Brad DeLong's Semi-Daily Journal (2004)

That's a winner. Hey everyone, we've cut taxes for wealthy and those making more than decent salaries. So now we want to cut the amount wage earners make from overtime. The gap between those who really really have and the rest is not widening at a fast enough pace.

You watch, they'll justify reduction in overtime on a desire to keep jobs in this country because wages will be lower and thus more competitive.

But this is from a guy who thought the best use of public money was a show trial impeaching then President Clinton.

Hey, the next thing we know the Administration will come out in articles and quotes strongly in favor of outsourcing jobs oversea....

Oh wait.

P.s. Didn't the overtime reductions already pass in that evil evil Omnibus spending bill back in January?

http://balta.blogspot.com

Speaking about Bush's economic policy, it's time for another "Why can't we have a better press corps (Weisman edition)" post:

http://www.washingtonpost.com/wp-dyn/articles/A46543-2004Feb16.html

(If the link doesn't work in the text of this post, I also placed it in the URL field of this comment.)

Wow. So tell me--where is Homo Economicus in all this? Why don't people who work lots of overtime (which is more and more of us, these days) rise up and righteously smite W. Bush? Class consciousness, hell! Where's the individual self-interest?

The dirty little secret is that people who are struggling full-time (or more) to get by tend to have all of their energies sucked up by that struggle.

I'm surprised that the Democrats haven't made more of this I found on some obscure website but if it gets out, it spells DOOM for Bush:

U.S. ECONOMY
Greenspan says Congress should cut Social Security to keep tax cuts
By MARTIN CRUTSINGER
Associated Press
2/13/2004

WASHINGTON - Federal Reserve Chairman Alan Greenspan said Thursday that Congress should make President Bush's tax cuts permanent and cover the $1 trillion price by trimming future benefits in Social Security and other entitlement programs.
Greenspan was asked how he would come up with the decade-long cost of $1 trillion to pay for extending the 2001 and 2003 individual tax cuts. "I would argue strenuously that it should be taken out on the expenditure side," he answered.

Greenspan, chairman of a commission that recommended solutions to a Social Security funding crisis in 1983, said he has felt for a long time that the promised program benefits greatly outweighed the government's ability to pay for them.

He recommended two items for study in terms of trimming benefits: linking the retirement age to the population's longer life spans and tying annual cost of living benefits in Social Security to a less-generous inflation index than the Consumer Price Index.

http://www.buffalonews.com/editorial/20040213/1031952.asp

Bush's war on overtime pay has been completely ignored by the media. Sadly, the vast majority of people affected by the new rules will only find out about the changes when they get a paycheck that's 25% smaller.

This should be a silver bullet for the Democrats. It completely encapsulates the comtempt Bush and his Republican henchmen have for middle-class working people. Unfortunately, I've yet to hear any of the candidates even mention it.

Shorter Greenspan:

"Are there no prisons? Are there no workhouses?"

Yes, the changes to the FLSA passed already and will take effect in (I think) March.

I've read through the Economic Policy Institute's critique of the rules plus some critiques by the Economic Policy Foundation of the EPI's critique. Essentially the EPF disputes the scope of the EPI's claims about the impact of these changes, but they don't dispute the nature of the impact themselves.

As near as I can tell, here's what the impact will be. People at the low end of the income spectrum will gain the right to overtime pay. People at the high ends will likely lose it. People in the middle are far more likely to lose it than to gain it.

Those conclusions don't take into account the inevitable changes in employer behavior that even the DoL agrees will occur. In short, employers will calculate the cheaper option between the low end of the threshold for exemption ($22,100/yr) and the likely cost of OT for those under that threshold. They'll pay whichever is cheaper which means that while an employee might gain some income by being bumped up to the low end of the threshold, they'll lose income because they'll no longer be able to earn OT pay (if they meet the other criteria for exemption). They'll still work long hours, but they just won't be compensated for the time beyond 40/week.

(The same sort of thing might happen at the near the upper range of the exemption rules. If you earn $65,100 or more you're not eligible for OT. Employers may bump employees up to this level to avoid paying OT.)

In general, the changes may help younger workers to some extent (the large majority of those now under the new threshold are 25 or younger), but it will hurt older ones, many of whom have families. Not only will they get paid less for the same amount of work, but the incentive for employers to assign OT hours to these exempt employees will be much greater. For the same pay employees will work more hours. Aside from the obvious fact that these workers will not get paid for their OT, the other down side is that the time spent working OT for free cannot be spent working a second job for pay.

