Being Certain in a Time of Uncertainty

The Pitch: Economic Update for December 2, 2021

(The Pitch is a weekly economics newsletter written by Zach Silk. Sign up for free on Substack to receive a new issue in your inbox every Thursday.)

Friends,

I’m not an epidemiologist or a virologist, so I’m not about to speculate about the Omicron Variant that dominated the popular consciousness over the holiday weekend. And I’m not about to panic, either. We’ll understand what we’re up against soon enough — in a week or two, when the experts have examined the new data and reported back.

It’s difficult to live in a state of uncertainty — the stock market predictably recoiled when confronted with Omicron news. But I find that taking a moment to reflect on what we are certain of is the best way to cope in uncertain moments. The fact is that we know a lot more now than we did in March of 2020, when coronavirus first entered the public consciousness. We know, for instance, that wearing a mask, social distancing, and getting vaccinated helps protect our communities from further spread. Keeping all that in mind, we can be grateful that some of what makes life joyful, like holiday gatherings with trusted loved ones, are back for many families this year. I hope everyone continues to stay safe and vigilant. We’ll continue to face this together.

The Latest Economic News and Updates

How is your state using American Rescue Plan funds?

The Center on Budget and Policy Priorities has compiled an awesome report on how states should best use the federal funds allocated in the American Rescue Plan, by examining how states have already used American Rescue Plan funds since Biden passed it into law in March of this year. There are plenty of fun graphs, tables, and interactive maps in the report showing how states have already spent more than half of the the $198 billion allocated to them.

This is a fantastic deep dive, and also a recommendation for how states can best use the remaining funds to maximize their impact. The Center advises state leaders to focus on “long-standing challenges such as lack of affordable housing and inadequate access to mental health services,” and not to waste the funds on austerity measures like slashing taxes or replacing existing revenue.

American Workers are taking charge

New unemployment claims fell in mid-November to less than 200,000 filings — a half-century low, reports Nelson D. Schwarz at the New York Times. For the first time in two years, unemployment claims are lower than they were before the pandemic began, presumably because workers can easily find employment, if they want it. When you combine that information with all the successful strikes that have happened this year (including today’s news that striking workers at Kellogg’s factories have reached a tentative agreement delivering them better pay, more job security, and better working conditions,) it’s pretty easy to come to the conclusion that this is a stronger labor market than many readers of this newsletter have seen in their lifetimes.

But what do those numbers look like in real life? For the American Prospect, David Dayen talks to dozens of American workers who have quit their jobs in what he calls “a remarkable moment that’s the closest thing to a general strike for the low-wage workforce.” It’s a terrific piece that explores exactly how low-wage work has become so terrible over the last few decades, and what these “striking” workers really want from their employers: “from my talks with workers, they’re really seeking something more ineffable than a couple more bucks an hour. Work is the largest time block of the day, in a moment where we’ve all learned how precious time can be. People simply want to spend that time getting the dignity and respect denied to them for so long.”

For teachers, it’s long past time for overtime

We at Civic Ventures feel very strongly that meaningful overtime standards are among the most important worker protections. By ensuring that most workers in America earn time-and-a-half for every hour worked over 40 hours in a week — yes, even salaried white-collar workers — our leaders would ensure that American workers earn more, they’d end the exploitation of low-wage workers who were given a bogus “manager” title in exchange for endless 60-hour weeks that work out to even less per hour than minimum wage, and they’d strengthen our nation’s commitment to the 40-hour workweek that has been weakened over the last four decades.

Our friends at the Economic Policy Institute have pointed out a grave injustice written into the existing overtime law: Teachers are exempt from overtime protections. By removing the blanket exemption for public and private school teachers, some 1.5 million of the nation’s lowest-paid teachers, 70 percent of whom are women, would either be fairly compensated for their time, or they’d get much-needed relief from the punishing schedules that have up till now been demanded of them. Either way, it’s egregious that our labor laws have exploited the passion of our teachers for so long. They deserve overtime protections.

The figure that could explain America’s economic dissatisfaction

I wrote earlier this month about the partisan divide in self-reporting economic confidence. In short, Republicans tell pollsters they lack confidence in the economy under Democratic presidents, even when economic conditions are strong. As Joe Weisenthal notes, people are reporting that they are seeing the best job market of their lives right now and they are simultaneously reporting a total lack of confidence in the economy.

But former Obama staffer Joel Wertheimer points out a metric that I’ve seen few economists mention: real disposable personal income rose throughout Donald Trump’s term in office, and it has declined for most of 2021 due to a variety of factors including inflation. While partisanship is still clearly an important factor in declining self-reporting numbers, this disposable personal income figure could be the smoking gun that explains why the economy doesn’t feel as lively to most Americans. As I noted before, growing American paychecks would be the best way to increase disposable income, and a strong job market is key to doing that.

