History > 2014 > USA > Economy (I)

Alnetta McKnight lost her job in June,

and her aid ran out after 20 weeks.

“I worked for 26 years;

I lost my job through no fault of my own.

This is what I get?”

Photograph:

Mark Courtney for The New York Times

States Cutting Weeks of Aid to the Jobless

NYT

JAN. 21, 2014

http://www.nytimes.com/2014/01/22/business/states-cutting-weeks-of-aid-to-the-jobless.html

U.S. Economy Grew at 4% Rate

in Second Quarter,

Beating Expectations

 

JULY 30, 2014

The New York Times

By DIONNE SEARCEY

The United States economy rebounded heartily in the spring after a dismal winter, the Commerce Department reported on Wednesday, growing at an annual rate of 4 percent from April through June.

In its initial estimate for the second quarter, the government cited major gains in inventories for private businesses as well as exports and personal consumption spending that added to the growth. Economists, who had been hoping for a full reversal of the first quarter’s decline, were thrilled with the second quarter’s numbers. The consensus forecast for G.D.P. was 3 percent.

“Fantastic,” Douglas Handler, chief United States economist for IHS Global Insight Analysis, said of the second-quarter G.D.P. increase, which further cemented views that the decrease in America’s overall output during the first quarter was most likely a fluke tied in large part to unusually stormy winter weather and other anomalies. Any dip in gross domestic product outside an official recession is considered rare.

During the first quarter, output shrank by 2.1 percent, less than had been reported, according to the Commerce Department’s newly revised G.D.P. figures, also released on Wednesday. The department had previously said first-quarter output decreased 2.9 percent.

“The really ugly G.D.P. report for the first quarter was likely the result of mostly one-off events,” Bob Baur, chief global economist for Principal Global Investors, wrote in a note to clients before Wednesday’s release.

In a note to clients, Paul Ashworth, chief United States economist for Capital Economics, said increases in consumption were driven by a surge in durable goods consumption. He also said state and government spending picked up, offsetting declines in the first quarter. “For once, the public sector wasn’t a drag on the economy,” his note said.

More optimism for the economy came on Wednesday as ADP, the payroll processing company, said private employers added 218,000 jobs in last month, which was down from 281,000 in June. It was the fourth straight month of job gains above 200,000. While ADP’s numbers offered reason to be hopeful, the company’s figures cover only private businesses and often do not track with the government’s jobs report, which will be released Friday. Also, the Conference Board said on Tuesday that consumers were more upbeat about the economy than they had been in about seven years.

Also on Wednesday, the Commerce Department was revising figures dating to 1999. Economists were hoping those revisions would adjust for numerous data irregularities in past quarters brought on by events like changes in health care spending related to the Affordable Care Act.

While the economy seems generally to be bouncing back from the recession, overall growth remains lackluster. Wages have failed to rise significantly, an area of concern that Janet L. Yellen, chairwoman of the Federal Reserve, noted when she appeared before Congress this month.

Second-quarter earnings for many companies have been mixed. Home prices are rising at the slowest pace in more than a year. Many economists say the mediocre housing market and underwhelming labor conditions are the driving forces behind the Fed’s plan to keep interest rates low into next year.

“We made up some of the ground lost in the first three months of this year, but there’s nothing in today’s data to indicate that the economy is growing more strongly than it has for the past couple of years,” the Economic Policy Institute, a left-leaning nonprofit group focused on low- and middle-income workers, said in a release Wednesday.

More important economic data will be released this week. Besides the Labor Department’s latest figures on unemployment and payrolls to be announced Friday, the Federal Reserve’s policy-making committee continues meeting on Wednesday, with the central bank announcing its latest plans on Wednesday afternoon.

    U.S. Economy Grew at 4% Rate in Second Quarter, Beating Expectations,
    NYT, 30.7.2014,
    http://www.nytimes.com/2014/07/31/business/economy/
    us-economy-grew-4-in-second-quarter.html

Fast-Food Workers

Intensify Fight for $15 an Hour

JULY 27, 2014

The New York Times

By STEVEN GREENHOUSE

ADDISON, Ill. — As labor gatherings go, this one was highly unusual — 68 workers arrived on charter buses from St. Louis, 100 from New York City and 180 from Alabama, Georgia and the Carolinas. Fifty flew in from Los Angeles and two dozen from Seattle.

These were not well-paid carpenters or autoworkers heading to their annual convention, hoping to sneak in a round of golf. Rather they were fast-food workers — 1,200 of them — from McDonald’s, Burger King and other chains, eager to pursue their ambitious goal of creating a $15-an-hour wage floor for the nation’s four million fast-food workers.

Crowding over the weekend into an expo center in this suburb west of Chicago, many wore boldly lettered T-shirts proclaiming “We Are Worth More” and “Raise Up for $15.”

“If we win $15, that would change my life,” said Cherri Delisline, 27, a single mother who earns $7.35 an hour after 10 years as a McDonald’s cashier in North Charleston, S.C. “I get paid so little money that it’s hard to make ends meet, and I’ve had to move back in with my mother.”

It was by far the largest gathering of fast-food workers, and it was largely underwritten by the Service Employees International Union, a powerhouse with two million members known for unionizing hospital workers, home care aides and janitors. Mary Kay Henry, the union’s president, said the S.E.I.U. has adopted the fast-food workers’ cause to lift low-wage workers and combat income inequality.

Knowing how to rally a crowd, Ms. Henry said in her keynote speech, “A selfish few at the top are using their power to hold down wages, no matter how much that hurts families and communities across the country.”

She attacked the C.E.O.s of McDonald’s and Yum Brands, which owns KFC, Taco Bell and Pizza Hut, for receiving executive compensation of more than $10 million a year. They make more than twice as much in a day as many fast-food workers earn in a year.

Glenn Spencer, executive director of the U.S. Chamber of Commerce’s Workforce Freedom Initiative, asserted that the S.E.I.U. wasn’t pumping $15 million into the fast-food campaign merely out of beneficence.

“You don’t put that kind of money in just to have a sense of altruism,” he said. “You have a plan for how that transfers into new members.”

The S.E.I.U. does hope to somehow unionize throngs of fast-food workers, but those efforts may prove difficult given that most fast-food employees are scattered among thousands of different franchised restaurants. Moreover, the franchisees and fast-food chains are likely to mount a fierce battle against unionization.

The two-day convention, with 150 tables spread across the expo center’s floor, highlighted the campaign’s growth since November 2012, when 200 workers went on a one-day strike at 60 fast-food restaurants in New York. In its most recent strike in mid-May, workers walked out at restaurants in 150 cities nationwide, with solidarity protests held in 30 countries. The focus increasingly includes unionizing; the movement’s motto has become “$15 and a union.”

“My sense is there’s been a recognition on the part of the S.E.I.U. that to get the labor movement out of the very deep rut it’s in, it’s going to take more than an individual local organizing drive — that this is a moment to do a large-scale, high-visibility effort to alter the climate for labor,” said Janice R. Fine, a professor of labor relations at Rutgers University. “They have taken a sector like fast food where the conditions are well known: low wages, part-time hours, irregular hours, often no benefits.”

In a high-stakes move, fast-food workers, backed by the S.E.I.U., have brought several cases before the National Labor Relations Board, asking its general counsel to declare McDonald’s a joint employer of the restaurants run by its franchisees. If the labor board agrees, that would open the door for the S.E.I.U. to try to unionize not just three or five McDonald’s at a time, but dozens and perhaps hundreds.

Business groups oppose such a change. Mr. Spencer said that if the labor board adopted a broader interpretation, “then you make the corporation sit down at the table and talk” with the union. S.E.I.U. officials want McDonald’s and its franchisees to agree not to fight unionization efforts.

McDonald’s declined to comment on the weekend convention, held four miles from its headquarters. The main target of the movement’s attacks and unionization talk, McDonald’s says it provides competitive pay and benefits and opportunities for many workers. The National Restaurant Association has repeatedly criticized the call for a $15 fast-food wage, saying it would result in higher menu prices and cuts in employment.

Ms. Henry said the fast-food campaign has already paid off. She cited its influence in creating an atmosphere for Seattle to approve a $15 minimum wage and for San Francisco and Chicago to be weighing similar measures. In early July, the S.E.I.U. signed a contract for 20,000 cafeteria workers, custodians and other service workers for the Los Angeles school district that will raise their pay, now often $8 or $9, to $15 an hour by 2016.

“The fast-food movement is producing real gains in the wages of our members,” Ms. Henry said, declining to disclose how much money her union has spent on underwriting the campaign — or the convention.

With the midterm elections approaching, Mr. Spencer said the union gets another benefit from the fast-food campaign, which is spurring efforts to raise the minimum wage in many states. “There’s clearly a political dimension here,” he said. “The S.E.I.U. is trying to rally the Democratic base for November.”

Francis O’Donnell, owner of a Buffalo Wings & Rings franchised restaurant near the White Sox stadium in Chicago, said a $15 wage would be a disaster. “It’s going to put a lot of businesses out of business,” he said.

Mr. O’Donnell estimated it would increase his payroll costs by 25 percent, erasing his profit margins. He added, “It would leave me with three choices: raising my prices, which will hurt customers, or reducing my staff” or shutting down.

The Rev. William Barber, a minister from North Carolina who has mobilized liberal protests there, gave a fiery speech with a different view.

Citing Franklin Roosevelt’s Depression-era advice, he told the workers: “You have to stay in the $15 fight until it is a reality. When you raise people’s wages and it raises the standard of living and you increase purchasing power, you actually not only do the right thing morally, but you do the right thing economically, and the whole country is blessed.”

Throughout the convention, one overarching strategy was to say the fast-food movement was an economic justice movement comparable to the civil rights movement — a strategy the service employees used to unionize tens of thousands of cleaning workers in its “Justice for Janitors” campaign. Inspired by the Rev. Martin Luther King Jr., the fast-food workers debated and discussed using nonviolent civil disobedience to step up pressure on the fast-food companies.

“They’re already slowly killing us with the way they’ve got us living,” said Terrence Wise, a Burger King worker in Kansas City, Mo., who served as M.C. for much of the convention. “Are we going to stand up?” he asked. “I want to see who is willing to do whatever it takes, who is willing to get arrested.”

After his pleas, the workers voted unanimously to conduct a wave of civil disobedience actions.
 

Adriana Alvarez, a McDonald’s worker from Chicago, was ready to answer the call. “It’s awesome to see all these people here,” she said. “I’m ready to take the next step.”

A version of this article appears in print on July 28, 2014, on page B1 of the New York edition with the headline: Fast-Food Workers Intensify Fight for $15 an Hour.

