Tuesday, January 24, 2017

[NJFAC] Who Is Finished Paying Their 2017 Social Security Taxes? Probably Not You.

Who Is Finished Paying Their 2017 Social Security Taxes? Probably Not You. Teresa Ghilarducci and Alex Pavlakis 1/1/17

Though 94 percent of us (about 151 million workers) will pay our Social Security tax every paycheck in 2017, a handful of the highest income Americans will stop paying before you finish reading this blog. The over $2 trillion dollars of earnings that escape Social Security tax are an accident caused by the lopsided growth of income for the lucky few (about 9.6 million) earning over $120,000 or so per year.

The tax rate for Social Security (old age survivors and disability insurance OASDI) is 6.4 percent for both the employer and employee and is paid on earnings up to a cap. In 2016, the cap was $118,500. In 2017, the cap will increase to $127,200 in 2017 based on average wage growth. For those at the upper end of the income distribution (the top 1 percent, or the 2 million people earning more than $250,000 per year and the 137,000 people earning more than $1 million per year), $127,200 is a trivial amount on which to pay Social Security tax.

....

The 202 Americans who earned more than $50 million a year finished paying less than 5 hours after the ball dropped in Times Square. Another 773 people earning between $20-$50 million a year will finish paying the tax before you finish reading this blog on January 2nd.

....

We face a retirement crisis in America. We need comprehensive pension reform, but we also need to shore up and expand Social Security. The first step is to right the wrong of lopsided earnings growth and raise the earnings cap. We should also tax some financial capital to strengthen and expand Social Security. Solving the retirement crisis by shoring up pension income is the best policy idea in the New Year. Raising the cap is very little pain and all gain.

************************************************************
WHY THE SYSTEM IS SHORT OF FUNDS

The boomers are not causing the system to run short of revenue in 2035. The system's actuaries anticipated baby boomers' retirement. In addition, the system is not bankrupt. Without increasing revenues, the system will generate revenue to pay 75 percent, rather than 100 percent, of promised benefits.

The main reason Social Security taxes aren't sufficient to pay full benefits is that the system did not anticipate the extreme growth of inequality in earnings and how much of wages would be diverted to pay health insurance back in 1983 when the Social Security tax was last raised by Congress and the President. The inequality of wage income is the most important reason for the short fall. Most of all, labor earnings growth since 1979 has gone to the top earners. When it comes to the pace of annual pay increases, the top 1 percent wage - the wage that escapes Social Security tax due to the cap - grew 138 percent since 1979, while wages for the bottom 90 percent grew only 15 percent. The unprecedented lopsided growth earnings are the main reason the system is in shortfall. The system can easily be made solvent if it adjusts to the reality of inequality.

Extreme earnings inequality explains the Social Security shortfall because Social Security taxes are only collected on incomes below an earnings cap. In 2016, the cap was $118,500 (which is indexed to average wage growth, not the wage growth at the top). Anyone who makes more than the cap stops contributing to Social Security as soon as they hit the earnings cap. For most of us, this does not matter. Last year, less than 6 percent of wage earners took home more than $120,000. Therefore, the vast majority of workers pay Social Security tax all year long.

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June Zaccone
National Jobs for All Coalition
http://www.njfac.org

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Tuesday, January 17, 2017

[NJFAC] Trump's a Keynesian?

Trump's a Keynesian?                                                                                                                                                   January 17, 2017
            Trump's tax cuts, although hugely favoring the rich, will dribble down to the middle class and raise overall economic demand. They will be financed, mostly, by borrowing as there are not enough easy budget cuts to make up for lower tax revenues. So we will have big-time deficit spending from Republicans. That's nothing new. Reagan had the largest deficits since World War II. Bush II had some pretty big ones for a couple of years too. Congress will go along with Trump's deficits because if there's one thing they like more than balanced budgets, it's tax cuts that favor the rich. Here's a good piece on the subject by Dean Baker that appeared two months ago.
            A key element in the Trump stimulus plan will be infrastructure spending and we will do a blog on that later. It's not clear that that there will be much there there.  It could be mostly smoke and mirrors. You know, like the Carrier deal. Trump makes a big payoff to Company X which builds a four-mile road somewhere and Trump talks about it ad nauseaum as a great victory.      Frank Stricker, NJFAC
 
