the laughably inadequate disclosure requirements, the rule that foreign nationals can't make political contributions, and the increased contribution limits, which were indexed to inflation.

And what's left? Not much. McCutcheon v. FEC does not simply undo the precedent set over forty years ago in Buckley v. Valeo. It will drastically increase the power of the wealthiest 1% of Americans because there is one less restriction on how much they can affect a campaign cycle.

There is some speculation that McCutcheon will actually improve things, because it will give more power and accountability back to the people and away from SuperPACs. Let’s debunk that terrible justification right now: The McCutcheon decision will only increase the amount of money in politics, without affecting the bottom lines of PACs, SuperPACs, or “CareyPACs” hardly at all. If you are someone like McCutcheon, and can afford to contribute more than $123,200 every election cycle, it’s only going to increase the amount of money you can hand out to the red-tied politicians waiting outside your office like a Great Depression-era bread line.

Senator Chuck Schumer of NY said in a statement yesterday “by eliminating aggregate contribution limits, nothing can stop a single millionaire from lining the pockets of an entire state’s congressional delegation.” In 72% of the country (36 states), an individual like McCutcheon could already do just that, because those states have small enough delegations. Now it’s possible in the entire country. Instead of contributing the maximum to as many as 9 candidates (the aggregate limit to candidates was $48,600), anyone with money burning a hole in their pocket could contribute the maximum to each of the 55 California Democrats or Republicans running for the House and Senate. That’s a potential contribution of $286,000 to the California delegation. And if McCutcheon (who is a conservative) wanted to contribute the max to every Republican running for the House and Senate in 2014, it would cost him a mere $2,433,600. That might not seem like a lot in comparison to the $150 million Sheldon Adelson gave last cycle, but it’s an extra $2.38 million to candidates that could have instead bought groceries for a family of four for over 150 years. That’s rent in New York City for 65 years. How many Americans can choose giant campaign contributions over that?

My prediction for 2014 was already record-high expenditures and expansive war chests simply because that’s the trend we’re facing. Now it’s going to skyrocket. Expect every major news outlet to start profiling the “mega donors” once August and September rolls around. You’ll see men like McCutcheon and Sheldon Adelson’s profiles on sites that track big money's influence on politics to blow up with contribution records – at least for the contributions that are disclosed.

For further reference on campaign finance reform, see the oral arguments from McCutcheon, and analysis from the Sunlight Foundation on the case and how it will benefit thetop 1,000 donors, as well as The New Yorker's John Cassidy's take.

Jeff Raines is the Chair of the Student Board of Advisors for the Roosevelt Institute | Campus Network.

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Daily Digest - April 4: McCutcheon Makes Money Speak Louder

Apr 4, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

Big Money in Politics (ABC World News)

Roosevelt Institute Senior Fellow Jonathan Soros speaks with Brian Ross about political spending in the post-McCutcheon era, with no limits on aggregate campaign contributions.

Click here to receive the Daily Digest via email.

Big Money in Politics (ABC World News)

Roosevelt Institute Senior Fellow Jonathan Soros speaks with Brian Ross about political spending in the post-McCutcheon era, with no limits on aggregate campaign contributions.

Supreme Court Decision Opens Floodgates for More Campaign Cash (Real News Network)

Roosevelt Institute Senior Fellow Tom Ferguson discusses how the McCutcheon decision will affect American democracy. He says that without public campaign financing, just a few people get to control the system.

Fast Food Workers Will Protest Again Today. Here's What They're Up Against. (MoJo)

When fast food workers rally for a $15-an-hour wage, they're facing a well-funded and well-coordinated restaurant industry. Erika Eichelberger runs through the numbers from a new report on the restaurant lobby.

Emails Show Sen. Corker’s Chief of Staff Coordinated with Network of Anti-UAW Union Busters (In These Times)

Mike Elk reports on leaked documents showing that members of Tennessee Senator Bob Corker and Governor Bill Haslam's staffs worked directly with anti-union groups during the union drive at the Chattanooga Volkswagen plant.

Ryan Budget Gets 69 Percent of Its Cuts from Low-Income Programs (Off the Charts)

With $3.3 trillion of the budget's $4.8 trillion in non-defense spending cuts coming from programs that support low-income Americans, Richard Kogan questions the rhetoric of the Ryan budget helping the poor.

New on Next New Deal

In the Wake of McCutcheon, Can Democracy Tame Capital?

Roosevelt Institute Senior Fellow Richard Kirsch ties the McCutcheon v. FEC decision to Thomas Piketty's new book, Capital in the 21st Century, as the Supreme Court has just increased the power of wealth in this country.

Farewell, Campaign Finance Restrictions, and Hello, Mega-Donors

Jeff Raines, Chair of the Student Board of Advisors for the Roosevelt Institute | Campus Network, looks at the McCutcheon decision and the state of campaign finance law and considers what's to come in the 2014 elections.