    Fast-Food Workers Intensify Fight for $15 an Hour, NYT, 27. 7.2014,
    http://www.nytimes.com/2014/07/28/business/
    a-big-union-intensifies-fast-food-wage-fight.html

Facebook’s Profit Propelled by Mobile

 

JULY 23, 2014

The New York Times

By VINDU GOEL

SAN FRANCISCO — Once again demonstrating its mastery of the mobile computing wave, Facebook dazzled Wall Street on Wednesday by posting significant growth in revenue and profits for the second quarter, driven largely by ads shown in the news feeds of a billion Facebook users checking the service on their mobile phones.

Shareholders celebrated, sending the stock of the company to a record high in after-hours trading.

But Facebook’s chief executive, Mark Zuckerberg, wasn’t basking in what he modestly described as a “good quarter.” Instead, he was looking ahead to the next wave.

In a conference call with investors, Mr. Zuckerberg warned that the company would be spending heavily for years on newer services like private messaging, virtual reality and Facebook search without any near-term prospects of making money from them.

“We think it is going to be years of work before those are huge businesses for us,” he said. “I really can’t underscore this enough that we have a lot of work to do. We could take the cheap and easy approach and put ads in and do payments and make money in the short-term, but we’re not going to do that.”

Right now, he doesn’t have to.

Facebook, based in Menlo Park, Calif., said it had about 1.32 billion monthly users around the world in June, with more than a billion of those people using the service at least partly on mobile devices.

Revenue was $2.91 billion, up 61 percent from $1.81 billion during the same period last year. Net income was $791 million, or 30 cents a share, compared with $333 million, or 13 cents a share, a year ago. The company’s operating profit margin hit a record 48 percent in the second quarter, reflecting increased cost efficiencies.

Mobile devices accounted for nearly two-thirds of Facebook’s revenue, which at this point mostly comes from ads shown on the Facebook website and apps. However, the company is beginning to supplement that with ads on other sites.

“These are just phenomenal numbers,” said Ben Schachter, an Internet analyst with Macquarie Capital. “The core business is so strong that it’s buying them time to be more conservative and deliberate in bringing out new products.”

Analysts had expected Facebook to report revenue of $2.8 billion. Wall Street had also projected that the company would post a profit of 32 cents a share, after excluding compensation-related expenses, according to consensus estimates collected by several services. On that basis, the company blew past the expectations with a profit of 42 cents a share, up from 19 cents a year earlier. The quarter’s results sent Facebook shares up 5.6 percent in after-hours trading to more than $75, well above its highest closing price.

In the conference call, Facebook executives offered few details about the performance of nascent products like new video ads that play automatically in the news feed, image ads on its Instagram photo-sharing app or its experiments in mobile payments.

But Mr. Zuckerberg did get enthusiastic about Oculus VR, a maker of virtual reality headsets that Facebook bought for $2 billion in a deal that closed this week.

“We can help define what the next generation of computing is going to be. Virtual reality, augmented reality, will play into this in an important way,” he said.

The Oculus purchase and Facebook’s proposed $19 billion purchase of WhatsApp, the leading text messaging app, are examples of the kind of long bets Mr. Zuckerberg is making without expecting any immediate returns.

Richard Greenfield, an analyst with BTIG Research, said that investors would be patient because Facebook was trying to reinvent display advertising, making it a formidable rival to Google, the king of search ads.

“They are clearly focusing on the quality of the creative, getting more into video, doing things like Instagram ads, that have real emotional connection with users,” he said. “I think they’re just trying to temper expectations so that expectations don’t get ahead of themselves.”

Indeed, Facebook continues to gain ground in digital advertising, particularly in mobile.

The company accounted for 5.8 percent of the world’s estimated $120 billion in digital ad revenues in 2013, and it captured 17.77 percent of mobile ad spending, according to the research firm eMarketer.

This year, eMarketer predicts, Facebook will garner nearly 8 percent of the world’s digital ad revenue and 22.3 percent of mobile ad revenue, which the firm projects will nearly double globally as people turn increasingly to phones as their primary on-ramp to the Internet.

“If you’re just out there fishing for new customers, Facebook is by far the most efficient channel,” said Bob Buch, chief executive of SocialWire, a San Francisco company that helps retailers market on Facebook.

One long-running concern is whether Facebook users are tiring of the service and turning to other apps. In the United States, the company’s websites and apps account for about one out of every six minutes that people spend online, according to comScore data.

Facebook said that about 63 percent of its users logged on daily in June, roughly the same as at the end of the first quarter.

Melissa Parrish, vice president and research director at Forrester Research, said Facebook clearly did well last quarter. Her one complaint was that the company was essentially selling display ads and doing little to help marketers capitalize on the social connections of Facebook users. But “I suppose I’m being a bit of a tiger mom,” she said. “My kids are getting all A’s, and I’d really like to see them get all A-pluses.”
 

A version of this article appears in print on July 24, 2014,
on page B1 of the New York edition with the headline: Facebook’s Profit Propelled by Mobile.

    Facebook’s Profit Propelled by Mobile, NYT, 23.7.2014,
   http://www.nytimes.com/2014/07/24/technology/
    facebooks-profit-soars-past-expectations-fueled-by-mobile-ads.html

A 401(k) for All

JULY 22, 2014

The New York Times

The Opinion Pages | Op-Ed Contributor

By GENE B. SPERLING

SANTA MONICA, Calif. — ONE compelling way to turn the ongoing national discussion on wealth inequality into a tangible policy to help Americans increase their wealth and savings would be to fix what I have long called our “upside-down” tax incentive system for retirement savings. In its current form, it makes higher-income Americans triple winners and people earning less money triple losers.

How so? First, the federal government’s use of tax deductibility to encourage savings turns our progressive structure for taxing income into a regressive one: While earners in the highest income bracket get a 39.6 percent deduction for savings, the hardest-pressed workers, those in the lowest tax bracket, get only a 10 percent deduction for every dollar they manage to put away.

Second, while less than 1 percent of lower- and moderate-income Americans can put aside enough to fully “max out” their benefits on I.R.A. contributions, higher-income Americans can maximize their return on savings by sampling from a menu of tax-preferred savings options. A business owner could theoretically benefit from a 401(k), a SEP I.R.A. of up to $52,000 and a state-based 529 program that allows tax-free savings for college education.

Finally, a far larger share of upper-income Americans get matching incentives for savings from their employers. Members of Congress and the White House staff, for example, get an 80 percent match for saving 5 percent of their income. But while half of Americans earning more than $100,000 get an employer match, only 4 percent of those earning under $30,000 and less than 2 percent of those making under $20,000 get any employer match for saving.

The results are stunning. Last year, of the $137 billion in tax benefits that went to encourage retirement savings, three times more went to the top 10 percent of taxpayers than to the bottom 60 percent. The top 5 percent of taxpayers get more tax relief for savings than the bottom 80 percent. If the main justification for savings incentives is to help workers overcome shortsightedness about the benefits of long-term accumulated savings, how is it defensible to focus so many of our resources on those best poised to save anyway?

One intermediate step would be to replace our regressive system of relying on tax deductibility with a flat tax credit that would give every American a 28 percent tax credit for savings, regardless of income. But why should we stop there? If we know that 401(k)’s with automatic payroll deductions and matching incentives work beautifully for those with access to them, why would we not institute a 401(k) for everyone?

A government-funded universal 401(k) would give lower- and moderate-income Americans a dollar-for-dollar matching credit for up to $4,000 saved annually per household. Upper-middle-class Americans could get at least a 60 percent match — doubling the incentive they get today. The match would be open to workers even if their employers were already matching, which would encourage employers to keep contributing to savings. The match would also be available through I.R.A. contributions for those who were self-employed or who wanted to keep saving even while they were temporarily not working.

Employers would have to provide automatic payroll deductions for their employees (while allowing those who still wanted to opt out to do so). Setting the default at “opting in” would ensure that workers did not miss out on the match provided by a universal 401(k). The government could set requirements for low fees, transparency and safety to allow for vigorous competition in the private sector while allowing individual savers access to a version of the plan that members of Congress use for their own retirement savings.

Costs need not be a roadblock. Among many ways to do it, moderate reforms to the estate tax could allow married couples to leave up to $7 million to their heirs tax-free (instead of the current $10.7 million) while generating over $200 billion in resources over the next decade, which could be used to help tens of millions of savers build their own estates. Even if a universal 401(k) ended up costing the government more than expected, it would still increase national savings overall if the public incentives led to additional private savings.

While President Clinton put forward a similar USA Account proposal in 1999 and President Obama has promoted automatic savings proposals since 2009, these ideas have gotten lost in partisan debates on fiscal and Social Security reform.

But with the economy recovering and many Americans beginning to focus on rebuilding lost nest eggs, politicians on all sides should see something they like in a policy that would both reduce wealth inequality and encourage individual wealth creation.
 

Gene B. Sperling was director of the National Economic Council from 1996 to 2001 and again from 2011
until March of this year.

A version of this op-ed appears in print on July 23, 2014,
on page A25 of the New York edition with the headline:
A 401(k) for All.

    A 401(k) for All, NYT, 22.7.2014,
    http://www.nytimes.com/2014/07/23/opinion/a-401-k-for-all.html

Jury Awards $23.6 Billion

in Florida Smoking Case

 

JULY 19, 2014

The New York Times

By FRANCES ROBLES

MIAMI — A jury in northwestern Florida awarded a staggering $23 billion judgment late Friday against the country’s second-largest tobacco company for causing the death of a chain smoker who died of lung cancer at the age of 36.

The company, the R. J. Reynolds Tobacco Company, promised a prompt appeal.

Michael Johnson Sr. died in 1996 after smoking for more than 20 years. In 2006, his widow, Cynthia Robinson, of Pensacola, sued R. J. Reynolds the maker of the Kool brand cigarettes her husband had smoked, arguing that the company had deliberately concealed the health hazards its product caused.

The four-week trial ended Wednesday. The jury deliberated for 18 hours over two days, first awarding $17 million in compensatory damages and then emerging at 10 p.m. Friday with a $23.6 billion punitive judgment.

“When they first read the verdict, I know I heard ‘million,’ and I got so excited,” Ms. Robinson said in a phone interview Saturday. “Then the attorney informed me that was a ‘B’ — billion. It was just unbelievable.”

She said Mr. Johnson, a longshoreman and hotel shuttle bus driver to whom she was married from 1990 until his death six years later, began smoking around age 13. He often lit a fresh cigarette with the butt end of another.

“He really did smoke a lot,” she said.

He had two children, who are now 23 and 29.

“The damages awarded in this case are grossly excessive and impermissible under state and constitutional law,” J. Jeffery Raborn, vice president and assistant general counsel for R. J. Reynolds, said Saturday in a statement. “This verdict goes far beyond the realm of reasonableness and fairness and is completely inconsistent with the evidence presented. We plan to file post-trial motions with the trial court promptly and are confident that the court will follow the law and not allow this runaway verdict to stand.”

