Tag Archives: economy

Chart of the Day: Overweight Teenagers Earn Less as Adults

by JBWFlynnmh Posted on October 7, 2014

Mother Jones

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Here’s a stunning chart for you. It comes from a paper by a team of Swedish researchers, and it shows the relationship between earnings and weight among men. As you can see, adult earnings reach a peak around a BMI of 23—smack in the middle of the normal range—and then steadily decline as you get more overweight. But here’s the kicker:

In particular, we contribute to the existing literature by showing that there is a large labor market weight-related penalty also for males, but only for those who were already overweight or obese in adolescence. We replicated this pattern using additional data sets from the United Kingdom and the United States, where the results were strikingly similar. The UK and U.S. estimates also confirm that the penalty is unique to those who were overweight or obese early in life.

The earnings penalty for overweight (and underweight!) men isn’t due to simple discrimination. Men who become overweight as adults face no special career penalty. It’s only a problem for men who become overweight as teenagers. The Economist summarizes the paper’s conclusions:

At first glance, a sceptic might be unconvinced by the results. After all, within countries the poorest people tend to be the fattest….But the authors get around this problem by mainly focusing on brothers….They also include important family characteristics like the parents’ income. All this statistical trickery allows the economists to isolate the effect of obesity on earnings.

So what does explain the “obesity penalty”? They reckon that discrimination in the labour market is not that important. Neither is health. Instead they emphasise what psychologists call “noncognitive factors”—motivation, popularity and the like. Having well-developed noncognitive factors is associated with success in the labour market. The authors argue that obese children pick up fewer noncognitive skills—they are less likely, say, to be members of sports teams or they may face discrimination from teachers.

In other words, social ostracism of both underweight and overweight teenagers produces lower cognitive skills and lower noncognitive (i.e., social) skills, and this in turn leads to lower earnings as adults. It may seem like harmless teenage clique behavior, but it has real consequences.

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Chart of the Day: Overweight Teenagers Earn Less as Adults

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Spending During a Recession Is an Even Better Idea Than We Thought

by CyrilRuddell Posted on October 7, 2014

Mother Jones

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Matt O’Brien points today to a new paper that tries to estimate the value of the fiscal multiplier during recessions. The multiplier is a number that tells us how effective government spending is. For example, if the government spends a dollar on donuts, and then the baker uses part of that dollar to buy sugar, and then the sugar distributor uses part of that to pay her truckers, then the original dollar of government spending might spur total spending of more than a dollar.

On the other hand, if government spending simply takes a dollar out of the pockets of taxpayers, the net effect might be zero. Total spending might not change at all.

The value of the multiplier during the Great Recession has been a subject of considerable dispute over the past few years, but a new trio of researchers has produced an estimate higher than most previous ones:

Riera-Crichton, Vegh, and Vuletin took this analysis a step further. They focused squarely on countries that, between 1986 and 2008, had both been in a recession and increased spending. This last point is critical. Stimulus, remember, is supposed to be countercyclical: the government spends more when the economy shrinks. But historically-speaking, countries have actually cut spending about half the time that they’ve been in a slump. So counting all that austerity as “stimulus,” as most do, gives us a misleadingly low estimate of the multiplier, something like 1.3. But it turns out, based on this new better sample, that the multiplier is really around 2.3 during a garden-variety recession, and 3.1 during a severe one.

Hmmm. I can’t say that I understand this. Every estimate of the fiscal multiplier I’ve seen acknowledges that it’s different during recessions. And why would previous research have included countries that cut spending during a recession? This is a bit of a mystery. Nonetheless, if this new paper really does do a better job of estimating the multiplier, then it makes a very strong case that stimulus spending during a recession—especially a severe one—is critical to recovery. America’s obsession with austerity starting in 2011 is probably a big reason our recovery was so weak, and cutting spending now, as the eurozone is doing even as its economy decays yet again, is the worst thing they could do.

More infrastructure spending, please. After all, why not do it now when it’s practically a free lunch?

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Spending During a Recession Is an Even Better Idea Than We Thought

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How Kansas Is Selling Sam Brownback’s Failed Trickle-Down Tax Cuts

by gjrrkjujp Posted on October 1, 2014

Mother Jones

Kansas Gov. Sam Brownback’s reelection campaign is in serious trouble. The latest poll has the incumbent Republican losing to his Democratic opponent by 4 percentge points.

Read more about how Sam Brownback’s red-state experiment could turn Kansas purple.