 
November 17, 2016
Photo by Ninian Reid | CC BY 2.0
Photo by Ninian Reid |
It looks like we will have to get used to the idea of Donald Trump being president for the next four years. In his campaign he pushed many outlandish proposals, like banning Muslim immigrants and deporting 11 million immigrants without documentation. We will have to do whatever we can to block such flagrantly inhumane measures.
There are many other items on his campaign agenda and that of the Republican leadership that will have to be resisted, but at least one part of his agenda could actually offer real gains. Trump has proposed large infrastructure spending and also tax cuts that will hugely increase the deficit. Both offer real benefits, although with substantial risks.
The infrastructure story is straightforward. Roads and bridges in many parts of the country are badly in need of repair. This is both an economic waste, as people needlessly get caught in traffic, and a health hazard when bad roads increase the risk of accidents. Ideally, infrastructure spending would also go to repair schools and improve water systems so that we don't have more Flints with people drinking lead in their water. It would be great if some of this funding also went to mass transit and clean energy to reduce greenhouse gas emissions, but that might be expecting too much from a Trump administration.
The infrastructure spending would also create jobs. Public construction has traditionally been a source of relatively good paying jobs for men without college degrees. In recent years, the construction workforce has been disproportionately Hispanic. Spending in this area benefits a segment of the labor market that badly needs help. Of course the benefits are considerably less if projects are privatized, as Trump has suggested, and this will have to be part of the battle.
The other useful part of Trump's agenda is that he clearly does not care about budget deficits. His tax cuts could add more than $400 billion, more than 2.0 percent of GDP, to the annual deficit. These tax cuts are not a good use of money. They will overwhelmingly go to the rich who have been the main beneficiaries of economic growth over the last four decades.
In addition to not needing the money, if the point is to boost demand, giving tax breaks to the rich is the worst way to do it. If a poor or middle class person gets $1,000 from the government they are likely to spend most or all of it. But if we give another $1,000 or even $1,000,000 to Bill Gates it is unlikely to affect his consumption at all.
Even though the bulk of the Trump's proposed tax cuts do go to the rich, there are still substantial cuts for the middle class, which will provide a real boost to consumption. This boost to consumption, along with the increased demand from his infrastructure spending, will mean a large increase in demand in the economy. The result will be more jobs and a reduction in unemployment.
The strengthening of the labor market will also leave workers better situated to get pay increases. The only time in the last four decades when workers at the middle and bottom of the wage distribution saw sustained gains in real wages was the tight labor market of the late 1990s.
The irony in this story is that it might take a Republican president to give us a tight enough labor market for workers to get their share of the benefits of growth. This is partly due to Democrats having come to idealize the virtues of balanced budgets. Many have wrongly concluded that the prosperity of the 1990s was due to the budget surpluses of the time, which were in fact the outcome rather than the cause of strong growth. In her campaign, Clinton repeatedly promised that her spending plans would not increase the deficit.
However the bigger obstacle to larger deficits under a Democratic president is the Republican Congress. The Republicans routinely screamed bloody murder over any effort by President Obama to stimulate the economy with larger deficits. Several times they have balked at raising the debt ceiling, arguing that this routine maintenance measure was somehow a threat to our children's well-being. In fact, the burden posed by servicing the debt, at 0.8 percent of GDP, is near a post-war low.
But Congressional Republicans will no longer care about deficits with President Trump in the White House. This means that he will be able to run deficits large enough to get the economy to full employment and quite possibly beyond.
We may once again see issues with inflation and a need for higher interest rates to slow the economy. That will have some negative effects, but at least it will put an end to the long period of high unemployment and secular stagnation. This will be a good thing; it's just unfortunate that we needed a Trump administration to get there.                 
This column originally appeared on Huffington Post.
 
 
 

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Tuesday, January 10, 2017

[NJFAC] Progressive efforts can be successful

 
Democrats Denounced Sanders' Ideas as "Impossible," Now Many are Starting to Materialize ....
19 states are raising the minimum wage this year, a testament to the success of activist movements protests for the fight for a $15 federal minimum wage.
....