Such efforts by the industry are often successful. In October 2002, a Los Angeles jury awarded $28 billion in punitive damages against Philip Morris USA. In August 2011, an appeals court reduced the punitive damages to $28 million.

The Florida case was among the thousands of the so-called “Engle progeny” cases that stemmed from a 2006 court decision ruling that smokers could not file class-action suits but were free to do so individually.

That decision reversed a $145 billion verdict in a class action awarded in 2000 on behalf of a Miami Beach pediatrician, Howard A. Engle. An appeals court voided the award, saying it was excessive and the cases of individual smokers were too disparate to be considered as a class.

The plaintiffs petitioned the Florida Supreme Court, which upheld the decertification of the class but permitted individuals to sue, which set the stage for Ms. Robinson’s lawsuit.

Friday’s verdict was the highest granted to an Engle progeny case.

Ms. Robinson was represented by Christopher M. Chestnut, based in Georgia, and Willie E. Gary and Howard M. Acosta, both based in Florida.

“The jury just got it,” Mr. Chestnut said. “The jury was outraged with the concealment and the conspiracy to conceal that smoking was not only addictive but that there were deadly chemicals in cigarettes.”

He said the jury seemed most persuaded by 1994 C-Span footage of tobacco industry executives claiming smoking did not cause cancer and was not addictive, and by 60-year-old internal documents showing the company knew otherwise.

Scott P. Schlesinger, a Fort Lauderdale, Fla., lawyer who has sued big tobacco but was not involved in the Robinson case, said a verdict this large is not typical.

“There have not been multibillion-dollar punishments in the Engle cases for one reason: We are afraid to ask for them. We are afraid of what will happen in the appellate process,” he said. “This verdict is important because it goes back to an ongoing saga that goes back to 1990. People have been filing suit one by one, and we have been winning about 70 percent of them.”

Correction: July 19, 2014

An earlier version of this article misstated the location of Willie E. Gary, a lawyer for Cynthia Robinson. He is based in Florida, not Georgia.

A version of this article appears in print on July 20, 2014, on page A17 of the New York edition with the headline: Jury Awards $23.6 Billion in Florida Smoking Case.

    Jury Awards $23.6 Billion in Florida Smoking Case, NYT, 19.7.2014,
    http://www.nytimes.com/2014/07/20/business/
    jury-awards-23-6-billion-in-florida-smoking-case.html

Microsoft to Lay Off Thousands,

Most From Nokia Unit

 

JULY 17, 2014

The New York Times

By NICK WINGFIELD

SEATTLE — Microsoft is trying to shake the effects of middle age.

The company, which is now 39 years old, said on Thursday that it was laying off up to 18,000 employees, in an attempt at reinvigoration. The cuts are the first major change made by Satya Nadella, the company’s new chief executive, who said Microsoft needed to be more nimble and focused.

The job cuts would be the largest in the company’s history, representing about 14 percent of its work force. Most of the cuts will come from the Nokia mobile phone business Microsoft acquired this year.

While Microsoft still makes profits that executives at other companies would be ecstatic to have, it has been beaten on the biggest new trends in tech, including mobile, Internet search and cloud computing. As a result, it is regularly left out of conversations about companies defining the next generation of technology, outflanked and overshadowed by companies like Apple, Google, Facebook and Amazon.

Cutting jobs does not mean the company will suddenly begin creating products that people love. And the cuts did not suggest a sharp shift in strategy. But it is a start of something new, in the view of many Microsoft critics, and one that could help the company concentrate on the businesses where it is likely to have the most impact.

“I think this is a jolt to the culture, which is really needed,” said George F. Colony, the chief executive of Forrester Research, a technology research firm. “It was frozen in place, and lacked new creativity and innovation.”

Microsoft has announced several bold plans meant to inject new dynamism into the company in recent years, including reorganizations, new products and acquisitions. Most of those changes did not produce the edge it wanted. The question yet to be answered with the latest move is whether Mr. Nadella’s leadership, and the scope of the change, will break that pattern.

Mr. Nadella has improved employee morale since taking over the company in February, partly by pledging big changes. He made a quick decision on a stalled project, releasing Microsoft’s lucrative Office applications for the iPad. And he departed from past practice at the company by making its Windows operating system free for mobile devices to improve its market share.

Investors have bought into his vision. The company’s stock, which languished during the tenure of Steven A. Ballmer, the company’s previous chief executive, is up about 22 percent since Mr. Nadella assumed the top job. On Thursday, its shares hit a 14-year high.

But critics of Microsoft, including many former employees, believe the company has become overly bureaucratic and slow moving. The company has grown to 127,000 employees worldwide, up from 57,000 a decade ago. Apple, which is just a year younger than Microsoft, has about 85,000 employees, nearly half of them in its retail stores. During the first three months of this year, Apple’s revenue and profit were each roughly double Microsoft’s.

“Having a clear focus is the start of the journey, not the end,” he said in the email. “The more difficult steps are creating the organization and culture to bring our ambitions to life.”

He added: “The first step to building the right organization for our ambitions is to realign our work force.”

Some investors were hoping for an even bolder move by Mr. Nadella, including trimming some product lines. The company’s investments in the search engine and video game businesses have come under particularly harsh scrutiny, raising questions about whether the company would be better off narrowing its focus to other more lucrative markets.

Mr. Nadella did, however, take a scalpel to some projects that were especially far afield from its primary business. The company said it planned to shut down Xbox Entertainment Studios, a group in Santa Monica, Calif., that was dedicated to producing original television programming for viewing on Microsoft’s video game system. Microsoft said it would complete some programs that were already underway, including two series based on the Halo game franchise.
 

The biggest chunk of job losses, though — about 12,500 — will come because of the Nokia deal. Mr. Nadella has singled out Microsoft’s mobile business as one of his top priorities, but the layoffs announced on Thursday amount to a significant retrenchment in one area of that market.

The vast majority of the jobs being eliminated will come from the Nokia groups, though some will come from overlap at Microsoft resulting from the deal. Microsoft said 1,100 job cuts would come from Finland, and 1,800 from a Nokia factory in Hungary. The result is that Microsoft is letting go of nearly half of the 25,000 people who joined the company from Nokia.

That deal, the brainchild of Mr. Ballmer, has been unpopular among some Microsoft employees and investors, who view it as a dangerous adventure into hardware, a business beyond Microsoft’s expertise. On paper, the deal sounded like a compelling effort to emulate the elegance of Apple’s products by bringing mobile hardware and software development together under one roof.

Google tried something similar with its acquisition of Motorola Mobility. After a couple years of lackluster handset sales, however, it sold Motorola to Lenovo in January.

“It is particularly important to recognize that the role of phones within Microsoft is different than it was within Nokia,” Stephen Elop, a former Nokia chief executive who now runs the devices group at Microsoft, said in an email to employees on Thursday. “Whereas the hardware business of phones within Nokia was an end unto itself, within Microsoft all our devices are intended to embody the finest of Microsoft’s digital work and digital life experiences, while accruing value to Microsoft’s overall strategy.”

Nokia’s handset sales have fallen for years, despite a partnership with Microsoft that put its Windows Phone operating system on Nokia smartphones. Mr. Nadella has said he is still committed to making hardware. But the depth of the Nokia cuts suggest he wants to minimize the risks in the smartphone market, said Rick Sherlund, an analyst at Nomura Securities.

“This wasn’t his acquisition,” Mr. Sherlund said. “This was Ballmer’s acquisition.”

 

Mark Scott contributed reporting from London.

A version of this article appears in print on July 18, 2014, on page B1 of the New York edition with the headline: Microsoft To Lay Off Thousands.

    Microsoft to Lay Off Thousands, Most From Nokia Unit, NYT, 17.7.2014,
    http://www.nytimes.com/2014/07/18/business/
    microsoft-to-cut-up-to-18000-jobs.html

Hiring Is Strong

and Jobless Rate Declines to 6.1%

 

JULY 3, 2014

The New York Times

By NELSON D. SCHWARTZ

American companies are finally getting comfortable enough with the economy’s prospects to add new workers at a very healthy pace, after years of saying they lacked the confidence to hire people aggressively during a fitful recovery.

Employers added 288,000 jobs in June, the Labor Department said Thursday, the fifth month in a row that hiring has topped the 200,000 mark. The unemployment rate dipped to 6.1 percent last month, the best reading since September 2008, when the collapse of Lehman Brothers turned what had been a mild recession into an economic rout.

Since then, many segments of the economy have rebounded — including corporate profits, Wall Street and the housing market — even as payrolls inched higher at a grindingly slow rate. Now, these broader economic gains are prompting businesses to actually hire significantly more workers in response to growing demand, rather than taking half steps, like adding hours to stretch existing work forces.

The prospect of stronger economic growth, with healthier consumer spending as more Americans find work, helped to lift the stock market to new highs. On Thursday, the Dow Jones industrial average closed above 17,000 for the first time, while the Standard & Poor’s 500-stock index recorded a new high and the tech-heavy Nasdaq hit its highest level since the go-go days of 2000.

Despite the broad gains, the economy is still a long way from its peak before the housing bubble burst and the recession began at the end of 2007. The broadest measure of unemployment, which includes people who are working part time because full-time positions are not available, stands at 12.1 percent. And the proportion of Americans in the labor force has been stuck for three straight months at 62.8 percent, a 36-year low, and is down sharply from 66 percent in 2008.

But the recent healthy level of hiring looks more sustainable than it has in years. Factoring in June’s increase and upward revisions for estimated hiring in April and May, employers added an average of 231,000 workers a month in the first half of 2014, the best six-month run since the spring of 2006. “We’re clicking on all cylinders in terms of job growth,” said Dean Maki, chief United States economist at Barclays.

Just as significant as the headline figures, Mr. Maki said, is that June’s hiring was broad-based, as industries as varied as health care, manufacturing, financial services and retailing all added workers. “Every major sector showed job growth in June, including the private service sector, where the bulk of jobs in the U.S. are created,” Mr. Maki said.

In an important turnabout, there were encouraging gains not just in well-paid white-collar professions, or in low-wage sectors like retail and restaurants, but also in the vast middle tier of jobs that enable workers to gain a foothold in the middle class. For example, manufacturers hired 16,000 workers, while transportation companies added 17,000 employees and the long-dormant public sector saw an addition of 26,000 positions.

“It’s definitely a strong report,” said Guy Berger, United States economist at RBS. “There really aren’t that many clouds.”

Despite the stock market jump, the more robust rate of hiring is making some traders nervous that the Federal Reserve will be forced to start raising short-term interest rates earlier than had been expected to ward off any risk of higher inflation. The drop in the unemployment rate to near 6 percent comes months earlier than the Fed had expected; the central bank had predicted it would take until the end of the year for the jobless rate to reach that level.

While the Fed’s program of buying bonds to stimulate the economy is on track to end in October, most economists have been predicting the first increases in short-term rates would not come until the summer or early fall of 2015. Now, some experts like Paul Ashworth of Capital Economics say the Fed could move as soon as March.

