More About Chad Stone

Chad Stone

Chad Stone is Chief Economist at the Center on Budget and Policy Priorities, where he specializes in the economic analysis of budget and policy issues. You can follow him on Twitter @ChadCBPP.

Full bio and recent public appearances | Research archive at CBPP.org


Why We Should Give Wages Room to Grow

October 17, 2014 at 1:35 pm

My latest post for U.S. News’ Economic Intelligence blog shows that American workers have been shortchanged in the recovery from the Great Recession and explains why the projected quickening of wage growth over the next few years won’t trigger an upward spiral of wages and prices.  It says in part:

How can wage increases go from 2 percent per year to 3.5 percent [as the Congressional Budget Office projects will occur over the next three years] without igniting unacceptable inflation?  The answer lies in the arithmetic of prices, productivity and labor costs.

In round numbers, since the start of the recession in late 2007, hourly labor compensation (wages plus fringe benefits) has grown at about 2 percent a year on average.  Productivity growth (increases in output per hour worked) offset about 1.5 percentage points of that increase.  The difference, a mere 0.5 percent a year, is the growth rate of labor costs per unit of output produced.

Prices were rising three times as fast as that over this period — 1.5 percent per year — so businesses had three times the revenue per unit of output they needed to cover the increase in unit labor costs.  It’s not surprising that profits grew substantially while workers got the short end of the stick. Businesses could have raised hourly compensation by 3 percent a year over this period (half paid for by higher prices, half by greater productivity) without threatening their bottom line.

CBO projects that inflation will rise gradually toward the Fed’s stated longer-term goal of 2 percent per year. That means hourly compensation can rise at 3.5 percent a year without putting any additional upward pressure on prices: Price increases would cover 2 percentage points of that increase, and greater productivity would cover the rest.

Click here for the full post.

Ryan’s Call for “Dynamic Scoring” in Tax Reform Would Invite More Mischief

October 3, 2014 at 2:18 pm

“The reality of tax reform . . . is that any politically feasible plan to scale back tax benefits doesn’t generate enough money to significantly cut tax rates without increasing the deficit,” my latest post for U.S. News’ Economic Intelligence notes.  “Rather than grapple with this reality, . . . House Budget Committee Chairman Paul Ryan invoked the last refuge of supply-side tax cutters in recent comments about how to proceed with tax reform.”  Specifically:

Ryan wants to change long-established methods for estimating the revenue effects of proposed tax changes that the Congressional Budget Office and Joint Committee on Taxation use to “score” the budgetary effects of such legislation.  Ryan . . . badly mischaracterizes existing revenue estimation methods while ignoring the fatal flaws in requiring budget crunchers to use so-called dynamic scoring.

Contrary to Ryan’s claim, current revenue estimates reflect many kinds of changes in households’ and business’ behavior resulting from proposed policy changes.  But they don’t reflect possible changes in the overall level of economic activity that might result from proposed legislation — and with good reason:

First, estimates of the macroeconomic effects of tax changes are highly uncertain.  Second, the most credible estimates usually show changes that are quite small.  Finally, and quite importantly, dynamic scoring would impair the credibility of the budget process because the resulting budget estimates will inevitably be controversial and subject to political manipulation.

Adopting dynamic scoring for tax reform, my post concludes, is a gimmick that would only invite more mischief.

Today’s Jobs Report in Pictures

October 3, 2014 at 9:48 am

Today’s generally solid report shows that job creation is back on an over-200,000-a-month track after slowing sharply in August.  Nevertheless, there appears to be substantial room for further expansion, allowing the Federal Reserve to keep interest rates low in pursuit of high employment without igniting unacceptable inflation.  Moreover, policymakers should not be concerned about inflation even if wages begin to grow faster than they have so far in the recovery.

Click here for my full statement with further analysis.

Read more…

Today’s Jobs Report in Pictures

September 5, 2014 at 9:39 am

Today’s disappointing jobs report, while perhaps only a temporary blip in an ongoing labor market recovery, is nevertheless a sober reminder of how devastating the Great Recession and subsequent prolonged jobs slump has been for American workers.  In particular, the share of the population with a job, which plunged to low levels not seen since the early 1980s, has since risen only modestly even though we now are more than five years into the recovery.  In addition, the share of the labor force that is working fewer hours than it would like remains elevated, and unusually high long-term unemployment persists.

Click here for my full statement with further analysis.

