Showing posts with label Biden. Show all posts
Showing posts with label Biden. Show all posts
Friday, 22 December 2023
Thursday, 21 December 2023
Saturday, 23 September 2023
Thursday, 14 September 2023
Friday, 5 May 2023
Saturday, 23 April 2022
Thursday, 3 June 2021
Thursday, 8 April 2021
The Covid crisis is doing what the 2008 crash didn’t: ending the old economic orthodoxies
Larry Elliott in The Guardian
A wealth tax to help pay for the cost of fighting the pandemic. An international agreement to prevent a race to the bottom on corporate tax. An insistence that recovery from the second severe crisis in just over a decade should be green and inclusive. A conviction that governments should spend whatever it takes to fend off the threat of mass unemployment, paying no heed to the size of budget deficit.
There’s nothing startlingly new about any of these ideas, which have been knocking around for years, if not decades. What is different is that these are no longer just proposals put forward by progressive thinktanks or marginalised Keynesians in academia, but form part of an agenda being pursued by the International Monetary Fund and the US Treasury under Joe Biden’s presidency.
This matters. From the 1980s onwards, the IMF and the US Treasury forged what became known as the Washington consensus: a set of beliefs that was foisted on any country that ran into economic difficulties and came looking for help. The one-size-fits-all approach involved cutting public spending and taxes, and privatisation, to create incentives for risk-taking entrepreneurs, and making inflation the overriding goal of economic policy. These policies inevitably caused pain, but it was thought the “tough love” approach was worth it.
It has been quite a different story in the buildup to the IMF’s spring meeting this week. Biden’s fast-tracking of a $1.9tn stimulus package through Congress, including direct payments to struggling American families, was significant in two ways. First, at about 10% of the annual output of the US economy, it was much bigger than the emergency support provided by Barack Obama after the global financial crisis of 2008. Second, and perhaps more importantly, it contained no promises of future deficit reduction. Austerity has no part in the thinking of the Biden administration, and nor does the idea that demand fuelled by borrowing inevitably leads to higher inflation.
The next phase in Biden’s plan is to spend a further $2tn on rebuilding America’s crumbling infrastructure. This will be funded by reversing some of Donald Trump’s cut to corporate tax rates, which will be opposed by Republicans in Congress but not by the IMF. When asked about the projected increase this week, the fund’s economic counsellor, Gita Gopinath, said Trump’s corporate tax cut had not done much to boost investment. Moreover, Gopinath was positively enthusiastic about the idea of a global minimum corporate tax rate, something the US has traditionally been wary of but which it now supports.
For the past year, the IMF has been trying to increase the financial firepower of its member countries through currency reserves known as special drawing rights. Trump’s concern that Iran would secure these rights meant there could be no progress while he was in the White House. Under Biden’s treasury secretary, Janet Yellen, the deadlock has been broken and a $650bn special drawing rights allocation has now been announced.
If the old Washington consensus believed in small states, low taxes and balanced budgets, the new Washington consensus believes in activist governments, inclusive growth and a green new deal. Until relatively recently, the only outpost of the multilateral system that supported such ideas was the UN’s trade and development arm in Geneva.
That is no longer the case. This week’s regular IMF update on the state of the global economy emphasises how the pandemic has made pre-existing inequalities worse. That’s true within countries, where the virus and its economic consequences have been toughest on the poor, the young, women and ethnic minorities. It is also true between countries, with the central banks and finance ministries in advanced nations having far more scope to mitigate the impact of lockdowns than those in poorer parts of the world.
Both the IMF and its sister organisation, the World Bank, are clear that there can be no final victory in the battle against Covid-19 until everybody is vaccinated. The problem is not simply that developing countries lack sufficient doses; it is that their health systems are underpowered and lack the trained staff to deliver treatments. Similarly, if the world is to make the transition to a zero-carbon future, developing countries need to be included. That means extra financial resources. All this at a time when fears of a new developing-country debt crisis are rife.
Make no mistake, the IMF is still no soft touch. The conditions imposed as the price for financial support are often draconian, and critics note the disconnect between the right-on rhetoric of the IMF’s managing director, Kristalina Georgieva, and the policies imposed by her organisation’s missions to struggling countries.
Meanwhile, pushback against what Biden has been doing has come from both left and right. Some of the president’s critics accuse him of not being nearly radical enough; others are convinced that all the money creation by the US Federal Reserve and the deficit spending by the US Treasury will inevitably mean much higher inflation. Conjuring up the ghost of economist Milton Friedman, they say it will all eventually end in tears.
For now, though, it is the Friedmanites who look marginalised, with the pandemic accelerating a shift in economic thinking that has been gestating over the past decade. Biden’s approach to running the economy – spending freely and taking a tough line with China – has more in common with that of his immediate predecessor than it does with Obama.