Despite such concerns, there was little hint of accelerating wage inflation in the data in June, a crucial trend that the Fed watches to gauge the broader danger of higher inflation. Wages are up just 2 percent from the period a year earlier, in line with the inflation rate today as well as the overall rate of salary increases over the last four years.

Some of the recent job gains represent a catch-up for employers that put off hiring during a bumpy 2013. The initial weakness in the first quarter of 2014 delayed it further, as the economy shrank 2.9 percent during a bitter winter and a downward swing for inventories.

Roger Hargens, chief executive of Accumold, an Ankeny, Iowa, maker of small, highly specialized components for medical device firms and other manufacturers, had hoped to begin hiring more aggressively last year. But after the delay of a big order last fall, he waited instead.

The last few months have been strong enough to persuade him to take the plunge. Orders in June hit their best level ever, with much of the demand coming from overseas customers. Accumold’s products include the exterior plastic shells of hearing aids, as well as the tiny tools used by doctors to remove cataracts or perform laparoscopic surgery.

Accumold added three workers last month at its facility in the Des Moines suburbs, and the company plans to hire another 10 to 20 employees in the second half of the year, bringing the total work force to just under 200 people. By the end of 2015, Mr. Hargens hopes to employ 220 to 230 people at his company, where the typical production worker earns about $17 an hour while people with technical expertise often make at least $25 an hour.

“We’re starting to scale up in a big way,” said Mr. Hargens, who is heading to Europe on Monday to meet with customers in Switzerland, France and Britain. “We had to hold off, but now we’re back on track.”

As the story of Accumold suggests, the 70 million American workers with a high school diploma or some college, who make up the largest group in the work force, are finally seeing some of the gains only college graduates had enjoyed earlier in the recovery.

Unemployment among high school graduates fell to 5.8 percent in June from 6.5 percent a month earlier, and joblessness among people with some college or an associate degree fell to 5 percent, from 5.5 percent in May. The unemployment rate among college graduates increased 0.1 percentage point to 3.3 percent.

Mr. Maki, the Barclays economist, said that among workers with only a high school diploma, employment was actually falling at this point in 2013 by 16,000 a month on a yearly basis. Now, he said, employers are adding 29,000 high school graduates a month.

“We’re seeing more significant gains among those who have less than a college degree,” Mr. Maki said. “The trend is beginning to shift.”

Correction: July 3, 2014

An earlier version of this article stated incorrectly the day that administration officials reacted to the jobs data. It was Thursday, not Friday.

A version of this article appears in print on July 4, 2014, on page A1 of the New York edition with the headline: Hiring Is Strong And Jobless Rate Declines to 6.1%.

    Hiring Is Strong and Jobless Rate Declines to 6.1%, NYT, 3.7.2014,
    http://www.nytimes.com/2014/07/04/business/
    jobs-data-for-june-released-by-labor-department.html

The War on Workers
 

The Supreme Court Ruling on Harris v. Quinn

Is a Blow for Unions

 

JULY 2, 2014

The New York Times

The Opinion Pages | Op-Ed Contributors

By CYNTHIA ESTLUND and WILLIAM E. FORBATH

UNIONS have never been uncontroversial in American society, but the battles over labor have grown fiercer in recent years: Witness the fight over public-employee unions in Wisconsin, or the 2012 decision by Michigan voters to join the ranks of “right to work” states.

On Monday a 5-to-4 majority of the Supreme Court fired its own salvo in the war on unions. Though its decision in Harris v. Quinn was narrow, saying that, in some cases, unions could not collect fees from one particular class of public employees who did not want to join, its language suggests that this may be the court’s first step toward nationalizing the “right to work” gospel by embedding it in constitutional law.

The petitioners in Harris were several home-care workers who did not want to join a union, though a majority of their co-workers had voted in favor of joining one. Under Illinois law, they were still required to contribute their “fair share” to the costs of representation — a provision, known as an “agency fee,” that is prohibited in “right to work” states.

The ability of unions to collect an agency fee reflects a constitutional balance that has governed American labor for some 40 years: Workers can’t be forced to join a union or contribute to its political and ideological activities, but they can be required to pay for the cost of the union’s collective bargaining and contract-administration activities.

The majority in Harris saw things differently. Making workers pay anything to a union they oppose is in tension with their First Amendment rights — “something of an anomaly,” in the words of the majority. But the real anomaly lies in according dissenters a right to refuse to pay for the union’s services — services that cost money to deliver, and that put money in the pockets of all employees.

Once selected by a majority of workers in a bargaining unit, a union becomes the exclusive representative, with a duty to fairly represent all of them. That is the bedrock of our public and private sector labor laws.

Unless everyone is required to pay for those services, individual workers can easily become “free riders,” taking the benefits of collective representation without paying their fair share of the costs. Not only dissenters but any employee who wants to save a buck can “free ride.” The net result may be that the union cannot afford to represent workers effectively, and everyone suffers.

Consider the home-care providers at issue in Harris. These workers, who are in one of the fastest-growing and lowest-paid occupations in America, are generally employed solely by individual customers, even when their wages came from public funds like Medicaid. Alone, they were stuck with low pay and meager benefits, and states faced labor shortages and high turnover.

Several years ago Illinois, like several other states, took on the role of joint employer, along with individual customers, of the care workers. That enabled them to vote on joining a union. They did so, and as a result nearly doubled their wages and secured state-funded health insurance, as well as training and safety provisions.

All of Illinois’s in-home care providers benefit from union representation. Until Monday, all were required to pay a modest fee for those services. But now workers can “free ride.”

While a majority declined to strike down agency-fee arrangements for “full-fledged” public employees, as the petitioners had requested, and as unions had feared, the majority makes clear that such fees now rest on shaky constitutional ground, at least in the public sector, and are vulnerable to broader attack in the future.

The ability of unions to survive rests on whether they solve the “free rider” problem. That is why mandatory fees have been a critical battleground for unions and their antagonists for over 70 years. The antagonists have won many of those battles, beginning with the state-level “right-to-work” laws that bar any mandatory union fees.

The First Amendment framework used by the “right to work” movement — and now by much of the Supreme Court — to mount this attack is something old masquerading as something new. Similar arguments were made during the 19th century, when rising inequalities between individual workers and increasingly large-scale industrial employers led workers to invent unions and collective bargaining. For decades, employers found a willing ally in the court: When Congress or state legislatures passed laws protecting workers’ freedom to organize and bargain collectively, the court struck them down in the name of “liberty of contract.”

This changed in the 1930s, when the New Deal court finally conceded the constitutional bona fides of “industrial democracy” through majority rule. But now the court’s conservative majority has taken a bold step backward, recasting the individualist crusade as a battle between compelled speech and the right to refrain from speech — between individual dissent and collective compulsion. But in substance it is the same old fight between the right of workers to bargain collectively and the individual liberty of contract.

Unions are already reeling. At a time when workers are losing economic ground, we should be looking for ways to strengthen their ability to join with co-workers and bargain collectively to improve their lot. Instead, the court in Harris sided with those who seek to weaken it further.

 

Cynthia Estlund is a professor of law at New York University. William E. Forbath is a professor of law and history at the University of Texas, Austin.

A version of this op-ed appears in print on July 3, 2014, on page A23 of the New York edition with the headline: The War on Workers.

    The War on Workers, NYT, 2.7.2014
    http://www.nytimes.com/2014/07/03/opinion/
    the-supreme-court-ruling-on-harris-v-quinn-is-a-blow-for-unions.html

Limiting Rights:

Imposing Religion on Workers

JUNE 30, 2014

By THE EDITORIAL BOARD

The Opinion Pages | Editorial

The Supreme Court’s deeply dismaying decision on Monday in the Hobby Lobby case swept aside accepted principles of corporate law and religious liberty to grant owners of closely held, for-profit companies an unprecedented right to impose their religious views on employees.

It was the first time the court has allowed commercial business owners to deny employees a federal benefit to which they are entitled by law based on the owners’ religious beliefs, and it was a radical departure from the court’s history of resisting claims for religious exemptions from neutral laws of general applicability when the exemptions would hurt other people.

The full implications of the decision, which ruled in favor of employers who do not want to include contraceptive care in their company health plans, as required by the Affordable Care Act, will not be known for some time. But the immediate effect, as Justice Ruth Bader Ginsburg noted in a powerful dissent, was to deny many thousands of women contraceptive coverage vital to their well-being and reproductive freedom. It also invites, she said, other “for-profit entities to seek religion-based exemptions from regulations they deem offensive to their faiths.”

The case involved challenges by two companies, Hobby Lobby, a chain of arts and crafts stores, and Conestoga Wood Specialties, a cabinet maker, to the perfectly reasonable requirement that employer health plans cover (without a co-payment) all birth control methods and services approved by the Food and Drug Administration. The main battleground was the Religious Freedom Restoration Act of 1993, which says government may not “substantially burden a person’s free exercise of religion” unless the burden is necessary to further a “compelling government interest” and achieves it by “the least restrictive means.”

As a threshold matter, Justice Samuel Alito Jr., read the act’s religious protections to apply to “the humans who own and control” closely held companies, an interpretation contradicted by the statute’s history, context, and wording. He then found that the contraceptive coverage rules put a “substantial burden” on the religious owners, who objected to some of the items on the F.D.A.’s list based on the incorrect claim they induce abortions.

It’s hard to see that burden. Nothing in the contraceptive coverage rule prevented the companies’ owners from worshiping as they choose or advocating against coverage and use of the contraceptives they don’t like.

Nothing compels women to use their insurance on contraceptives. A woman’s choice to use or not to use them is a personal one that does not implicate her employer. Such decisions “will be the woman’s autonomous choice, informed by the physician she consults,” as Justice Ginsburg noted. There also is no requirement that employers offer employee health plans. They could instead pay a tax likely to be less than the cost of providing insurance to help cover government subsidies available to those using an insurance exchange. That did not convince Justice Alito and his colleagues on the court’s right flank, who bought the plaintiffs’ claim that providing health coverage to employees was part of their religious mission.

The majority’s finding that the government’s contraception coverage rules were not the “least restrictive” way to carry out the broad and complex health reform was also unpersuasive.

Mr. Alito’s ruling and a concurrence by Justice Anthony Kennedy portray the decision as a narrow one without broader application, like denying vaccine coverage or job discrimination. But that is not reassuring coming from justices who missed the point that denying women access to full health benefits is discrimination.


A version of this editorial appears in print on July 1, 2014, on page A20 of the New York edition with the headline: The Justices Endorse Imposing Religion on Employees.