As I explained in our November/December issue, Brownback’s woes can largely be traced back to the drastic tax cuts for the wealthy that he pushed through the state legislature. Kansas’ tax rate for top earners dropped from 6.45 to 4.9 percent, with further future cuts baked in. The cuts were even more generous for business owners, entirely wiping away their tax burden for pass-through income.

Brownback sold his tax cuts on supply-side promises of unbounded future growth, but the results have been less than stellar: While the state’s unemployment rate, like the national jobless rate, has dropped over the past few years, Kansas’ economic growth has lagged behind its neighbors’.

Despite these disappointing results, the state has settled on enticing out-of-state businesses with its low tax rate. Check out this full-page ad from the Kansas Department of Commerce, scanned from an issue of the US Small Business Administration’s magazine Small Business Resource by a reader:

Small Business Resource

That ad’s pitch—”one of the most pro-growth tax policies in the country” leads to “a perfect state”—lines up with the theories of free-market economist Arthur Laffer, the grand poobah of Ronald Reagan’s trickle-down economics. Brownback cited Laffer’s work to justify his cuts. During the thick of the legislative debate, he flew Laffer in for a three-day sales pitch, costing the state $75,000.

When I called Laffer in August, he excitedly proclaimed that Brownback’s cuts would prove a resounding success. “I’ll make you a very large bet that Kansas will improve its relative position to the US over, let’s say, eight years, hands down. I’ll bet you with great odds,” he told me. “I feel very confident that what Sam Brownback has done is and will be extraordinarily beneficial for the state of Kansas.”

As Laffer saw it, low tax rates would entice out-of-state residents and businesses to relocate. Laffer himself had moved to Tennessee sight unseen nine years ago, fleeing from California because of the Volunteer State’s lack of income tax. “In someplace like Kansas, I don’t think the income tax makes any sense whatsoever,” Laffer said. “That’s what we’re trying to move toward in Kansas. The income tax is a killer.”

Except that magical migration hasn’t developed yet. In August, the state added just 900 jobs, with a tepid growth rate of just half a percent for the full year. Maybe I should have made that bet with Laffer.

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How Kansas Is Selling Sam Brownback’s Failed Trickle-Down Tax Cuts

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A GOP Senate’s First Target: Elizabeth Warren’s Consumer Protection Agency

by KathleenEdmundl Posted on September 26, 2014

Mother Jones

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If the GOP wins the Senate, they’ll no doubt use the opportunity to push through a range of measures that are kryptonite to Democratic voters—new abortion restrictions, limits on the ability of the Environmental Protection Agency to combat climate change, a relaxation of the rules reining in Wall Street’s worst excesses.

But Republicans are particularly keen on handicapping one particular federal watchdog: the Consumer Financial Protection Bureau (CFPB), the three-year-old agency that Sen. Elizabeth Warren (D-Mass.) devised and helped build in the wake of the financial crisis.

The bureau’s job is to make sure Americans aren’t getting screwed by mortgage lenders, credit card companies, debt collectors, and other financial institutions. It’s the first federal agency designed specifically to protect everyday consumers from financial wrongdoing, and Republicans have done everything in their power to hobble the agency—including fighting the confirmation of its director, Richard Cordray. Winning the Senate in November could be their best chance to roll back Warren’s greatest accomplishment.

Half of their work is already done. The House has passed a bill that would limit the bureau’s power by replacing its director with a five-member panel, and subjecting its budget to the congressional appropriations process—meaning that hostile lawmakers could starve it to death. (Unlike most federal agencies, the bureau is bankrolled by the Federal Reserve, an effort to free it from the whims of partisan politics.) House Republicans have also introduced legislation to let other financial regulators overturn CFPB rules, to eliminate a fund the bureau uses to compensate consumers who’ve been defrauded by an institution that’s gone belly-up, and to restrict the kind of data the bureau may collect from consumers. (Republicans have charged that the CFPB’s collection of credit data is a violation of privacy, even though the bureau does not collect any personal details the consumer doesn’t volunteer.)

The Democratic-controlled Senate has refused to consider these types of bills from the House, but the floodgates would open with a GOP takeover. “You just have to watch the House to see what is going to come out of the Senate,” says a Senate Democratic staffer who works on banking issues.

Sen. Richard Shelby (R-Ala.), who is expected to chair the banking committee if his party takes the Senate, has led the charge to water down the CFPB’s powers. Financial-reform advocates say he would likely speed the House bills through committee.