It's hard to deny that these changes will likely have the effect of shrinking the middle class (depending on how one wants to define middle class), and it ought to give ample ammunition to someone like Edwards who says this about Jobs and the Economy on his web site:

"This administration’s economic vision has one goal: to get rid of taxes on unearned income and shift the burden onto people who work. They want a world where the only people who have to pay taxes are the ones who do the work…I believe the backbone of the American economy is the hard work, determination, and ingenuity of the middle class, not the insiders. I believe the way to grow the economy is to grow and strengthen the middle class, not shrink its size and add to its burdens."

Granted, I'm not following the Democratic primaries in great detail, so maybe Edwards has latched onto this development. But the Democratic Party as a whole needs to shed seering light on this tangible Republican assault on the middle class.

Bush gets away with outrageous deficits and cutting overtime pay because he offers something the Democrats foolishly underestimate the political dividends on: lower taxes for a hell of a lot of people. Not just the outrageously rich.

I am a John Kerry supporter for now, and I don't like the Bush administration's lack of interest in equity, but Kerry could well lose me if it appears the Democrats are going to hike my taxes substantially.

Sorry. But for a lot of folks this trumps stuff like overtime pay. And Bush knows it.

I have no problem with Greenspan's calls for cutting SS (I'm young! No skin off my back. My dad's back, yes, but regardless...).

However, Greenspan must also say tax cuts should be in payroll FICA taxes, not in income taxes.

That, or he should say there's a unified budget, and hence no social security crisis.

It's the only way for things to make sense, rather than just being ways rigging accounting to favor the rich as much as possible.

Bush gets away with outrageous deficits and cutting overtime pay because he offers something the Democrats foolishly underestimate the political dividends on: lower taxes for a hell of a lot of people. Not just the outrageously rich.

The existence of those massive structural deficits means that your taxes haven't been cut. They've been deferred until such time as the debt rises to the point that creditor nations think the risks too great to lend without a sharp increase in interest rate, and the USA decides that it would rather not default. Until Bush indicates how those structural deficits will be closed, he can chirp about lowering my taxes all he wants. I can't share in consigning the United States to the fate of Argentina for a few thousand bucks. I'd be as selfish and corrupt as he his.

Jim Harris:

Don't you see that deficit spending is just a 'foward tax' -- a tax in the future but a tax nonetheless.

The tax will be paid by taxpayers either directly through a tax increase or indirectly through inflation or both. Reagan raised taxes. Bush I raised taxes. Clinton raised taxes. All three raised taxes to reduce the deficits. They chose that course over inflation.

Nixon chose not to and the inflation genie was uncorked.

Short of the conquering the Middle East and appropriating their oil and charging the Chinese, Europeans and Japanese a $45 a barrel for the stuff, we either have tax increases, inflation, or in the worst case, both.

Yes, Wanderer, that is what is missing from the analysis. People who understand that deficits of this magnitude are just unallocated taxes give Bush far less credit for cutting taxes. My husband is in this camp -- he tends to vote Republican but he can't stomach what is happening on this front, and he simply does not believe that there is any discipline for cutting Medicare (obviously not, as the Rx benefit clearly demonstrates) or Social Security. I hope someone can come up with a sound bite soon to make this point more easily understood. President Spend and Borrow is pretty good but it doesn't nail the "who's going to pay for this mess" question.

Jim Harris' commment demonstrates one of the truly scary things about the U.S. electorate: That they are unable to understand the concept of "the common good." Worse, that they don't care one whit about the well-being of the United States.

Taking Harris' argument to heart, he and others like him would happily and eagerly see the country destroyed if it meant they could pocket a few extra dollars in tax savings.

We can only hope that they apply such logic in their own lives. Such people would never get their house fixed or the car repaired or their illnesses treated because these things cost money that could be better spent on the latest DVD or yet another dinner at the local chain restaurant. Never mind that over the longer term such a philosophy leaves you homeless, immobile, unemployed and desperately ill. Those things are meaningless when compared to the value of a copy of Gigli and a Bloomin' Onion.

Isn't it enough that jobs are going overseas in the form of "off-shoring." Most of those are in high-tech telecom customer service. I lost my job working for a telecom company in 2002 and it took me 7 months to find another job. I also have friends who are now stay-at-home dads because they can’t find jobs or find jobs that pay high enough to make it worthwhile in the field. I blame Bush for these job losses (about 250,000 jobs). I saw a report by Criterion Economics (at NMRC site http://www.newmillenniumresearch.org/archives) that said that having broadband to all homes in the US would create 61,000 jobs a year for the next 20 years and that’s just in telecom. This country is so far behind and Bush is to blame. We need jobs!!