The shift in attitudes has partly been caused by a lack of results. Austerity did not lead to the surge in private investment and faster growth that was promised. Instead, the 2010s were a lost decade of stagnant living standards, which explains why Bidenomics is a big hit with American voters.
Crises also encourage experimentation. Furlough schemes to subsidise the wages of those unable to work are not the same as a basic income, but they are similar enough to get people used to the idea. Necessity rather than ideology explains why Rishi Sunak has spent more than £400bn in the past year on emergency support programmes in the UK, but a Labour chancellor would have done much the same.
There is a sense in which history is repeating itself. It took more than a decade after the end of the first world war for the realisation to dawn that the gold standard was finished. It was the second rather than the first oil shock that opened the door to the economics of the new right in the 1980s. Those who thought that the financial crisis would result in a challenge to the Washington consensus were not wrong. The old nostrums are indeed being questioned. It has just taken 10 years longer than they were expecting, that’s all.
A wealth tax to help pay for the cost of fighting the pandemic. An international agreement to prevent a race to the bottom on corporate tax. An insistence that recovery from the second severe crisis in just over a decade should be green and inclusive. A conviction that governments should spend whatever it takes to fend off the threat of mass unemployment, paying no heed to the size of budget deficit.
There’s nothing startlingly new about any of these ideas, which have been knocking around for years, if not decades. What is different is that these are no longer just proposals put forward by progressive thinktanks or marginalised Keynesians in academia, but form part of an agenda being pursued by the International Monetary Fund and the US Treasury under Joe Biden’s presidency.
This matters. From the 1980s onwards, the IMF and the US Treasury forged what became known as the Washington consensus: a set of beliefs that was foisted on any country that ran into economic difficulties and came looking for help. The one-size-fits-all approach involved cutting public spending and taxes, and privatisation, to create incentives for risk-taking entrepreneurs, and making inflation the overriding goal of economic policy. These policies inevitably caused pain, but it was thought the “tough love” approach was worth it.
It has been quite a different story in the buildup to the IMF’s spring meeting this week. Biden’s fast-tracking of a $1.9tn stimulus package through Congress, including direct payments to struggling American families, was significant in two ways. First, at about 10% of the annual output of the US economy, it was much bigger than the emergency support provided by Barack Obama after the global financial crisis of 2008. Second, and perhaps more importantly, it contained no promises of future deficit reduction. Austerity has no part in the thinking of the Biden administration, and nor does the idea that demand fuelled by borrowing inevitably leads to higher inflation.
The next phase in Biden’s plan is to spend a further $2tn on rebuilding America’s crumbling infrastructure. This will be funded by reversing some of Donald Trump’s cut to corporate tax rates, which will be opposed by Republicans in Congress but not by the IMF. When asked about the projected increase this week, the fund’s economic counsellor, Gita Gopinath, said Trump’s corporate tax cut had not done much to boost investment. Moreover, Gopinath was positively enthusiastic about the idea of a global minimum corporate tax rate, something the US has traditionally been wary of but which it now supports.
For the past year, the IMF has been trying to increase the financial firepower of its member countries through currency reserves known as special drawing rights. Trump’s concern that Iran would secure these rights meant there could be no progress while he was in the White House. Under Biden’s treasury secretary, Janet Yellen, the deadlock has been broken and a $650bn special drawing rights allocation has now been announced.
If the old Washington consensus believed in small states, low taxes and balanced budgets, the new Washington consensus believes in activist governments, inclusive growth and a green new deal. Until relatively recently, the only outpost of the multilateral system that supported such ideas was the UN’s trade and development arm in Geneva.
That is no longer the case. This week’s regular IMF update on the state of the global economy emphasises how the pandemic has made pre-existing inequalities worse. That’s true within countries, where the virus and its economic consequences have been toughest on the poor, the young, women and ethnic minorities. It is also true between countries, with the central banks and finance ministries in advanced nations having far more scope to mitigate the impact of lockdowns than those in poorer parts of the world.
Both the IMF and its sister organisation, the World Bank, are clear that there can be no final victory in the battle against Covid-19 until everybody is vaccinated. The problem is not simply that developing countries lack sufficient doses; it is that their health systems are underpowered and lack the trained staff to deliver treatments. Similarly, if the world is to make the transition to a zero-carbon future, developing countries need to be included. That means extra financial resources. All this at a time when fears of a new developing-country debt crisis are rife.
Make no mistake, the IMF is still no soft touch. The conditions imposed as the price for financial support are often draconian, and critics note the disconnect between the right-on rhetoric of the IMF’s managing director, Kristalina Georgieva, and the policies imposed by her organisation’s missions to struggling countries.