    Limiting Rights: Imposing Religion on Workers, NYT, 30.6.2014,
    http://www.nytimes.com/2014/07/01/opinion/the-supreme-court-
    imposing-religion-on-workers.html

Making Everything Shipshape

As Panama Canal Expands,

West Coast Ports Scramble

to Keep Big Cargo Vessels

JUNE 27, 2014

The New York Times

By DIONNE SEARCEY

TACOMA, Wash. — As construction crews 5,000 miles away are working to widen the Panama Canal to allow much larger ships to sail straight to the East Coast, this historic port city and others along the West Coast are doing everything they can to avoid becoming superfluous.

The Port of Tacoma is determined to keep up its rich import business, which can be traced to the 1880s when chests of tea from Asia arrived at its docks and headed to the East Coast by rail. Port officials know that by the time the Panama Canal opens in 2016, an even newer, larger fleet of cargo ships will be plying the oceans and will be so big they will not be able to squeeze through even the wider channel.

So Tacoma, Seattle and other ports are spending billions to be ready to receive the ships and keep themselves competitive in the overall scramble for foreign trade.

“The ships continue to get bigger, the cranes need to get bigger, and the docks need to be able to handle them,” said Trevor Thornsley, senior project manager for the Port of Tacoma, as he stood along the jagged rebar and broken concrete of a $22 million renovation to shore up the port’s Pier 3.

The work in Tacoma, a major port in this state that likes to call itself the most trade-dependent in the nation, is among dozens of projects being completed in port cities across the United States in response to major changes in the world of container imports from Asia.

“Everybody in the supply chain from the manufacturer to the end consumer — that entire supply chain is changing,” said Tay Yoshitani, chief executive of the Port of Seattle. “The port industry is trying to make adjustments.”

Traditionally, America’s West Coast ports have been the gateway to the rest of the country for the growing supply of goods from China and Hong Kong. The ports in Tacoma, Seattle, Oakland, Los Angeles, Long Beach and elsewhere offer much shorter sailing times than Gulf Coast and East Coast ports. But for shippers of some goods, the web of logistics, including trucks and railroads, ends up being less expensive if they go through the Panama Canal.

Even though the West Coast ports are viewing the project to widen the Panama Canal as a major threat, it may not be their biggest challenge, said John Martin, who works as an economic consultant for several ports.

Most imminently, officials at the West Coast ports are concerned about negotiations underway for a union contract, which expires on Tuesday and affects nearly 20,000 dockworkers at 29 ports. In 2002, during contract negotiations, talks broke down and resulted in a bitter battle that shut down shipping along the West Coast for 10 days and sent cargo ships to other ports of call, some of them permanently.

Craig Merrilees, a spokesman for the International Longshore and Warehouse Union, said that contract talks were positive and on track. John Wolfe, the chief executive of the Port of Tacoma, said that while port officials did not have a role in the talks, he, too, was optimistic. “We’ve been down this road before,” Mr. Wolfe said. “We’re all in this together.”

Besides the union concerns, ports are bracing for an onslaught of changes in the shipping world.

While the widened Panama Canal will allow an all-water route for big ships to the East Coast, the project — originally scheduled to open this year — has been plagued with construction delays. And the authorities have yet to announce toll charges for passing ships. In the end, it might be too expensive for some ships to use.

It is also possible that railroads that move goods from West Coast ports could lower fees to make it more economical for ships to avoid the Panama Canal route.

“The uncertainty as to what’s going to happen with rates is huge,” said Mr. Martin, the consultant, who is president of Martin Associates.

At the same time, sailing patterns may shift as Asian manufacturing continues to move from China to countries to the south, like Singapore and Vietnam, which are actually closer by sea to East Coast ports through the Suez Canal than to West Coast ports across the Pacific.

A new competitive threat has emerged 500 miles north of the United States border with Canada. Tacoma and Seattle are losing market share to the Port of Prince Rupert in British Columbia, just six years old and already doing brisk business with goods headed for the Midwest United States. While the port is nearly at capacity, the Canadian government continues to make major investments in it and is also pursuing a plan to build an export facility for liquefied natural gas that would tap a gas pipeline that is in the works.

For trade with China, Prince Rupert’s appeal is proximity. Prince Rupert is two to three days closer than the western coast of the United States, helping ships cut fuel costs. Another major factor is that Canada’s railroads are offering bargain rates to ship goods from Prince Rupert to Midwestern cities, analysts said. While the railways and truck lines in Canada have a history of labor instability, cargo carriers sailing into the country can avoid taxes levied by the United States government.

Here at the Port of Tacoma, the biggest threat in the past has been the port just 30 miles away in Seattle. The two ports have fought back and forth for decades over shipping business. But the new competition from Canada and elsewhere has brought an unusual alliance.

This year, the two ports for the first time sought permission from the Federal Maritime Commission to share information on operations and rates without violating federal antitrust laws. The ports now are coordinating lobbying tactics as well as construction projects to make sure they’re not duplicating efforts, officials said, and are researching other ways to cooperate.

“In the past 60 years we’ve truly been cutthroat,” said Stephanie Bowman, a commissioner for the Port of Seattle. “We’ve been able to work together and put aside our historical competition.”

In Seattle, the port’s facilities already have undergone $1.2 billion in upgrades through 2012 and plans have been approved for an additional $5 million to upgrade Terminal 5 to get ready for big ships. Tacoma’s Pier 3 project will make it sturdy enough to handle the monster cranes needed to reach across wide berths and unload the big ships.

The expenditures are a gamble. No one knows for sure whether enough of the big ships will come to Seattle and Tacoma to offset the investments in the ports. But Steve Sewell, economic development director for Washington State’s maritime industry, said the preparations were worth it.

“You have to make some investments,” Mr. Sewell said, “and take some risks.”

A version of this article appears in print on June 28, 2014,
on page B1 of the New York edition with the headline:
Making Everything Shipshape.

    Making Everything Shipshape, NYT, 27.6.2014,
    http://www.nytimes.com/2014/06/28/business/
    as-panama-canal-expands-west-coast-ports-scramble-to-keep-big-ships.html

Student Borrowers and the Economy

JUNE 10, 2014
The New York Times
By THE EDITORIAL BOARD

 The Opinion Pages | Editorial

President Obama took an important step this week when he signed an executive order providing relief to millions of struggling student loan borrowers and urged Congress to pass a student loan refinancing bill that is scheduled for a vote in the Senate on Wednesday. Both the executive order and the refinancing bill speak to a grave problem that has trapped recent college graduates and threatens the long-term health of the economy.

This problem has its roots in the financial crisis, which destroyed trillions of dollars in household savings and home equity that families might otherwise have used to pay for college. (Even before the recession, the state colleges, which educate about 70 percent of the nation’s students, reacted to state budget cuts by raising tuition.) With no other choice, students and their families financed college by relying more heavily on student loans. According to the federal Consumer Financial Protection Bureau, student debt has doubled since 2007 and now stands at about $1.2 trillion.

Stagnant wages and a tough job market have made it difficult for borrowers to repay these debts. According to federal statistics, for example, about seven million of the nation’s 40 million student loan borrowers are in default. The people in this large and growing pariah class have difficulty getting jobs or credit, or renting apartments. But borrowers who narrowly earn enough to make loan payments are not much better off; they have to put off car purchases and bunk with their parents because they can’t afford rents, and they can’t even begin to think about saving for retirement.

As an official from the Consumer Financial Protection Bureau told a Senate hearing earlier this month, student debt is having a kind of “domino effect,” damaging other areas of the economy. And unless federal policy makers intervene in a muscular way, this generation of student borrowers could become a long-term drag on the economy.

The executive order signed on Monday will help up to five million student loan borrowers. It will expand access to the federal government’s Pay as You Earn program, which allows borrowers to arrange affordable payments and qualify for loan forgiveness. It requires the Department of Education to evaluate more stringently how well the companies that collect federal loans keep borrowers out of default. Most significantly, it requires the department to help people who have defaulted rehabilitate their records through a program allowing lower payments.

Homeowners, businesses and individuals can take advantage of low interest rates to refinance their debts. Student borrowers, however, have few such options. The Senate bill, known as the Bank on Students Emergency Loan Refinancing Act, would create a fund — paid for by a new minimum tax on millionaires and billionaires — that would be used to help people with federal or private student loans refinance those loans at lower interest rates.

The bill might pass the Senate, but House Republicans will oppose any such tax. Still, by bringing the matter to a vote, Senate Democrats underscore the need to do something about dire indebtedness among recent graduates, and also give members of their party a potent issue on which to run in the midterm elections. Even if the refinancing bill were to become law, it would represent only part of the solution. To get a handle on this problem, Congress needs to reconfigure the student aid system to prevent the most vulnerable student borrowers from falling too deeply into debt in the first place.

A version of this editorial appears in print on June 11, 2014,

on page A22 of the New York edition with the headline:

Student Borrowers and the Economy.

    Student Borrowers and the Economy, NYT, 10.6.2014,
    http://www.nytimes.com/2014/06/11/opinion/
    student-borrowers-and-the-economy.html

Seattle Approves $15 Minimum Wage,

Setting a New Standard for Big Cities

 

JUNE 2, 2014
The New York Times
By KIRK JOHNSON

SEATTLE — The City Council here went where no big-city lawmakers have gone before on Monday, raising the local minimum wage to $15 an hour, more than double the federal minimum, and pushing Seattle to the forefront of urban efforts to address income inequality.

The unanimous vote of the nine-member Council, after months of discussion by a committee of business and labor leaders convened by Mayor Ed Murray, will give low-wage workers here — in incremental stages, with different tracks for different sizes of business — the highest big-city minimum in the nation.

“Even before the Great Recession a lot of us have started to have doubt and concern about the basic economic promise that underpins economic life in the United States,” said Sally J. Clark, a Council member. “Today Seattle answers that challenge,” she added. “We go into uncharted, unevaluated territory.”

But some business owners who have questioned the proposal say that the city’s booming economy is creating an illusion of permanence. The fat times and the ability to pay higher wages, they warn, will not go on forever.

“We’re living in this bubble of Amazon, but that’s not going to go on,” said Tom Douglas, a prominent restaurateur in Seattle, referring to the local boom in jobs and economic growth from hiring at Amazon, the online retailer, which has its headquarters here. Mr. Douglas said the new law will inevitably result in costs being passed on to consumers. “There’s going to be some terrific price inflation,” he said.

The measure has the support of Mr. Murray, who ran last year on a pledge to raise the wage to $15 and made it one of his first priorities in office.

Cheers and jeers repeatedly erupted in the City Hall meeting room, which was packed with supporters of the plan, who often interrupted speakers in the 90-minute debate before the vote with chants.

“We did it — workers did this,” said Kshama Sawant, a socialist who campaigned for a $15 minimum wage when she was elected to the Council last year. Ms. Sawant sought to accelerate the carrying out of the measure and to strip out a lower youth wage training rate, but the council rejected her proposals.