President Obama, of course, has his veto power—Senate Dems could block legislation so long as Republicans lack a filibuster-proof majority. But Obama and his party might cave, Hill staffers say, if anti-CFPB legislation were attached to a bill they really had to pass, such as an appropriations bill or a debt ceiling measure.

A Republican-controlled Senate would also likely try to eviscerate portions of the 2010 Dodd-Frank financial reform act. In 2011, Shelby introduced a bill to beef up the requirements that force banking regulators to conduct cost-benefit analyses prior to issuing any new rule—a significant hurdle. Last year, the House passed a handful of bills to deregulate derivatives, often-opaque banking products that have been demonized as “financial weapons of mass destruction.” In June, House Republicans passed a bill chipping away at consumer mortgage protections.

The financial industry and Republicans are likely to sell these Dodd-Frank rollbacks as “small technical” fixes, a former Treasury Department official told me, and “the White House is more likely to cave” and sign them into law if “they don’t have help from a Democratic Senate in blocking and tackling.”

A GOP Senate would scale back financial regulations “in so many ways,” the Democratic Senate staffer says, “I don’t know where to start.”

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A GOP Senate’s First Target: Elizabeth Warren’s Consumer Protection Agency

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Chart: You’re Working More But Earning Less

by SophiaCharbonne Posted on September 26, 2014

Mother Jones

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We’ll be posting a new chart on the current state of income inequality every day for the next couple of weeks. Yesterday’s chart looked at the history of the 1 percent, from ancient Rome to today.

Today, another look at how middle-class incomes have been stuck in neutral while the rest of the economy has grown. In 2012, the median household income (adjusted for inflation) was the same as it was in 1996.

Sources: Household income: US Census; economic growth: St. Louis Fed; 1 percent: Emmanuel Saez and Thomas Piketty (Excel); corporate profits: St. Louis Fed

Illustrations and infographic design by Mattias Macklerâ&#128;&#139;

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Chart: You’re Working More But Earning Less

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Chart: It’s Never Been a Better Time to Be Rich

by ClaudetIun Posted on September 25, 2014

Mother Jones

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We’ll be posting a new chart on the current state of income inequality every day for the next couple of weeks. Yesterday’s chart looked at how the richest of the rich have enjoyed massive income gains for decades.

But wait, you say, isn’t that the way it’s always been? Yes and no. It’s never been a bad time to be rich in America. But some times have been a lot better. In fact, the best time may be now, especially when you consider the amount of total income controlled by the top 1 percent since colonial times (with ancient Rome thrown in for comparison):

Sources: Rome: Walter Scheidel and Steven J. Friesen; US in 1774 and 1860: Peter H. Lindert and Jeffrey G. Williamson; US in 1929-2012, Emmanuel Saez and Thomas Piketty (Excel)

Illustrations and infographic design by Mattias Macklerâ&#128;&#139;

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Chart: It’s Never Been a Better Time to Be Rich

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IHOP Has Cut Back Its Menu By 30 Items

by Adolph7467 Posted on September 18, 2014

Mother Jones

Here’s an interesting factoid: in 2008 we apparently reached Peak Menu. That year, the average menu contained 99.7 items. Then the housing bubble burst, we entered the Great Recession, and menus began to shrink. Today’s menus feature a paltry 92.6 items.

Why is this? Cost is one reason: it’s cheaper to support a smaller menu. But Roberto Ferdman writes that there’s more to it:

The biggest impetus for all the menu shrinking going on is likely tied to a change in the country’s food culture: Americans are becoming a bit more refined in their tastes.

“Historically, the size of menus grew significantly because there wasn’t the food culture there is today,” said Maeve Webster, a senior director at Datassential. “People weren’t nearly as focused on the food, or willing to go out of their way to eat specific foods.”

For that reason, as well as the fact that there were fewer restaurants then, there used to be a greater incentive for restaurants to serve as many food options as possible. That way, a customer could would choose a particular restaurant because it was near or convenient, rather than for a specific food craving (which probably wasn’t all that outlandish anyway). But now, given the increasing demand for quality over quantity, a growing appetite for exotic foods and a willingness to seek out specialized cuisines, Americans are more likely to judge a restaurant if its offerings aren’t specific enough.

“The rise of food culture, where consumers are both interested and willing to go to a restaurant that has the best Banh Mi sandwich, or the best burger, or the best trendy item of the moment, means that operators can now create much more focused menus,” said Webster. “It also means that the larger the menu, the more consumers might worry all those things aren’t going to be all that good.”