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Labor Law That Would Support Organizing in Today’s Economy

Apr 3, 2014Richard Kirsch

This is the fifth in a series of posts summarizing a new Roosevelt Institute paper report by Senior Fellow Richard Kirsch, entitled the "The Future of Work in America: Policies to Empower American Workers for and Ensure Prosperity for All." The paper report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class.

This is the fifth in a series of posts summarizing a new Roosevelt Institute paper report by Senior Fellow Richard Kirsch, entitled the "The Future of Work in America: Policies to Empower American Workers for and Ensure Prosperity for All." The paper report provides a short history of how the rise and decline of unions and then explores reforms in labor policy to empower American workers to organize unions and rebuild the middle class. Today’s post outlines possible policy solutions to several major challenges to organizing workers in today’s economy. Over the next year, the Future of Work project will be exploring many of these ideas in depth. Their inclusion here is to begin surfacing ideas, rather than as final recommendations for reform.

For decades, organized labor has supported federal legislation that aims to correct the imbalances in the NLRANational Labor Relations Act (NLRA), which favor employers and block unionization. The most recent push was for the Employee Free Choice Act (EFCA), which President Obama supported when he ran in 2008. However, in the face of threatened filibuster in the Senate by Republicans and a handful of Democrats, the President never made the issue a priority.

The list of potential reforms to the NLRA is as long as the law’s weaknesses. The top priority inof the EFCA was requiring employers to recognize a union once a majority of workers in the workplace had signed a card supporting the union. Card check elections could be expanded to include mail ballots and confidential on-line ballots as methods for demonstrating support from a majority of workers.

Other potential policies focus on leveling the playing field in union elections. Employers could be required to allow union representatives to have access to workers on the employer’s premises and be given equal time to speak to employees, when equal to the time employers spend campaigning against unionization.

Other reforms would create meaningful disincentives for employers, such as substantial penalties for retaliating against workers, rather than the current virtually meaningless penalty of requiring employers to provide back pay. Employers could also be prohibited from hiring replacement workers during a strike or lockout. Indeed, lockouts could be outlawed altogether.

While the reforms above are aimed at correcting long-established imbalances in labor law, other polices would tackle a big challenge in today’s economy. The nation’s biggest employers, fast-food chains and big box stores, have thousands of locations, each with a relatively small number of workers. Organizing these huge employers could be facilitated by allowing bargaining at multiple worksites. This would give unions the right to define the boundaries of bargaining units, either combining the units that exist within a single corporation or bringing together workers who labor for multiple employers within the same industry.

Another approach would require the creation of multi-employer consortia for the purposes of bargaining, allowing for workers to organize for better wages and working conditions in an entire industry.

Another policy would expand the use of hiring halls to a number of industries, potentially modeled after the construction industry. In construction, union members typically work on short-term jobs for multiple employers. These construction workers are hired through union hiring halls, and they receive health and retirement benefits from a multi-employer insurance fund administered jointly with the union.

To build on this model, employers in other industries could be required to hire workers through hiring halls, run by worker organizations. Employers would be required to pay into a fund run by the worker organizations, which would administer portable benefits - – including health coverage, retirement accounts, and earned sick days, family leave, and vacation - – earned by individual workers through their work with multiple employers,

Another transformational policy would be to end the requirement that a union win majority recognition in a given bargaining, with the responsibility to represent all the workers in that unit. Instead, unions would could be allowed to represent only those workers who choose to join the union. Members-only unions could operate across numerous employers within an industry, within a region or across a supply chain. Repealing exclusive representation would allow members-only unions to collectively bargain for their members and to represent only their members in grievances with their employers. A hybrid system would allow members-only unions to function until such time that a majority of workers vote to establish a union with the responsibility of exclusive representation.

In today’s economy, many workers are employed by companies that are largely or wholly dependent on huge companies that drive national and global supply chains. Labor policies must enable workers to seek decent wages and working conditions from those big companies, even if they do not work for them directly.

Companies like Walmart often contract with warehouse companies that almost exclusively handle Walmart-bound products. Policy changes to hold a dominant employer accountable for the companies that it effectively controls, would make a company like Walmart accountable for the conditions in those warehouses and require them to bargain with the warehouse workers. Similarly, it is common in the garment industry for a major retailer to require garment factories to produce items to the retailer’s specifications. The major company would be held accountable to the workers in those subcontracted garment factories. The dominant employer would be responsible if the controlled company violates labor laws, including labor standards, worker organizing and occupational safety and health protections.

Another approach would be to address the now-common practice of employers misclassifying workers as “independent contractors” in order to reduce compensation costs to employees and to exclude those workers from federal labor law protections. If workers are misclassified, all of the employers up the supply chain could be held legally responsible. Anti-trust and labor law should be changed to remove any barriers to worker organizations reaching agreements with a dominant employer that would apply to other firms in the supply chain.

Restoring the right to organize boycotts or strikes of companies in the supply chain, would be another tool for unions to pressure companies upstream or downstream from the company being organized.

Taken together, these measures would level the playing field for workers who now face a huge economic and legal imbalance as they seek a fair share of the enormous wealth being produced by huge, global employers.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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