The vote, economists and labor experts said, accentuates the patchwork in wages around the country, with places like Seattle — and other cities considering sharply higher minimum pay, including San Diego, Chicago and San Francisco — having economic outlooks increasingly distinct from those in other parts of the nation. Through much of the South, especially, the federal minimum of $7.25 holds fast.

Eight states plus the District of Columbia have already increased their minimum wages this year, the most to have done so in a single year since 2006, and at least eight other states and municipalities could put minimum wage ballot measures before voters by November. But it is the scale of ambition that is catching the attention of economists, labor leaders and business owners.

“In past rounds of minimum wage increases, proposals sought chiefly to restore the value of the minimum wage lost to inflation over the decades,” said Paul Sonn, the general counsel and program director at the National Employment Law Project, a New York-based group that supports raising the minimum wage. The increases in places like Seattle, Mr. Sonn said, go beyond playing catch-up. “The $15 proposals make real gains,” he said.

Economists who study the minimum wage are not sure of the effect of having sharply different levels — in some places, it is twice that of others. Though records are a bit uncertain, people who track minimum wage law say the range of mandated minimums, lowest to highest, is the largest it has been since a national minimum was established by Congress in 1938.

“Nobody has studied a doubling of the minimum wage — that’s outside our experience,” said Dale Belman, a professor of labor and industrial relations at Michigan State University and co-author of a coming book about the minimum wage.

Individual workers and business owners in and around Seattle are unsure of the implications. Washington State already has the highest state minimum wage in the nation, $9.32, but more than 24 percent of Seattle residents earn hourly wages of $15 or less, according to the city, and approximately 13.6 percent of Seattle residents live below the federal poverty level.

Under the plan approved on Monday, the hourly wage will rise to $15 by 2017 for employers with more than 500 workers that do not provide health insurance, and by 2018 for those large employers who do. The minimum will be phased in through 2021 for smaller employers.

In its early years, the law allows employers to include tips as part of a workers’ compensation in reaching the minimum, but that provision is phased out over time.

“The short-term side of it says it’s attractive,” said Mickey Adame, a bartender who works in Bellevue, Washington’s fifth-largest city, which is just outside Seattle, and the new $15 wage boundary. “But I think people in Seattle aren’t going to tip as much, knowing the servers are getting paid $15,” added Mr. Adame, who lives in Seattle and is trying to start a music record label called Sounder Music, for which his tip jar, he said, is crucial. “If I had to pick an answer, I would say I think I’ll make more in Bellevue.”

Ms. Sawant, in her comments to the Council and the crowd, did not take the tone of someone who was savoring a victory. The fight for workers’ rights and economic fairness, she said, is not over.

“We have fought to the last day, the last hour, against all the loopholes demanded by business,” she said. “The attempts of business to undermine $15 will continue,” she said, as would the battle to “turn the tide against corporate politics.”

She added: “$15 in Seattle is just a beginning. We have an entire world to win.”

A version of this article appears in print on June 3, 2014

on page A15 of the New York edition with the headline:

Seattle Approves $15 Minimum Wage,

Setting a New Standard for Big Cities.

    Seattle Approves $15 Minimum Wage,
    Setting a New Standard for Big Cities,
    NYT, 2.6.2014,
    http://www.nytimes.com/2014/06/03/us/
    seattle-approves-15-minimum-wage-setting-a-new-standard-for-big-cities.html

Children Don’t Belong in Tobacco Fields

MAY 17, 2014
The New York Times
SundayReview | Editorial
By THE EDITORIAL BOARD

A new report from Human Rights Watch paints a grim picture of child labor in the United States, something that most Americans probably believe was banned years ago. Children as young as 7 are working on tobacco farms in North Carolina, Kentucky, Tennessee and Virginia, and many are said to suffer from the symptoms of acute nicotine poisoning.

There are no good estimates of how many youngsters work on tobacco farms, but Human Rights Watch said it interviewed 140 children, most of whom work alongside their parents, who are migrant farmworkers, during the summer and on weekends. Their stories, some recorded on video, highlight gaping flaws in how America regulates child labor on farms. Under federal laws and regulations, children can work on any farm, not just those owned by their families, outside school hours and in hazardous conditions if their parents let them. And there are no restrictions on how many hours they can work. By contrast, the government has far stricter rules for teenagers who work in retail stores and restaurants.

There is little doubt that the work is backbreaking and dangerous. Some of the children interviewed by Human Rights Watch say they often vomit, lose their appetites, have nausea and suffer from headaches — symptoms associated with nicotine poisoning. The children absorb nicotine through their skin when they handle tobacco leaves in the process of cutting, weeding and harvesting plants. One 13-year-old in North Carolina, Elena G., told Human Rights Watch: “I felt like I was going to faint. I would stop and just hold myself up with the tobacco plant.”

Most cigarette companies do not insist that the farms they buy tobacco from refrain from employing children. Worse still, in 2012 the Obama administration abandoned regulations that would have restricted children younger than 16 from “participating in the cultivation, harvesting and curing of tobacco” after Republican lawmakers opposed the proposal by falsely claiming that the rules would keep children from working on family farms.

The Human Rights Watch report should be a loud alarm for the tobacco industry and lawmakers in Washington. Philip Morris International says it is working to eliminate the use of child labor for a list of hazardous tasks on the roughly 500,000 farms around the world that it buys tobacco from, but most other companies have not made similar commitments. For example, a spokesman for Altria told NPR recently that restrictions on young people “handling or coming into contact with tobacco is counter to a lot of farming practices that currently take place in the U.S.” All cigarette companies should use their buying power to make sure tobacco growers stop hiring children under 18 to work in their fields.

But the country cannot simply rely on industry promises. The tobacco companies’ long history of marketing their products to teenagers is good reason to question their commitments on health issues. Congress and the Obama administration should change the law to restrict child labor in hazardous agricultural work.


A version of this editorial appears in print on May 18, 2014,

on page SR10 of the New York edition with the headline:

Children Don’t Belong in Tobacco Fields.

    Children Don’t Belong in Tobacco Fields, NYT, 17.5.2014,
    http://www.nytimes.com/2014/05/18/opinion/sunday/
    children-dont-belong-in-tobacco-fields.html

A Better Economy, Still Far From Good

MAY 4, 2014
The New York Times
The Opinion Pages | Editorial
By THE EDITORIAL BOARD

The good news from last week’s economic reports is this: April was the best month for job growth in quite a while. Employers added 288,000 jobs, bringing the average for the last three months to a respectable 238,000.

But let’s keep this milestone in perspective: wages remained flat, nearly 10 million unemployed people are looking for jobs, and millions more have become so disenchanted that they have given up on finding work altogether. That the unemployment rate fell to 6.3 percent in April from 6.7 percent a month earlier is due mainly to the fact that the number of people looking for jobs fell. The percentage of Americans 16 and over who are working or looking for work was just 62.8 percent, the lowest level since the late 1970s.

Moreover, even if job growth continued at last month’s solid, steady pace, the country would not have a labor market as healthy as the one it had before the recession started in December 2007 until the end of 2016, according to calculations by Heidi Shierholz of the Economic Policy Institute in Washington. Put differently, it would take the economy nine years to recoup the jobs lost during the recession plus those needed to employ new workers during the slow recovery.

The economic recovery that began in June 2009 has been the weakest the country has experienced since World War II, according to an analysis by the Federal Reserve Bank of Minneapolis. But it did not have to be. Lawmakers in Washington have repeatedly undermined the recovery by emphasizing deficit reduction rather than economic growth. They have also stood in the way of proposals that would have helped the unemployed and workers at the lowest rungs of the economy.

To take two recent outrages, the Republican-controlled House has refused to take up a measure passed by the Senate that would reinstate extended unemployment benefits to people who have been out of work for six months or more. The long-term unemployed make up more than one-third of everyone who is classified as unemployed — those out of work and looking for a job — but helping them strikes legislators like Tom Cole of Oklahoma as “pie in the sky.”

And last week, Senate Republicans blocked a vote on a bill that would have raised the federal minimum wage to $10.10 an hour, from $7.25 an hour, which would help the working poor while providing a much-needed boost to the economy. But Senator Lamar Alexander, Republican of Tennessee, would have you believe that giving the poorest workers a raise is a “stale, bankrupt, ineffective policy.”

People like Mr. Cole and Mr. Alexander speak as if the formal end of the recession five years ago put everything right. But everything is not right for the millions of Americans whose jobs, wages and livelihoods disappeared in those dark days.


A version of this editorial appears in print on May 5, 2014,

on page A22 of the New York edition with the headline:

A Better Economy, Still Far From Good.

    A Better Economy, Still Far From Good, NYT, 4.5.2014,
    http://www.nytimes.com/2014/05/05/opinion/
    a-better-economy-still-far-from-good.html

The Truth About the Pay Gap

APRIL 9, 2014
The New York Times
By THE EDITORIAL BOARD

Women are the primary or co-breadwinner in 6 out of 10 American families. That makes the economic imperative of addressing the wage gap between women and men important, as is every step President Obama can take in that direction.

On Tuesday, Mr. Obama recognized “Equal Pay Day,” the date that symbolizes how far into this year a woman must work on average to catch up with what an average man earned for the previous year, by signing two executive orders to help reduce the persistent pay disparities.

One order prohibits federal contractors from retaliating against employees for sharing salary information with co-workers. The other directs the Labor Department to adopt regulations requiring federal contractors to report salary data to the agency, including sex and race breakdowns, that can be used to better target government enforcement.

Mr. Obama’s action will apply to about 26 million Americans who work for federal contractors, more than 20 percent of the nation’s work force. Greater transparency could have a significant impact, giving employers incentive to correct unfair pay discrepancies by making it more likely that employees will find out if they are being shortchanged.

Threaded through the political fight over pay fairness is a continuing debate about the size of the pay gap. Mr. Obama and others often cite 77 cents as what women make on average for every $1 earned by men — a figure that critics say is an exaggeration.

In fact, it is a rough, but important, measure of overall workplace inequality. It is not a comparison of what men and women are paid for performing the same or comparable jobs. But, in representing the full-time wages of a working woman against that of a full-time working man, it reflects overt discrimination as well as more nuanced gender-based factors, like the fact that women are disproportionately concentrated in the lowest-paying fields and not well-represented in higher-paying fields. Of course, 77 cents is not the only measure. But there is no doubt that the pay gap is real.

The Pew Research Center last year found that women earned 84 percent of what men earned in its study of the hourly wages of all workers, including those who work part time. Similarly, a 2013 review by the Economic Policy Institute of annual hourly wages for men and women with college degrees, including salaried and hourly workers, found that the men earned on average $33.71 per hour and the women just $25.35 an hour.

On what grounds? If Senate Republicans are willing to block consideration of the Paycheck Fairness Act -- doesn't that essentially say they...