Progressive Climate Change activists managed to help push through a pro-solar amendment in Florida this past August 2016, and help deny an anti-solar amendment in November.

....On January 2, New York Governor Andrew Cuomo announced with Sanders a plan to provide free college tuition to New Yorkers whose families make less than $125,000 a year.....

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June Zaccone
National Jobs for All Coalition
http://www.njfac.org

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Wednesday, December 14, 2016

[NJFAC] Why Aren't More Prime-Age Men Working?

OpEdNews Op Eds

What's Wrong with These Men? Why Aren't They Working?

By       Message Frank Stricker     Permalink

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There is a group of adults who do not have jobs, are not recorded as looking for work, and are not counted as unemployed. They are men in the prime working ages of 25 through 54. Most of the men in this age group are in the labor force, but seven million are not and they have received a fair amount of attention in recent years. The labor force participation rate of men in this age group has fallen since the 1960s from 98% to 89%. Declines were substantial in the weak labor markets of the early 1970s, the 1980s, the early 1990s, and the 2010s. About half of these non-participants report that they are ill or disabled and have to take prescription medications every day. More of them are in school or retired or performing home responsibilities than in the past. It must be true, too, that some of them refuse to work for very low wages. Many have no college education. If these men were hired in the retail, hospitality or restaurant sectors, they would earn, on average, ten dollars an hour. Many jobs in this sector are part-time. If you work a full year of 30-hour weeks earning $10 an hour, your gross annual income would be $15,600. That's poverty, and remember, if $10 is the average, millions of people are earning less. Economic analyst Frank Lysy says that much of the problem of non-participation is just Economics 101:"if you want more people in paying jobs, pay them better."
Some of the seven million non-participants have looked for work in the past and been rejected because of their race, or because they have prison records, or both. Men with criminal records are 34% of all nonworking men who are 25 to 54 years old. Sociologist Devah Pager found that men who reported criminal convictions were 50% less likely to receive a callback or job offer and Black men's chances were worse. If we want more men to work, we have to make it easier for ex-prisoners to get jobs. And we need to stop jailing so many people.
Given the barriers some people face and the mediocre results for many of those who do get work, it is not hard to see why some prime-age men don't bother. Lousy wages lower the cost of not working. They may also be a reason to engage in criminal money-making. Ditto, if decent jobs are out of reach, then disability benefits, even though they average just $1,166 a month, look better. (Gross income for 120 hours of work a month at $10 an hour is $1,200.) Similarly, for prime-age women who are not participating in work or the job search, more affordable child-care options and more high quality jobs would make working outside the home more attractive.
In general, if there were real full employment--more vacancies than people who needed jobs and an unemployment level of around 2%-- and if wage levels were increasing substantially every year for many years, more people would work. Also employers would be a little more desperate for workers and they might not be so quick to eliminate whole categories of applicants.
It is not good social policy that every prime-age adult should be working all the time, but if people want a decent job, they should have a shot at it; and if pundits and policy makers claim to be worried about non-participation among prime-age men, they should be active in these areas: reversing the incarceration mania and getting both a $15 federal minimum wage and real full employment.
_______________________________
In addition to government statistics, important sources for this topic include Frank Lysy, "The Structural Factors Behind the Steady Fall in Labor Force Participation Rates of Prime Age Workers, posted October 14, 2016, aneconomicsense.org/2016/ 10/14/the-structural-factors; Jim Puzzanghera, "Job Market Mystery: Where Are the Men?," Los Angeles Times (LAT hereafter), November 21, 2016, A8; Binyamin Appelbaum, "Out of Trouble, but Criminal Records Keep Men Out of Work," New York Times (NYT hereafter), February 28, 2015, accessed 12/4/2016 at nytimes.com.; Don Lee and Samantha Masunaga, "Nothing in the Works," LAT, September 7, 2015, A8; June Zaccone, "The Labor Force Participation Rate and Its Trajectory--Why It Matters," National Jobs for All Coalition, Special Report 5, June 2015, at njfac.org/lfp; David Leonhardt, A Unemployed, and Skewing the Picture, @ NYT, March 5, 2008, updated March 7, and accessed online 9/29/2008; David Streitfeld, "Disparate Jobs Data Add Up To a Mystery, @ LAT, August 23, 2004, C1, C5; A Workers or Shirkers, @ The Economist, January 29, 2005, 28
 
Frank Stricker is a member of NJFAC and has recently completed American Unemployment: a New History, Explanations, Remedies.
 
