Hey Brainstorm readers! This blog site made itself into another blog and newspaper—well sort of newspaper.

A blogger for The Washington Examiner (a give-away paper at the D.C. Metro and in freebie boxes around town) attacks my Brainstorm blog about falling wages for American workers. 

Did he dispute the fact that employers are using unemployment as an opportunity to cut wages for their existing workers even when profits are up?

No.

He defended the practice.

He writes that the price of labor is "dynamic and free of moral content." Wow. That comment would be breathtaking if it weren't a mainstream view among some neo-classical economists. They will invoke “supply and demand” as a kind of natural law that determines wages. 

Most other economists reject the view that the supply and demand of human beings’ time, effort, skill, and loyality determines (or should determine) compensation. ...

The shocking story in this week’s Financial Times had this lead: "Call center workers are becoming as cheap to hire in the U.S. as they are in India." High unemployment in the U.S. has forced down wages for low-paid workers in the U.S. so that in many cases Americans are cheaper to hire than those in a country where most people live on less than $8.00 per day.

For 90 days, workers at the upstate New York Mott factory (owned by Dr Pepper Snapple) have been striking to stop a $1.50 cut in pay, pension contributions, and other givebacks in the face of healthy company profits. Unlike other companies that have gotten drastic pay cuts from union members when they opened their books to prove their economic distress—GM, Ford, Chrysler, Goodyear tire company—Dr Pepper Snapple admits they can afford to pay; but they argue (I imagine some with some smugness) that unemployment is so high that...

I just got back from Ireland, discussing my book When I’m Sixty-Four: The Plot Against Pensions and the Plan to Save Them. In Ireland, pension security and the financial crisis is on everyone’s mind.

I spoke twice—first at the business school at Trinity College, at an event sponsored by its superb Pension Policy Research Group funded by the American based Atlantic Philanthropies. The second venue was the Kilkenny Arts Festival (fellow economists, eat your heart out—my badge said “Kilkenny Artist"!). Fintan O’Toole of The Irish Times, whose latest book is Ship Of Fools: How Stupidity And Corruption Sank The Celtic Tiger, 2009, moderated the panel. The audience included union officials, artists, and advocates, including a representative of the wonderfully named group Older and Bolder.

The Irish economy is totally in the tank, with major banks in worse shape than ours. This ongoing bank...

On a daily basis, political leaders stoke fears about the growing U.S. federal budget deficit. Senator Judd Gregg (R-NH), ranking Republican on the Senate Budget Committee, warns that “the United States will “essentially be where Greece is in about seven years.”  Senator Tom Coburn (R-OK) says that the growth of the federal deficit “… puts our kids and grandkids at great risk.”

 And Democrat Erskine Bowles, former Chief of Staff to President Clinton and the chair of President Obama’s deficit reduction commission, calls growing debt and deficits a “cancer” that must be stopped.

Pretty serious stuff, huh? You would then think that, with a “cancer” eating away at the nation’s vitals, threats to our adorable grandchildren, and the prospect of becoming a bunch of irresponsible Mediterraneans, lazing about in the sun and retiring early (wait—that last one sounds pretty good), there would be ...

graph from treehugger

Last week, I wrote that excessively paid CEO's are bad for the economy. Now we have more evidence that an extremely top-heavy economy hurts us all. Five percent of the people represent 30 percent of our consumer spending.

Top-of-the-fold NY Times front page story reports the rich spent more and faster last year than the rest of us, but they are slowing down now.

So is it logical that the rich should have lower taxes, more subsidies, and anything else they want so their spending buoys the economy? The answer is no, for four reasons known to all economists.

One: Taxing the rich and using revenue to build bridges, schools, and extend unemployment benefits will make the economy grow faster. The rich spend a fraction of what they make, the middle class spends a larger share, and the poor and working class spend all their income. A dollar in the pocket of the...

If Obama and the Democratic Party get clobbered in November, a big reason will be that people won’t vote because they feel that Obama and the Democrats don’t care about ordinary people.

Democrats may wail that Republicans cater to banks and rich people more: that Former Treasury Secretary Hank Paulson and President Bush, for example, made the AIG deal that favored investment banks at the expense of taxpayers. But even when foaming at the mouth about the bankers’ outrageous pay, Obama’s chief economic adviser, Larry Summers, said he couldn’t do anything about the AIG bonuses because they had “a contract.”  

A big part of Main Street’s disgust toward politicians and Wall Street is the obscene pay of all American executives. Economic theory that hails "contracts" before regulation is part of the problem.

The Institute for Policy Studies tracks the gap between U.S. CEO's and American work...

Students have been asking me about how I think the middle class is doing.

They used to ask about poverty. I’m figuring they don't any more because the poor are so down and out they don't even get blamed. (There was a flirtation with blaming the poor for taking out mortgages they couldn’t afford, but that died down. The shocker news today is that one out of 7 people who have a mortgage over a million dollars default—just walk away—whereas among less tony borrowers, the default rates are only one out of 12).

Back to the middle class. If we are going to worry about the middle class, let’s define it.

The Vice President’s Middle Class Task Force annual report gave a fairly sophisticated definition. It noted (see page 20) that “middle-class families are defined by their aspirations more than their income. The Commerce report assumes that middle-class families aspire to home ownership, a...

Believe me: What the Debt Commission does or does not do will affect all of us who care about jobs, Social Security, and education.

To get acquainted with Obama’s Debt Commission, watch the viral video of Debt Commission member Alan Simpson explaining why Social Security has to be cut.

Alan Simpson gets many of the lyrics right, he knows every answer to every question about Social Security, but his music, his interpretation is in outer space. The American people do not agree with him.

This is how I know. Just Monday, the Peter Peterson Foundation, through the organization America Speaks, held "town halls" (which cost $1-billion) to get ordinary people to talk about the government budget. A reported 3,500 people spread across 18 sites to sit around tables to discuss budget priorities.

I like this format; I did it once in a church basement in South Bend, Indiana (cost $4.50 for Chips A...

The New York Times reprinted a political cartoon last Sunday which got the financial reform bill (the bill is out of conference committee and about to be voted on by the full Senate and House) just right.

The cartoon: a little mouse, in a suit, carries a brief case labeled "bank reform" between two phalanxes of tall cats dressed up as bank lobbyists and asks himself, "define final passage." The cartoon identifies where the tooth and claw of the reform is going to lie—in the myriad of regulations and rules that will determine how much banks will have to pay for the financial reform and how much of their most profitable and risky business activity will be clipped.

USA Today estimates that agencies will have to pass 350 rules compared to Sarbanes-Oxley reforms, which required only 16 rules. (Yesterday’s USA Today has a nice summary of the bill by reporters Davidson, Wiseman, and Waggoner ...

The World Cup is roaring along, and the many games among 32 nations have produced some great moments, unexpected thrilling results, and virtually irresistible opportunities for clichés and national stereotyping.

So, in a spirit of fun, I’ve asked my soccer fanatic economist friend Rick McGahey to collect a bunch of amusing national clichés, which also will keep my non-American graduate students at The New School busy since they don’t seem to be doing anything but watching soccer this month. Good thing they are so productive the rest of the year. (Eloy, stop doing multiple regression analysis on soccer outcomes!) 

North Korea is Secretive and Breaks the Rules. Before the tournament, each team lists 23 players, 3 of whom are supposed to be goalkeepers. The third goalkeeper hardly ever plays, so the North Koreans named two real goalkeepers, and, instead of a third, tried to sneak an...