"I have no problem with Greenspan's calls for cutting SS (I'm young! No skin off my back. My dad's back, yes, but regardless...).

However, Greenspan must also say tax cuts should be in payroll FICA taxes, not in income taxes.

That, or he should say there's a unified budget, and hence no social security crisis.

It's the only way for things to make sense, rather than just being ways rigging accounting to favor the rich as much as possible."

Posted by: Julian Elson on February 17, 2004 06:26 AM

Julian, remember that the tax cuts were skewed as much to the rich as possible. FICA taxes are apparently sacred, though.

And Greenspan has apparently gone along with the scam - endorsing tax cuts that he knew would cause a massive deficit, and then proposing cutting SS.

They aren't doing this for your benefit. They're doing it for theirs. Always, always keep that in mind.

The Bush Industrial Recovery Plan

Perpetual Winter:

"Industrial production rose 0.8% MoM in Jan, bang on expectations but coupled but marginal downward revisions to prior months. Those revisions resulted in a weaker than expected level (but on-consensus change) in CapU, going from 75.6% to 76.2%. Manufacturing output grew 0.3% MoM, still looking somewhat weaker than the manufacturing PMI's have been suggesting (see below). The big support in here came from utilities, with output surging 5.2% MoM on the back of the unseasonably cold weather. Generally speaking, the IP numbers have clearly improved, taking some slack up along with them, but the magnitude of the improvement has been slightly disappointing."

Great, if we just cancel summer, we will be back in the pink of economic health!

Do you have any doubt that the word is going out from Cheney to Republican CEOs to do a little gratuitous hiring for the cause prior to Nov. 2?

Those Greenspan comments were reported, but most of the headlines I saw said something like "Greenspan Supports Bush Tax Cuts."

You had to read down to the part about cutting Social Security.

I thought you were talking about *Phil* Graham and my first thought was, Awww why are they getting shy now, how about the stealing pensions economic plan?

Anyway thanks for the link that led me to the Bush campaign slogan anagrams. Well worth it.

PS. I'll take one of those gratuitous jobs.

dennisS: Phil Gramm spells his last name differently and retired from the Senate in 2002.

Bush gets away with outrageous deficits and cutting overtime pay because he offers...lower taxes for a hell of a lot of people. Not just the outrageously rich.

"Deficits are deferred taxes." ---Milton Friedmann

Bush is lowering taxes on us and increasing them on the next generation. On your children and grandchildren. No child left behind, indeed.

> Great, if we just cancel summer, we will be
> back in the pink of economic health!

---Sterling Newberry

I live in Chicago, and that's not even funny.

Someone should make that into a bumper sticker.

Someone should make that into a bumper sticker.

Julian Elson wrote, "However, Greenspan must also say tax cuts should be in payroll FICA taxes, not in income taxes.

"That, or he should say there's a unified budget, and hence no social security crisis."

DAMN STRAIGHT!!

I've been making this argument for awhile now.

EITHER SS is a separate account, the budget deficit that should be reported is the non-trust fund deficit (which is much higher than the unified budget deficit), the fact that SS will start drawing down it's assets in 2016/2017 is immaterial, ..., OR

there's a unified budget, contrary to the standard Republican line you don't have to pay income taxes to pay taxes, ...

Stirling, winter is just around the corner.

I would like to get back to the overtime side of this discussion. As anyone who has worked for a large corporation can tell you, companies have been playing fast and loose with their interpretation of the National Fair Labor Standards Act for some time now while the government has turned a blind eye (how do you think we've been achieving all that increased worker productivity as of late?). People have been "asked", under the misapplication of the "exempt" status, to put in unpaid overtime through a skillful combination of manipulation and coercion (the fear factor) but companies have still had to show some restraint because they knew they were skirting the law. Pity the working middle class once the new law goes into effect and companies can fully leverage their legal power to force unlimited unpaid overtime on their employees. We are about to see the re-emergence of the plantation mentality.

http://www.epinet.org/content.cfm/overtime_2003

When the Department of Labor issued its Notice of Proposed Rulemaking at the end of March 2003, EPI tried to understand how it could conclude that only 644,000 employees would lose their right to overtime pay. The proposal makes radical changes in the law, but the DOL regulatory analysis does not reflect them. So EPI analyzed the changes ourselves, with the help of a team of experts. EPI’s analysis determined that if this proposal became law, more than 8 million workers would lose overtime protection.