Meanwhile, pushback against what Biden has been doing has come from both left and right. Some of the president’s critics accuse him of not being nearly radical enough; others are convinced that all the money creation by the US Federal Reserve and the deficit spending by the US Treasury will inevitably mean much higher inflation. Conjuring up the ghost of economist Milton Friedman, they say it will all eventually end in tears.
For now, though, it is the Friedmanites who look marginalised, with the pandemic accelerating a shift in economic thinking that has been gestating over the past decade. Biden’s approach to running the economy – spending freely and taking a tough line with China – has more in common with that of his immediate predecessor than it does with Obama.
The shift in attitudes has partly been caused by a lack of results. Austerity did not lead to the surge in private investment and faster growth that was promised. Instead, the 2010s were a lost decade of stagnant living standards, which explains why Bidenomics is a big hit with American voters.
Crises also encourage experimentation. Furlough schemes to subsidise the wages of those unable to work are not the same as a basic income, but they are similar enough to get people used to the idea. Necessity rather than ideology explains why Rishi Sunak has spent more than £400bn in the past year on emergency support programmes in the UK, but a Labour chancellor would have done much the same.
There is a sense in which history is repeating itself. It took more than a decade after the end of the first world war for the realisation to dawn that the gold standard was finished. It was the second rather than the first oil shock that opened the door to the economics of the new right in the 1980s. Those who thought that the financial crisis would result in a challenge to the Washington consensus were not wrong. The old nostrums are indeed being questioned. It has just taken 10 years longer than they were expecting, that’s all.
Monday, 25 January 2021
As Joe Biden moves to double the US minimum wage, Australia can't be complacent
Van Badham in The Guardian
When I was writing about minimum wages for the Guardian six years ago, the United States only guaranteed workers US$7.25 an hour as a minimum rate of pay, dropping to a shocking US$2.13 for workers in industries that expect customers to tip (some states have higher minimum wages).
It is now 2021, and yet those federal rates remain exactly the same.
They’ve not moved since 2009. Meaningfully, America’s minimum wages have been in decline since their relative purchasing power peaked in 1968. Meanwhile, America’s cost of living has kept going up; the minimum wage is worth less now than it was half a century ago.
Now, new president Joe Biden’s $1.9tn pandemic relief plan proposes a doubling of the US federal minimum wage to $15 an hour.
It’s a position advocated both by economists who have studied comprehensive, positive effects of minimum wage increases across the world, as well as American unions of the “Fight for 15” campaign who’ve been organising minimum-wage workplaces demanding better for their members.
The logic of these arguments have been accepted across the ideological spectrum of leadership in Biden’s Democratic party. The majority of Biden’s rivals for the Democratic nomination – Bernie Sanders, Elizabeth Warren, Kamala Harris, Pete Buttigieg, Amy Klobuchar, Cory Booker and even billionaire capitalist Mike Bloomberg – are all on record supporting it and in very influential positions to advance it now.
In a 14 January speech, Biden made a simple and powerful case. “No one working 40 hours a week should live below the poverty line,” he said. “If you work for less than $15 an hour and work 40 hours a week, you’re living in poverty.”
And yet the forces opposed to minimum wage increases retain the intensity that first fought attempts at its introduction, as far back as the 1890s. America did not adopt the policy until 1938 – 31 years after Australia’s Harvester Decision legislated an explicit right for a family of four “to live in frugal comfort” within our wage standards.
When I was writing about minimum wages for the Guardian six years ago, the United States only guaranteed workers US$7.25 an hour as a minimum rate of pay, dropping to a shocking US$2.13 for workers in industries that expect customers to tip (some states have higher minimum wages).
It is now 2021, and yet those federal rates remain exactly the same.
They’ve not moved since 2009. Meaningfully, America’s minimum wages have been in decline since their relative purchasing power peaked in 1968. Meanwhile, America’s cost of living has kept going up; the minimum wage is worth less now than it was half a century ago.
Now, new president Joe Biden’s $1.9tn pandemic relief plan proposes a doubling of the US federal minimum wage to $15 an hour.
It’s a position advocated both by economists who have studied comprehensive, positive effects of minimum wage increases across the world, as well as American unions of the “Fight for 15” campaign who’ve been organising minimum-wage workplaces demanding better for their members.
The logic of these arguments have been accepted across the ideological spectrum of leadership in Biden’s Democratic party. The majority of Biden’s rivals for the Democratic nomination – Bernie Sanders, Elizabeth Warren, Kamala Harris, Pete Buttigieg, Amy Klobuchar, Cory Booker and even billionaire capitalist Mike Bloomberg – are all on record supporting it and in very influential positions to advance it now.
In a 14 January speech, Biden made a simple and powerful case. “No one working 40 hours a week should live below the poverty line,” he said. “If you work for less than $15 an hour and work 40 hours a week, you’re living in poverty.”