Share of population with a job remains near recession levels

Long-term unemployment

Monthly job growth

Job losses were particularly high

Unemployment rate

Today’s Jobs Report in Pictures

August 1, 2014 at 10:02 am

Today’s solid jobs report shows a labor market that is moving in the right direction but still has a ways to go before everyone who would like to be working has a reasonable chance of finding a suitable job.  In particular, Congress dealt the long-term unemployed a harsh blow when it allowed federal emergency jobless benefits to expire prematurely at the end of last year.  Seven months later, long-term unemployment remains higher than when any of the previous seven emergency unemployment programs expired after previous recessions.  In addition, the share of the population with a job remains well below where it was at the start of the recession.

Click here for my full statement with further analysis.

Today’s Jobs Report in Pictures

July 3, 2014 at 11:28 am

Today’s jobs report contains encouraging signs that the labor market is healing but also reminders that it remains far from fully healed.  Payroll employment jumped by 288,000 in June and the unemployment rate fell to 6.1 percent.  While employment increased sharply and unemployment fell, there was little net growth in the labor force, leaving the percentage of people with a job well below where it was at the start of the Great Recession.  Nearly a third of the unemployed have been looking for work for 27 weeks or longer and encounter more re-employment obstacles than the typical jobseeker.  That’s why Congress should act immediately to restore emergency federal unemployment insurance.

Employment bar chart

Unprecedented job losses

Unemployment rate

Epop

Long-term unemployed

Emergency Jobless Benefits Cut-Off Has Hit Nearly 300,000 Veterans

June 24, 2014 at 12:16 pm

The number of jobless veterans who’ve lost access to federal jobless benefits since Congress allowed Emergency Unemployment Compensation (EUC) to expire at the end of last year — which we estimated at the end of February was close to 200,000 and counting — will reach an estimated 285,000 by the end of this month.

EUC provided additional weeks of unemployment benefits to people who could not find a new job before exhausting their regular state benefits, which run for up to 26 weeks in most states.  About 1.3 million workers were cut off from EUC when the program expired on December 28, according to the most recent Labor Department estimates, and another 1.6 million have exhausted their regular state benefits in the first six months of this year.

We estimate that about 1 in 10 EUC recipients were veterans (based on the Census Bureau’s March Current Population Survey, which shows that over the last three years, 9.7 percent of unemployment insurance recipients who were looking for work for between 27 and 73 weeks were veterans).  Applying that percentage to the Labor Department totals, about 285,000 veterans have been cut off from EUC — about 130,000 when the program expired December 28 and even more since then who have exhausted their regular benefits and not received any EUC.

In February, we urged Congress to act quickly to reauthorize EUC retroactively to restore benefits to those who’d already lost them and keep the total number of vets — and other long-term unemployed workers — denied emergency jobless benefits from continuing to grow.

Congress hasn’t acted yet — and the numbers keep growing.

Today’s Jobs Report in Pictures

June 6, 2014 at 9:54 am

Today’s jobs report shows that more than six years after the onset of the Great Recession and the worst jobs slump since the 1930s, payroll employment has finally topped its level at the start of the recession.  Still, with essentially no net job growth since December 2007 but continued growth in the working-age population, there are many more people now who want to be working but don’t have a job.

Click here for my full statement with further analysis.

Need to Protect Low-Income Households Up in the Air Under EPA Climate Regulation

June 3, 2014 at 12:42 pm

In my latest post for US News & World Report, I previewed the Obama Administration’s proposal to reduce carbon pollution from existing electric power plants.  It was important to include robust low-income protections in the comprehensive national “cap-and-trade” proposal that Congress debated but failed to enact.  Should the new proposal also include such protections?

At this point, we don’t know.  The new proposal relies on the Environmental Protection Agency (EPA) to establish emissions-reduction goals for each state and approve state plans for meeting those goals.  As CBPP has explained, such a prescriptive regulatory approach will likely be less cost-effective (i.e., it will cost more to achieve a given emissions target) than a comprehensive market-based approach like cap-and-trade or a carbon tax that “puts a price on carbon” and lets market forces determine where emissions reductions come from.  But the consumer impact is likely to be smaller under regulation precisely because the price signal is weaker.