A subsequent analysis by EPI also concluded that the Department of Labor’s claim that 1.3 million low income workers would stand to gain overtime pay from their proposal is untrue. In fact, the number of low-income workers who would benefit from DOL’s proposal is certainly less than 737,000, and probably much smaller.

http://www.epinet.org/content.cfm/ot_numbers

The Truth Behind the Administration's Numbers on Overtime Pay

The U.S. Department of Labor (DOL) readily admits that its major overhaul of the regulations governing the right to overtime pay could cause the loss of overtime pay for 644,000 employees who are currently earning it. But the Economic Policy Institute estimates that more that more than eight million workers would lose overtime protection. Why are these estimates so radically different? It's because DOL is only counting a fraction of those affected.

DOL chose not to count all of the workers who will lose their federal right to receive overtime pay when they work more than 40 hours in a week. Instead, the only workers DOL includes in its estimate are those who are actually working overtime hours now and are getting paid for it. DOL did not count the vastly larger group of workers who, although eligible for overtime pay, aren't currently receiving it because they are not working overtime hours. The way DOL estimates the impact of the rule, a worker who isn't working overtime today, but will work overtime hours next month or next year, isn't counted as losing anything. DOL only counts the loss of current overtime pay, not the loss of the right to receive overtime pay. Only about 11 million workers currently earn overtime pay, whereas 80 million are covered by the law's overtime protection.

Today's Benson:

http://www.azcentral.com/arizonarepublic/opinions/benson/

"Yes, the changes to the FLSA passed already and will take effect in (I think) March."

This is incorrect. The FLSA remains unchanged and to my knowledge the current Congress never proposed any changes to the FLSA. What has happened is that last March the Administration published a proposed rule that would change, among other things, the definitions for a number of the catetories of employees that are exempt from the overtime provisions of the FLSA.

In response, Democrats in Congress introduced legislation that would have prohibited the Dept. of Labor from revising the existing regulations implementing the FLSA. This legislation was originally attached as a rider to the omnibus spending bill but was removed by Republicans at the last moment.

So where do things stand now? The Administration has published proposed changes to the regulations implementing the FLSA and Congress has chosen not to intervene. So presumably the Department of Labor will proceed with final regulations. However to my knowledge we don't yet know when/if the final rule will be published and to what extent it will vary from the proposed rule in response to public comments. I imagine that the DOL is still sorting through hundreds of thousands of comments.

However I would say that it's a very good bet that they will push out a final rule ASAP to reward their business contributors, certainly before the 2004 elections. Because if they put it off until 2005 all bets are off if a Democrat takes the White House.

In any event, Anne is correct on the numbers. However no one can really know how many people will be affected because it's impossible to know how many employeers will recategorize workers under the new regulations. Ultimately a lot of these definitions are subject to quite a bit of interpretation and have to be done on a case-by-case basis. And just because a employers are no longer REQUIRED to pay overtime under the FLSA doesn't mean that they won't continue to do so in many instances. Just as employers aren't required to pay more than the minimum wage but do so anyway.

I'm late as usual but Julian, my experience with SS is great. My mom retired on SS and a small teacher's retirement and was able to live independently till her last illness. Saved my sanity for sure. I loved her greatly but could only take her in small doses. Hope you and your dad get along really well otherwise there may be a bit of skin scraped off your back.
My other data point is my marriage to a woman who was left with two teenagers to raise on a less than adequate income. SS picked up the slack and made her somewhat secure till the kids grew up.
I have heard too many young people giving up on SS , saying it won't be there for their retirement. It certainly won't if they don't fight for it. I told them when the SS age to full benefits was raised that their cohort should be in Washington with the rope, pitchfork and burning torches. You may live longer but living better is problematic. Will Walmart want to hire you at 70 to greet and press the flesh? I haven't read that with the increasing life span there is an increasing span of mental or physical capability. There may be some old coger of 100 who is phyically and mentally capable but he is at the very sharp point of the curve. I don't expect "fat tails" in this distribution.

Jim Harris: You sound like The Bad Guy who everyone bitches about -- the thoughtless, selfish, short-term, kamikaze voter. But you seem oddly self-aware, as if that's what you consciously decided to be. You oughta write a book, or give interviews, or something. People like you control the state of Oregon, and the rest of us are going nuts.

It's not so much the selfishness, as the short-sightedness, which leaves one so terribly open to simple GOP bait-and-switches.

Frankly, I don't really mind that, as I get older. Some people won't learn, and will suffer for it. O.K.

What bothers me is that this thinking takes the rest of us down with them.