Even controlling for hours, occupations, marital status, and other relevant factors, college-educated women earn less than their male counterparts, according to a recent study by the American Association of University Women. And a study issued this month by the Institute for Women’s Policy Research reported that women’s median earnings are lower than men’s in nearly every occupation, including the most common occupations for full-time working women, like elementary- and middle-school teaching and nursing.

Some Republicans have chided Mr. Obama for pointing out the wage gap when the White House has one of its own. Female White House staff members make 88 cents on average for every $1 male employees earn, the American Enterprise Institute discovered. Jay Carney, the White House spokesman, has awkwardly noted that that is better than the national average and that men and women in the same positions earn the same salary.

But instead of becoming defensive and trying to explain away the discrepancy, Mr. Obama should simply say the White House has to do better and present the lag for what it is: more evidence that the problem persists even in workplaces committed to equal treatment.

On Wednesday, Senate Republicans blocked consideration of the Paycheck Fairness Act, which would apply the changes ordered by Mr. Obama for federal contractors to the entire American work force as well as make some other important updates to the federal Equal Pay Act. The outcome was entirely predictable. Republicans also stopped the bill in 2010 and 2012. But wage injustice matters to all Americans, regardless of party, and those who stand in the way of fairness do so at their political peril.

A version of this editorial appears in print on April 10, 2014,

on page A24 of the New York edition with the headline:

The Truth About the Pay Gap.

    The Truth About the Pay Gap, NYT, 9.4.2014,
    http://www.nytimes.com/2014/04/10/opinion/the-truth-about-the-pay-gap.html

Obama Signs Measures

to Help Close Gender Gap in Pay

APRIL 8, 2014
The New York Times
By PETER BAKER

WASHINGTON — President Obama on Tuesday signed two executive measures intended to help close longstanding pay disparities between men and women as Democrats seek to capitalize on their gender-gap advantage at the ballot box in a midterm election year.

Mr. Obama, standing in front of a platform of women in a picture-ready ceremony in the East Room of the White House, said his actions would make it easier for women to learn whether they had been cheated by employers. He called on Congress to pass legislation that would take more significant steps.

“America deserves equal pay for equal work,” he said. Noting that it was “Equal Pay Day,” he said a woman who worked in 2013 had to work this far into 2014 to catch up to what a man earned by the end of last year.

“That’s not fair,” Mr. Obama said. “That’s like adding another six miles to a marathon.” He added: “America should be a level playing field, a fair race for everybody.”

The president, as he has in the past, reiterated that it was “an embarrassment” that women on average earn 77 cents for every dollar men make. But he made no mention of a recent study that found that women in his own White House make 88 cents for every dollar men do. Aides have said women earn the same salary as men of the same rank but that there are more women in lower-paying jobs — an explanation similar to that often given by private-sector employers.

Some critics have said both of those statistics are misleading because they are averages of all men and women in all jobs, rather than apples-to-apples comparisons of men and women in equivalent jobs with equivalent experience. Once such factors are taken into account, they say, the gap is smaller.

“We all support equal pay for equal work and know there’s a problem that must be addressed,” said Kirsten Kukowski, national press secretary for the Republican National Committee. “But many are questioning the Democrats’ motives as they continue their dishonesty about the issue and their own gender gap.”

The Senate is set to vote on the Paycheck Fairness Act on Wednesday, and a memo distributed by the Republican National Committee and two other party committees ahead of the vote noted that it was already illegal to discriminate on the basis of gender. It said Democrats “always seem to wait for an election year to push another empty promise.”

The committees released statistics showing pay gaps in the office staffs of several Democrats up for re-election this year, including Senators Mark Begich of Alaska, Mark R. Warner of Virginia, Mary L. Landrieu of Louisiana and Kay Hagan of North Carolina.

Mr. Obama responded to the critics. “Some commentators are out there saying that the pay gap doesn’t even exist,” he said. “They say it’s a myth. But it’s not a myth. It’s math.”

The president lambasted Republicans for opposing “any efforts to even the playing field for working families.” He added: “I don’t know why you would resist the idea that women should be paid the same as men and then deny that that’s not always happening out there. If Republicans in Congress want to prove me wrong, if they want to show that in fact they do care about women being paid the same as men, then show me. They can start tomorrow.”

Neither of the actions Mr. Obama took on Tuesday would affect the broad American work force. The executive order he signed bars federal contractors from retaliating against employees who discuss their salaries and an executive memorandum he issued instructs the Labor Department to collect statistics on pay for men and women from such contractors.

But the White House staged a ceremony with the sort of profile usually reserved for a major bill signing. Aides arranged for Mr. Obama to be introduced by Lilly M. Ledbetter, who has become a symbol of the pay gap issue since the Supreme Court ruled that her discrimination case had been filed after the expiration of a statute of limitations. Congress passed a measure named for her changing the deadlines for filing such suits and Mr. Obama made it the first bill he signed after taking office.

Ms. Ledbetter said the executive order signed by Mr. Obama would have made a difference in her case. “I didn’t know I was being paid unfairly and I had no way to find out. I was told in no uncertain terms that Goodyear, then and still a government contractor, fired employees who shared their salary information. It was against company policy.”

Mr. Obama said Ms. Ledbetter’s case belied the explanations often given for pay differentials. “You’ll hear all sorts of excuses: ‘Oh, well they’re childbearing and they’re choosing to do this and they’re this and they’re that and they’re the other,'” he said.

“She was doing the same job, probably doing better. Same job. Working just as hard, probably putting in more hours,” Mr. Obama said, “But she was getting systematically paid less.”

    Obama Signs Measures to Help Close Gender Gap in Pay, NYT, 8.4.2014,
    http://www.nytimes.com/2014/04/09/us/politics/
    obama-signs-measures-to-help-close-gender-gap-in-pay.html

Charles Keating,

Key Figure in the 1980s Savings

and Loan Crisis,

Dies at 90

 

APRIL 2, 2014
The New York Times
By ROBERT D. McFADDEN

Charles H. Keating Jr., who went to prison and came to symbolize the $150 billion savings-and-loan crisis a generation ago after fleecing thousands of depositors with regulatory help from a group of United States senators known as the Keating Five, has died. He was 90.

The death was confirmed by his son-in-law, Gary Hall.

The S. & L. debacle of the 1980s and 90s, when a thousand institutions collapsed in an implosion of reckless investments, may be a distant echo in a nation stricken by economic turmoil. But to millions old enough to have been dragged through the mess, Mr. Keating is remembered, perhaps unjustly, as the pre-eminent villain of an era when depositors, many of them older Americans and naïve investors, lost life savings they had squirreled away in hometown thrifts they thought were safe.

Mr. Keating, who pleaded guilty to fraud charges, had been a young man of promise — a Navy flier during World War II, an All-American swimmer in college, the leader of a national campaign against pornography, a blustery Cincinnati lawyer and businessman whose brother was an Ohio Congressman.

But in 1984, Mr. Keating, then a 61-year-old Phoenix real estate millionaire, bought Lincoln Savings & Loan, of Irvine, Calif., for $51 million, double its net worth. Lincoln, with 26 branches, made small profits on home loans, but under new state and federal rules it could make riskier investments, and Mr. Keating began pouring depositors’ savings into real estate ventures, stocks, junk bonds and other high-yield flings.

In three years, Lincoln’s assets soared from $1 billion to $3.9 billion, and Mr. Keating was using the business as his personal cash machine, taking $34 million for himself and his family and $1.3 million more for political contributions, prosecutors said.

The Federal Home Loan Bank Board, fearing wide collapses in a shaky industry, finally imposed a 10 percent limit on risky S. & L. investments. By 1987, its investigators found that Lincoln had $135 million in unreported losses and was more than $600 million over the risky-investment ceiling. Soon, the F.B.I., the Securities and Exchange Commission and other agencies were homing in.

Mr. Keating hired Alan Greenspan, soon to be chairman of the Federal Reserve, who compiled a report saying Lincoln’s depositors faced “no foreseeable risk” and praising a “seasoned and expert” management. And Mr. Keating called on Senators Alan Cranston of California, Donald W. Riegle Jr. of Michigan, John Glenn of Ohio and Dennis DeConcini and John McCain of Arizona, all recipients of his campaign largess, to pressure the bank board to relax its rules and kill its investigation.

All five met with regulators, and Edwin J. Gray, then the board chairman, said four senators — all but Mr. Riegle — “came to me like lawyers arguing for a client.” He resisted, but was replaced by a chairman more sympathetic to Mr. Keating, and the board backed off, with disastrous results for depositors and investors.

For two more years, Lincoln survived. On the books, assets ballooned to $5.46 billion, but billions were in speculative investments and hidden losses soared. Meanwhile, Lincoln talked many customers into replacing federally insured deposits with high-yielding bonds from Lincoln’s parent, American Continental, a Keating corporation that was drowning in losses.

Bond buyers were not told the condition of American Continental, or that its bonds were uninsured, prosecutors said. A witness in a lawsuit years later produced a Lincoln memo, telling its bond salesmen to “remember [that] the weak, meek and ignorant are always good targets.”

In 1989, American Continental went bankrupt and an insolvent Lincoln was seized by the government. Some 23,000 customers were left holding $250 million in worthless bonds, the life savings of many, and taxpayers paid $3.4 billion to cover Lincoln’s losses. It was the largest of 1,043 S. & L. failures between 1986 and 1995 that, authoritative studies show, cost taxpayers $124 billion and the savings and loan industry $29 billion. The government sued Mr. Keating for $1.1 billion, but he said he was broke.

Convicted of fraud, racketeering and conspiracy in state and federal trials, Mr. Keating went to prison for four and a half years. Both verdicts were overturned on appeals in 1996. California dropped its case, and on the eve of a federal retrial in 1999, Mr. Keating, who always insisted he had done nothing wrong, pleaded guilty to four counts of wire and bankruptcy fraud and was sentenced to time already served.

The Keating Five — all Democrats except Mr. McCain — also insisted they had done nothing improper. The Senate Ethics Committee concluded in 1991 that none had violated laws, but said Senators Cranston, DeConcini and Riegle had interfered with the bank board’s inquiry and rebuked them, Mr. Cranston in the harshest terms. Senators Glenn and McCain were cleared, but criticized for “poor judgment.”

Mr. Keating, a 6-foot-5-inch beanpole who walked with a swagger, never minced words about buying political influence. Asked once whether his payments to politicians had worked, he told reporters, “I want to say in the most forceful way I can: I certainly hope so.”

Charles Humphrey Keating Jr. was born in Cincinnati on Dec. 4, 1923. He attended Catholic schools and became an accomplished swimmer. He joined the Navy in World War II and became a fighter pilot, but was never deployed to a combat theater. After the war, he enrolled in law school at the University of Cincinnati, won various collegiate swimming championships and was named an All-American. In 1948, he received a law degree and began practice in Cincinnati.