 
 

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Wednesday, November 23, 2016

[NJFAC] Unemployment increases violence against women

American Marriage in the Time of the Recession, Campbell, Atlantic 11/16

Women who lived in areas that suffered the brunt of the downturn, new research suggests, were more likely to be abused by their partners.
....
Now that the American economy has emerged from the Great Recession, there is new research that looks at its impact on the quality of the country's relationships. Its findings are not encouraging. Daniel Schneider, a sociologist at the University of California, Berkeley, found that among mothers in heterosexual relationships, those who lived in areas hit harder by drops in employment rates during the Great Recession experienced higher rates of domestic violence and controlling behavior.....
--   June Zaccone  National Jobs for All Coalition  http://www.njfac.org

Wednesday, November 16, 2016

[NJFAC] How Good and How Bad Are American Job Markets? Here’s a Checklist

How Good and How Bad are American Job Markets?
Here's a Checklist                                                          
            In short, job markets have improved in recent years, but we are nowhere near full employment and decent wages for all. Here are the basic numbers. There's not much about subgroups. More on them in another piece.         
Recent Good News: Median household income was up 5.2% in 2015. Percentage gains higher at the bottom than at the top. More people with jobs helped. Largest single-year increase since record-keeping began. But in real terms, the median was still below 2007 and still below the peak of the late 1990s. And, of course, pay, household incomes, and wealth shares are massively unequal, especially for minorities.
Poverty rates fell from 15% in 2010-2013 to 13.5% in 2015. The lowest ever was 11.1% in 1973. We've come close to that a couple of times, but we won't get there soon. It's worse for some people. Of African Americans 22.7% are below the line and of Hispanics 21.4%.  That's not all. American poverty lines are antiquated, almost an insult to our intelligence. A family of four with two kids needed just a dollar more than $24,036 to be non-poor in 2015. Really? Common sense and serious budget studies say that the lines should be doubled.  
Real Hourly Wages:  Of late, we have seen a rising trend for wages. That's positive, but will the trend last? We have a long way to go. Real wages often fell in the 1970s and 80s, stagnated for much of the 90s, and increased at times in the 2000s. But we have just gotten back  to the wage levels of 1972-1973. In terms of real pay, average workers are no better off than their counterparts of forty years ago.
Unemployment and Job Creation. Getting Better but a Long Way to Go: Unemployment is around 5%. That's better than 10% in the Great Recession. But not close to full employment as some experts, including some at the Federal Reserve, want you to believe. Here's why.  
a. In September of 2016, we still had 5.9 million people who worked part-time but wanted full-time work. These people cannot find full-time jobs but they are not counted as unemployed.
 b. In September of 2016, we had 6.1 million people who said they wanted a job but had not searched for one recently. More of these people would have jobs in a stronger economy, and many more people would be looking for work if they felt they could find a half-way decent position. None of these people are counted as unemployed. A relative handful--553,000-- are called "discouraged workers", but I think many more of the 6.1 million and others who aren't in any survey are truly discouraged about their prospects of landing a decent job.
 c.  Job totals in monthly reports from several hundred thousand businesses and governments show that we are about 5 million jobs short of where we would be if we had not had a big recession and a weak recovery. In 2013, 2014, and 2015, there was pretty strong demand for labor and we added between 2 and 3 million jobs a year. But we need much higher totals for many years if we are to clear up both official and hidden unemployment and get to Real Full Employment, something around a 2% unemployment rate.
 d. Here's a striking fact about job totals which indicates how they lag. In the last ten years job totals grew by 6%. That is the worst record of the last seventy years. Here are the increases in job totals between starting and ending years for ten-year periods.
                                                2006 to 2016      6%
                                                1996 to 2006:   15%
                                                1986 to 1996:   20%
                                                1976 to 1986:   26%
                                                1966 to 1976:   26%
                                                1956 to 1966:   20%
                                                1946 to 1956:   30%                        
Participating in the Labor Force (working or looking for a job): The participation rate of women tapered off in 1999-2000, fell in the recession and has not come back. Men's rate has been on a long decline that grew steeper in the Great Recession. Part of the decline comes because we have more people of retirement age. But much of it has to do with lousy job markets, low wages, and, perhaps, the expansion of disability benefits. For prime-age males (ages 25 to 54), the labor force participation rate has fallen from 97% in 1948 to 89% in 2016. 
Some non-participants have lost jobs due to plant closures and mine shutdowns. Some of them did not move to regions
with more jobs because they felt too old and too rooted to move; because they could not sell their homes except at a big loss; or because they weren't convinced there were decent jobs elsewhere. Some have become hooked on opioids and they are
killing themselves.
Too Many Numbers? Here's the Big Take-away: In most areas discussed above we are doing better, but reversing the impact of forty years of lousy wages, rampant inequality, dire poverty, and not enough jobs will require major federal action on job creation, big increases in the minimum wage, fair taxes, and more assistance to low income families and college students. 
Frank Stricker is Emeritus Professor of History, California State University, Dominguez Hills. He has written about poverty and has written American Unemployment: A New History, Explanations, Remedies. He is a member of the National Jobs for All Coalition.
 