Hmmm. Let me say, based on precisely no evidence, that I find this unlikely. Have American tastes really gotten more refined since 2008? Color me skeptical. And even if American palates are more discriminating, are we seriously suggesting that this has affected the menu length at IHOP, Tony Roma’s, and Olive Garden—the three examples cited in the article? I hope this isn’t just my inner elitist showing, but I don’t normally associate those fine establishments with a “growing appetite for exotic foods and a willingness to seek out specialized cuisines.”

So, anyway, put me down firmly in the cost-cutting camp. Long menus got too expensive to support, and when the Great Recession hit, casual dining chains needed to cut costs. They did this by lopping off dishes that were either expensive to prep or not very popular or both. Occam’s Razor, my friends, Occam’s Razor.

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IHOP Has Cut Back Its Menu By 30 Items

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Scotland Should Plan On Having Its Own Currency

by Tabitha92B Posted on September 17, 2014

Mother Jones

When provinces propose a split with the mother country, they usually insist that they’ll continue to use the old currency. This is odd on its face since having your own money is usually considered one of the key attributes of a sovereign state. So what’s the appeal of keeping the old country’s currency? Greg Ip ponders the question:

Facilitating trade and capital movements is only one part of the story. Another, I think, is political and emotional. Forming a new country is fraught with risk. For savers, in particular the elderly, one risk looms especially large: that one’s retirement savings are suddenly redenominated in a new currency whose value is then inflated away. In both Quebec and Scotland, independence is mostly a movement of the left, and a separate currency would create the ever-present temptation to use the printing press to accommodate fiscal expansion and industrial policy. By promising to keep the old currency, separatists are reassuring savers that they will not succumb to the temptation of inflation.

I wonder if this is true? I hope it’s not. I don’t have a strong opinion about Scottish independence, but I do have a strong opinion about this. Here it is: if you favor independence, but only if Scotland holds onto the British pound, you’re an idiot. If you don’t trust a Scottish government to run its own monetary policy, then you don’t trust a Scottish government. Period.

There are other arguments for currency union, of course, but I don’t think they add up to much. Nor do I truly believe them. They mostly seem like post hoc rationalizations to provide people with a more palatable reason for keeping the British pound than fear of a reckless Scottish monetary authority. Generally speaking, the history of currency unions is simply too fraught for anyone who’s paying attention to really think it’s a good idea. And as Ip points out, they rarely last very long anyway.

An independent Scotland should have its own currency and its own monetary policy. If this makes you nervous, then the whole idea of independence should make you nervous.

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Scotland Should Plan On Having Its Own Currency

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Poverty Keeps Getting Worse and Worse for Working-Age Adults

by AltaG65eacunv Posted on September 17, 2014

Mother Jones

The Census Bureau released its annual poverty report today, and the headline number shows that the official poverty rate declined from 15.0 percent to 14.5 percent. This decline was driven entirely by a drop in the number of children living in poverty.

This gives me an excuse to make a point that doesn’t get made often enough. You’ll often see charts showing that the overall poverty rate has remained roughly the same since the late 60s, and that’s true. But this is largely due to more generous Social Security benefits, which have reduced elderly poverty from over 30 percent to under 10 percent.

There’s been no such reduction among working age adults. In fact, just the opposite. The low point for working-age poverty was about 9 percent, reached in 1968, and since then it’s steadily increased. There are small variations from year to year, but basically it went up to about 10-11 percent in the 80s and then increased to 13.6 percent during the Great Recession. It’s stayed there ever since.

The safety net has helped most of these folks tread water, but it doesn’t change the fact that the market economy has gotten steadily bleaker for the poor over the past 40 years. It’s great that we’ve made such significant inroads against elderly poverty, but aggregates can fool you about the rest of the country. Among everyone else, poverty has only gotten worse and worse.

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Poverty Keeps Getting Worse and Worse for Working-Age Adults

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Chart of the Day: The Rich Are Getting Richer, The Poor Are….

by RobtKirkland Posted on September 4, 2014

Mother Jones

The Federal Reserve’s 2013 Survey of Consumer Finances is out, and guess what? Over the past 25 years, the rich have seen their wealth skyrocket, from 44.8 percent of the total to 54.4 percent of the total. The middle class and the poor, by contrast, have seen their share of national wealth plummet from 33.2 percent to 24.7 percent.

In other words, the rich are getting richer and the poor are….well, you know. Is it any wonder that the rich don’t really want to see a lot of changes to our current economic regime? Why would they?

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Chart of the Day: The Rich Are Getting Richer, The Poor Are….

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