And yet the forces opposed to minimum wage increases retain the intensity that first fought attempts at its introduction, as far back as the 1890s. America did not adopt the policy until 1938 – 31 years after Australia’s Harvester Decision legislated an explicit right for a family of four “to live in frugal comfort” within our wage standards.
As an Australian, it’s easy to feel smug about our framework. The concept is so ingrained within our basic industrial contract we consume it almost mindlessly, in the manner our cousins might gobble a hotdog in the stands of a Sox game.
But in both cases, the appreciation of the taste depends on your level of distraction from the meat. While wage-earning Australians may tut-tut an American framework that presently allows 7 million people to both hold jobs and live in poverty, local agitation persists for the Americanisation of our own established standards.
When I wrote about minimum wages six years ago, it was in the context of Australia’s Liberal government attempting to erode and compromise them. That government is still in power and that activism from the Liberals and their spruikers is still present. The Australian Chamber of Commerce and Industry campaigned against minimum wage increases last year. So did the federal government – using the economic downtown of coronavirus as a foil to repeat American mythologies about higher wages causing unemployment increases.
They don’t. The “supply side” insistence is that labour is a transactable commodity, and therefore subject to a law of demand in which better-paid jobs equate to fewer employment opportunities … but a neoclassical economic model is not real life.
We know this because some American districts have independently increased their minimum wages over the past few years, and data from places like New York and Seattle has reaffirmed what’s been observed in the UK and internationally. There is no discernible impact on employment when minimum wage is increased. An impact on prices is also fleeting.
As Biden presses his case, economists, sociologists and even health researchers have years of additional data to back him in. Repeated studies have found that increasing the minimum wage results in communities having less crime, less poverty, less inequality and more economic growth. One study suggested it helped bring down the suicide rate. Conversely, with greater wage suppression comes more smoking, drinking, eating of fatty foods and poorer health outcomes overall.
Only the threadbare counter-argument remains that improving the income of “burger-flippers” somehow devalues the labour of qualified paramedics, teachers and ironworkers. This is both classist and weak. Removing impediments to collective bargaining and unionisation is actually what enables workers – across all industries – to negotiate an appropriate pay level.
Australians have been living with the comparative benefits of these assumptions for decades, and have been spared the vicissitudes of America’s boom-bust economic cycles in that time.
But after seven years of Liberal government policy actively corroding standards into a historical wage stagnation, if Biden’s proposals pass, the American minimum wage will suddenly leapfrog Australia’s, in both real dollar terms and purchasing power.
It’ll be a sad day of realisation for Australia to see the Americans overtake us, while we try to comprehend just why we decided to get left behind.
But in both cases, the appreciation of the taste depends on your level of distraction from the meat. While wage-earning Australians may tut-tut an American framework that presently allows 7 million people to both hold jobs and live in poverty, local agitation persists for the Americanisation of our own established standards.
When I wrote about minimum wages six years ago, it was in the context of Australia’s Liberal government attempting to erode and compromise them. That government is still in power and that activism from the Liberals and their spruikers is still present. The Australian Chamber of Commerce and Industry campaigned against minimum wage increases last year. So did the federal government – using the economic downtown of coronavirus as a foil to repeat American mythologies about higher wages causing unemployment increases.
They don’t. The “supply side” insistence is that labour is a transactable commodity, and therefore subject to a law of demand in which better-paid jobs equate to fewer employment opportunities … but a neoclassical economic model is not real life.
We know this because some American districts have independently increased their minimum wages over the past few years, and data from places like New York and Seattle has reaffirmed what’s been observed in the UK and internationally. There is no discernible impact on employment when minimum wage is increased. An impact on prices is also fleeting.
As Biden presses his case, economists, sociologists and even health researchers have years of additional data to back him in. Repeated studies have found that increasing the minimum wage results in communities having less crime, less poverty, less inequality and more economic growth. One study suggested it helped bring down the suicide rate. Conversely, with greater wage suppression comes more smoking, drinking, eating of fatty foods and poorer health outcomes overall.
Only the threadbare counter-argument remains that improving the income of “burger-flippers” somehow devalues the labour of qualified paramedics, teachers and ironworkers. This is both classist and weak. Removing impediments to collective bargaining and unionisation is actually what enables workers – across all industries – to negotiate an appropriate pay level.
Australians have been living with the comparative benefits of these assumptions for decades, and have been spared the vicissitudes of America’s boom-bust economic cycles in that time.
But after seven years of Liberal government policy actively corroding standards into a historical wage stagnation, if Biden’s proposals pass, the American minimum wage will suddenly leapfrog Australia’s, in both real dollar terms and purchasing power.
It’ll be a sad day of realisation for Australia to see the Americans overtake us, while we try to comprehend just why we decided to get left behind.
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