As I say in the US News post:

The Obama administration pledges to give states as much flexibility as possible to meet the new regulations on emissions from existing power plants, and there are several ways to do that, including some that mimic a carbon tax or cap-and-trade, achieving some of the cost efficiencies (but only within the existing power plant sector)…

One leading issue in designing market-based solutions is the impact on consumers, especially low-income households, of putting a price on carbon.  The comprehensive bills that Congress debated in 2009-10 addressed that issue by allocating some of the revenue the government received from selling emissions allowances to consumer relief.  EPA regulation is less cost-effective, but it also has a less adverse impact on household budgets.  But were states to choose more market-based solutions within the EPA’s requirements, such as joining regional cap-and-trade systems, both federal and state policymakers should be mindful of the possible harm to low-income households.

The EPA will issue final guidelines in about a year and states will have until June 2016 to submit plans.  In the meantime, CBPP will continue to urge policymakers to develop policies that are compatible with protecting both the environment and low-income households.

House Fiscal Double Standard in Action

May 6, 2014 at 3:35 pm

The House will vote this week to add $156 billion to budget deficits over the period 2014-2024 by expanding and making permanent the lapsed corporate tax credit for research and experimentation (R&E) without offsetting the cost.  Meanwhile, House Speaker John Boehner continues to oppose legislation to restore emergency jobless benefits that lapsed in December unless “it is paid for and includes something to help create jobs.”

I addressed this fiscal double standard in my latest US News & World Report post, contrasting the House Ways and Means Committee’s passing of bills that would make permanent the R&E credit and five other lapsed corporate tax breaks with Speaker Boehner’s refusal to take up the Senate-passed emergency unemployment insurance bill.

As a low-cost temporary measure, a renewal [of jobless benefits] would add only trivially to future deficits and debt, even if it weren’t paid for — although, in fact, the Senate bill offsets the costs. The corporate tax breaks, in contrast, will do little or nothing for the recovery, while the resulting deficits will hamper economic growth for years.

…Earlier this year, when he was wearing a tax reformer’s hat and not pushing through these tax cuts, Ways and Means Committee Chairman Dave Camp, R-Mich., embraced the principle that any provisions worth having in the tax code should be offset by scaling back inefficient tax breaks elsewhere.

That’s sound long-run fiscal policy. The economic cost of borrowing to finance tax cuts typically outweighs the economic benefit of even a relatively well-regarded tax break like the credit for business research and experimentation. In contrast, scaling back an inefficient tax break ipso facto helps make the economy work better.

Extending the tax breaks without paying for them is unsound long-run economic and budget policy, and it will do little or nothing for job creation in the short run, when the economy needs stronger demand for goods and services to create jobs.  On a bang-for-the-buck basis, analysts typically estimate that corporate tax breaks generate well under 50 cents of additional demand for goods and services per dollar of budgetary costs while policies like jobless benefits, which put money in the hands of people who will spend it, generate well over a dollar.

The chart below and the conclusion of my US News post sum it up:

[A] House Republican majority that says it’s all about job creation and reining in “out of control” deficits is enthusiastic about tax cuts that won’t create jobs and will make deficits worse, but it dismisses emergency jobless benefits that will create jobs and won’t make deficits worse.

Sources:  Deficits: Congressional Budget Office cost estimates of H.R. 4438 and Senate EUC Extension Act; Bang-for-the-Buck: Testimony of Mark Zandi, Moody’s Analytics (R&E credit is CBPP estimate based on other corporate provisions in Zandi testimony)

 
Click here to read my full US News post.

Today’s Jobs Report in Pictures

May 2, 2014 at 9:48 am

Today’s mixed jobs report shows a big jump in payroll employment but a sharp fall in labor force participation.  The labor market is clearly much stronger than in the depths of the Great Recession but still far from the “maximum employment” goal that Congress has mandated the Federal Reserve to pursue.  Long-term unemployment remains a particular concern, highlighting why Congress must restore federal emergency jobless benefits – which it allowed to lapse at the end of 2013 and has not restored even though long-term unemployment remains substantially higher than when any of the previous seven emergency programs expired.

New York Times Is Right: “No Spring Break for the Unemployed”

April 18, 2014 at 12:30 pm

“As members of Congress enjoy their extended spring break, 2.3 million unemployed Americans have been left to worry about whether lawmakers will ever get around to renewing federal unemployment benefits, which expired at the end of 2013,” today’s New York Times editorial points out.  And the total number of jobless workers affected grows each week.

As we’ve explained, the Labor Department estimates that 4.9 million people will miss out on emergency benefits by the end of the year if policymakers don’t restart the federal program, known as Emergency Unemployment Compensation (see graph).

For state-by-state figures on those 4.9 million workers, click here.  For state unemployment rates and the number of weeks of state unemployment benefits available, click here.