Who benefits from inflation?

The Omicron Variant has taken the media’s attention off rising prices, but you can be sure that inflation will be back in the conversation soon. With that in mind, here are two of the most interesting inflation takes I’ve seen recently: First, forBloomberg Markets, Joe Weisenthal argues that while proponents of Modern Monetary Theory have quieted in recent days, Weisenthal believes that rising inflation has validated MMT.

And then in a bomb-throwing piece for The New Republic, Timothy Noah explains that Republicans don’t just love using inflation as a political tool to bludgeon Democrats — he argues that Republican donors actively love the fact that inflation shrinks debt, and debt is the lever that grows the fortunes of corporations and the super-rich. This is just a taste of Noah’s explanation, but the whole piece warrants your attention:

Inflation is catnip for borrowers because it reduces the value of their debt. Who borrows more than anyone else? Rich people…Business, another Republican constituency, loves inflation, too…corporations are adept at taking advantage of inflation once it comes, gouging customers and boosting profits…The real estate market is especially fond of inflation because real estate is a debt-intensive industry….The stock market likes inflation because it depresses the bond market. When stocks fall, that isn’t because the stock market fears inflation; it’s because it fears the Fed will raise interest rates to curb it.

It shouldn’t cost more to be poor

Under mounting pressure from the Consumer Financial Protection Bureau, Capital One has officially ended overdraft fees, making them the largest bank to do so. Overdraft fees are one of the most pernicious examples of the vampire economy, in which financial institutions essentially punish poor people for being poor by weighing them down with relatively small fees and high interest rates. The CFPB should use this announcement as leverage to keep the pressure on big banks to end overdraft fees and other exploitative policies that prey on the poor. (And it wouldn’t hurt for the CFPB to start taking credit for its victories, too — the elimination of overdraft fees will make a tremendous difference in the lives of Americans who live paycheck to paycheck, and they should know this development was inspired by action from the federal government.)

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

• On Civic Action Live this week, we’ll be discussing the latest economic indicators, including the numbers that prove we could be seeing the best labor market of our lifetime. We’ll also discuss whether higher prices are interfering with holiday spending, and we’ll take your questions in real-time.
• On the Pitchfork Economics podcast, University of Oxford professors Eric Beinhocker and Doyne Farmer join Nick to talk about the widespread (and wrong-headed) assumption that transitioning to a clean energy economy would be a slow and prohibitively expensive process. In fact, moving quickly to a clean energy economy would not only be great for the environment, but it could also deliver the cheapest energy in the history of humanity.
• In his Business Insider column, Paul wrote a piece that puts the Great Resignation into focus, offering a top-to-bottom explanation of what’s happening in America’s labor market right now.
• And don’t miss last week’s Pitchfork Economics podcast, which featured a substantive interview with Seattle-area homelessness expert Josephine Ensign about what we really need to do to end homelessness in American cities. Both the urbanists who claim we can build our way out of the housing crisis and the conservatives who claim homelessness is a personal failing are wrong — if we want to get people housed, we need more investments into quality services, in addition to more affordable housing. You can also read more about it in Paul’s Business Insiderarticle on the episode.

Closing Thoughts

I’ve talked a fair amount in this newsletter about the strong labor market that American workers are enjoying right now, but it’s important to remember that, as in all economic matters, a strong labor market doesn’t just happen. It’s the result of outside forces — the pandemic, in this case — and specific policy choices made by our leaders. For instance, the Economic Policy Institute published a great report rounding up all the hard work that state and local leaders have put into standing up against wage theft, worker misclassification, and other illegal activities committed by employers. For every extractive employer caught by attorneys general for not paying sick leave, you can bet there are two other bosses who stop stealing from their employees for fear of getting caught.

Another way our lawmakers are helping to make America a better place to work is through leading by example. Starting on January 30th of 2022, some 390,000 workers will benefit from a new $15 minimum wage for federal contractors. (The current federal minimum wage for contractors is $10.95 per hour.) About half of those workers are Black or Hispanic, and they’ll each bring home over $3000 more in wages over the next year, which will make a significant difference in their day-to-day lives. And this pay raise will likely inspire contractors to raise wages for other employees to compete with the higher wages that the government is paying.

These small policies and actions to enforce existing rules may only affect a few handfuls of workers at a time, but they add up to create a more pro-worker environment that creates the strong labor market we’ve been hearing about for the past few months. While we usually focus our attention on the big numbers and fights dominating the headlines, the truth is that every action, no matter how small, can help move us toward a more equitable future.

Be kind. Be brave. Mask up. Get vaccinated — and don’t forget to get your booster shot.

Zach