 
 

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Monday, October 31, 2016

[NJFAC] Inequality As Policy: Selective Trade Protectionism Favors Higher Earners

Inequality As Policy: Selective Trade Protectionism Favors Higher Earners

Globalization and technology are routinely cited as drivers of   inequality over the last four decades. While the relative importance of   these causes is disputed, both are often viewed as natural and   inevitable products of the working of the economy, rather than as the   outcomes of deliberate policy. In fact, both the course of globalization   and the distribution of rewards from technological innovation are very   much the result of policy. Insofar as they have led to greater   inequality, this has been the result of conscious policy choices.  ....  Instead of only putting manufacturing workers into competition with   lower-paid workers in other countries, our trade deals could have been   crafted to subject doctors, dentists, lawyers and other highly-paid   professionals to international competition. As it stands, almost nothing   has been done to remove the protectionist barriers that allow   highly-educated professionals in the United States to earn far more than   their counterparts in other wealthy countries.    This is clearest in the case of doctors. For the most part, it is impossible for   foreign-trained physicians to practice in the United States unless they   have completed a residency program in the United States. The number of   residency slots, in turn, is strictly limited, as is the number of slots   open for foreign medical students. While this is a quite blatantly   protectionist restriction, it has persisted largely unquestioned through   a long process of trade liberalization that has radically reduced or   eliminated most of the barriers on trade in goods. The result is that   doctors in the United States earn an average of more than $250,000 a   year, more than twice as much as their counterparts in other wealthy   countries. This costs the country roughly $100 billion a year in higher   medical bills compared to a situation in which U.S. doctors received the   same pay as doctors elsewhere. Economists, including trade economists,   have largely chosen to ignore the barriers that sustain high   professional pay at enormous economic cost.    ....  The pattern of gains from technology has been even more directly   determined by policy than is the case with gains from trade. There has   been a considerable strengthening and lengthening of patent and   copyright and related protections over the last four decades. The laws   have been changed to extend patents to new areas such as life forms,   business methods, and software. Copyright duration has been extended   from 55 years to 95 years. Perhaps even more important, the laws have   become much more friendly to holders of these property claims to tilt   legal proceedings in their favor, with courts becoming more   patent-friendly and penalties for violations becoming harsher. And, the   United States has placed stronger intellectual property (IP) rules at   center of every trade agreement negotiated in the last quarter century.    In this context, it would hardly be surprising if the development of   "technology" was causing an upward redistribution of income. The people   in a position to profit from stronger IP rules are almost exclusively   the highly educated and those at the top end of the income distribution.   It is almost definitional that stronger IP rules will result in an   upward redistribution of income.  ....  --   June Zaccone  National Jobs for All Coalition  http://www.njfac.org