In 1949, he married the former Mary Elaine Fette. They had five daughters and a son. In the 1950s, Mr. Keating organized Catholic men’s groups to fight pornography and founded Citizens for Decent Literature, which under various names grew to 300 chapters and 100,000 members nationally. He became known as a stern moralist, and in 1969 was named by Richard M. Nixon to the President’s Commission on Obscenity and Pornography.

With his brother, William, he founded a law firm in 1952. (William was a congressman from 1971 to 1974 and later chairman of The Cincinnati Enquirer.) By the late 1950s, the law firm’s principal client was Carl H. Lindner Jr., a businessman who formed American Financial Corporation in 1960 as a sprawling conglomerate. Mr. Keating left law practice in 1972 to become American Financial’s executive vice president.

In the 1970s, the S.E.C. accused American Financial of irregularities; Mr. Lindner and Mr. Keating admitted no wrongdoing but agreed to violate no fraud statutes. After a falling out with Mr. Lindner, Mr. Keating moved to Phoenix in 1976 to run American Continental, a real estate spinoff he acquired from American Financial. By the early 1980s, it was a major home builder in Phoenix and Denver.

Mr. Keating thus acquired millions just as the government lifted rules that had long limited the scope of investments S. & L.’s could make with depositors’ money. Lincoln became a cash cow for Mr. Keating’s investments, prosectors said, and its failure a metaphor for an age of excess.

In recent years, he had lived in Phoenix, working occasionally as a real estate consultant. In their book, “Trust Me: Charles Keating and the Missing Billions,” (Random House, 1993), Michael Binstein and Charles Bowden said: “He did not simply rob a bank. He broke a bank with his dreams.”

A version of this article appears in print on April 2, 2014,

on page A25 of the New York edition with the headline:

Charles Keating, Key Figure in the 1980s Savings

and Loan Crisis, Dies at 90.

    Charles Keating, Key Figure in the 1980s Savings and Loan Crisis,
    Dies at 90, NYT, 2.4.2014,
    http://www.nytimes.com/2014/04/02/business/
    charles-keating-key-figure-in-the-1980s-savings-and-loan-crisis-dies-at-90.html

Murray L. Weidenbaum,

Reagan Economist,

Dies at 87

 

MARCH 21, 2014
The New York Times
By ROBERT D. HERSHEY Jr.

Murray L. Weidenbaum, who as President Ronald Reagan’s first chief economic adviser elevated government regulation of business to the forefront of public policy debate, but resigned unhappy about the administration’s budget-making, died on Thursday in St. Louis. He was 87.

His son, Jim, confirmed the death.

Mr. Weidenbaum, a Bronx-born economist, was fond of saying, “Don’t just stand there, undo something.” And he did, beginning in 1981, when the newly inaugurated Mr. Reagan appointed him chairman of the Council of Economic Advisers.

Reducing the size of government and lightening its regulatory hold on the private sector — including the banking, broadcasting and the food and drug industries — became a large theme of the Reagan presidency, which began with inflation still running in double digits and the economy heading into recession.

Deregulation, the White House believed, would help stimulate the economy by reducing the government rules and restrictions that industries say hamper their ability to expand and create jobs. But the policy’s critics feared that an unfettered private sector could be dangerous to the economy and the public interest.

At the heart of what came to be known as Reaganomics was the proposition that the nation could be restored to economic health through fiscally stimulating tax cuts — the essence of supply-side economic theory — and by restricting the money supply to contain inflation. Critics of the administration called that combination contradictory.

Mr. Weidenbaum, a wry and slightly rumpled figure who had long shuttled between government and academic posts, previously at Washington University in St. Louis, proved to be one of the administration’s least doctrinaire members, neither full-throated supply-sider nor strict monetarist.

“I was sympathetic to both,” Mr. Weidenbaum said in a 2011 telephone interview for this obituary. But neither side “thought I was one of them.”

He was also a prominent advocate of federal revenue-sharing, involving no-strings payments to states and localities. As an assistant secretary of the Treasury under President Richard M. Nixon, he had led a revenue-sharing initiative, which was briefly effective. But he wound up helping President Reagan dismantle the program when revenue sharing did not displace a proliferation of separate grants and payments to state and local governments voted for by Congress.

Though fiscally conservative, Mr. Weidenbaum was more moderate than some of his peers in the White House. He was generally aligned with administration pragmatists like the budget director, David A. Stockman, and the chief of staff, James A. Baker III. They favored compromising with Democrats in Congress on raising tax revenue and cutting military spending because of their concern about deficits.

Internal battles over budget deficits were a hallmark of the administration in those years.

Mr. Weidenbaum, in the 2011 interview, said he left the administration after a year and a half precisely because he was unhappy with the 1983 budget, and chose to quit rather than defend it before Congress.

Stepping down in August 1982, a time when Mr. Reagan’s popularity had plummeted and the country was sinking into a deep recession, Mr. Weidenbaum was replaced by Martin S. Feldstein.

“After fighting the good fight, I quietly folded my tent and returned to St. Louis,” Mr. Weidenbaum said.

But he left satisfied. In an Op-Ed article in The New York Times afterward, he wrote that the administration had “achieved significant progress in carrying out its economic recovery program” and that its deregulation efforts had been successful.

“For the first time in decades, no new major regulatory activities were enacted or promulgated,” he wrote. “In fact, many burdensome regulations were modified or rescinded.”

Mr. Weidenbaum also expressed general satisfaction with the administration’s policy in a 2005 memoir, “Advising Reagan: Making Economic Policy, 1981-82.”

“It seems clear that, on balance, Reaganomics was a success,” he wrote. “The president’s policies had injected a new sense of realism into the decision making in the private sector,” as both management and workers paid more attention to controlling costs and raising productivity.

Murray Weidenbaum (the first syllable rhymes with “feed”) was born on Feb. 10, 1927, into a liberal Democratic household in the Bronx. He graduated from Erasmus Hall High School in Brooklyn and the City College of New York, where he was elected president of the student body on a platform of “Wine, Women and Weidenbaum.”

Mr. Weidenbaum received a master’s degree from Columbia University, then joined the New York State Department of Labor as a junior economist. At the time, like his family, he held union-friendly views, and saw labor as the little guy at the mercy of big business. But he grew disillusioned with the labor cause after being assigned to a statistical analysis of a master contract for the Teamsters union. His encounter with an independent trucker who had vainly sought to negotiate on his own was a pivotal moment.

“The roles were reversed,” he said. “The little employer was dealing with the giant union.”

Laid off under New York State’s “last in, first out” policy, he found work in Washington at the Bureau of the Budget. During a leave to pursue doctoral work at Princeton, he met Phyllis Green. They married in 1954.

Besides his son, Jim, he is survived by two daughters, Laurie Stark and Susan Juster-Goldstein, and six grandchildren.

After marriage, he began a life characterized by the title of a 2009 autobiographical monograph, “Vignettes From a Peripatetic Professor,” moving among academia, government, industry and research institutes in Washington and elsewhere.

Mr. Weidenbaum had an early, formative stint in the military industry. The General Dynamics Corporation in Fort Worth hired him as an economist and had him analyze the operations of the B-58 supersonic bomber. Moving to Boeing, in Seattle, he developed forecasts of the military market.

The jobs exposed him to the numerous rules military contractors were subject to, underscored by the full-time presence of inspectors stationed in the factories.

“There’s more government regulation of the defense industry than any other,” Mr. Weidenbaum said in the 2011 interview, adding that complaints were seldom voiced for fear of offending the main customer, the government itself.

After Boeing, he moved to the Stanford Research Institute in California to continue studying the military industry.

That was followed by a turn in Washington as the staff director of President Lyndon B. Johnson’s Council of Economic Advisers.

He moved to St. Louis in early 1975 when Washington University created the Center for the Study of American Business and recruited him to be its first director. He was there when Mr. Reagan lured him back to the White House.

Mr. Weidenbaum later served on boards and government commissions, including one on clean air initiatives formed by President George H. W. Bush, and he continued as director of the Washington University business institute. In 2001 it was renamed the Weidenbaum Center on the Economy, Government and Public Policy.

The center gave him a platform from which to express his views on deficit spending — “I conclude that deficits do not matter, but that Treasury borrowing and money creation surely do” — and on military spending and other economic matters. It also gave him an opportunity to display his dry sense of humor.

Speaking at the center’s annual policy conference in October 1982, he remarked, “At a time when, alas, economist jokes are in vogue, I would like to add my favorite wisecrack about our profession: If all the economists in the world were laid end to end, it might be a good thing.”

A version of this article appears in print on March 22, 2014,

on page A22 of the New York edition with the headline:

Murray L. Weidenbaum, Reagan Economist, Dies at 87.

    Murray L. Weidenbaum, Reagan Economist, Dies at 87,
    NYT, 21.3.2014,
    http://www.nytimes.com/2014/03/22/business/
    murray-l-weidenbaum-reagan-economist-dies-at-87.html

Extra Pay for Extra Work

MARCH 12, 2014
The New York Times
By THE EDITORIAL BOARD
The Opinion Pages|Editorial

For the first 40 years of its existence, a worker’s right to time-and-a-half for overtime, established by federal law in 1938, operated as intended. It guarded against exploitation and inequality by ensuring that extra hours meant extra pay.

Since the mid-1970s, however, that right has been severely eroded. The law gives the Labor Department the authority to update the salary threshold and job descriptions that define who is eligible for overtime pay. The last meaningful update was in 1975, when the Ford administration raised the salary threshold significantly to account for inflation.

In 2004, rule changes by the Bush administration, which remain in force today, basically locked in the law’s by-then outdated and inadequate salary threshold, while giving employers more leeway to define workers in ways that make them ineligible for overtime pay.

President Obama’s directive to the Labor Department to revamp the nation’s overtime rules is an opportunity to undo the damage. By reasserting a meaningful right to overtime, it could lift pay for an estimated five million workers a week and, in the process, help to mitigate the wage stagnation and income inequality that increasingly plague the American economy.

The most important change the department can make is to raise the salary threshold — the pay level below which all hourly and salaried workers are guaranteed overtime pay. Today’s threshold, $455 a week, is unacceptably low, barely above the poverty level for a family of four. The Labor Department should set the new threshold at around $1,000 a week, which is where it would be if it simply had been adjusted for inflation since 1975.

White House officials told reporters on Tuesday that the president will also ask the department to write rules to end the widespread business practice of misclassifying workers as administrators, supervisors or managers — designations that can exempt workers from overtime protection. But raising the salary threshold is even more important, because doing so would automatically grant overtime protection to many workers who are misclassified, without having to clarify or redefine their job duties.

Given that rule-making is a laborious process, updating the overtime rules could easily take longer than the roughly two-and-a-half years that Mr. Obama has left in office. The president would thus do well to instruct the Labor Department to focus solely on raising the salary threshold, if needed, to get reform enacted promptly.

Mr. Obama knows that it is not enough to say that Americans deserve a raise. He is also urging Congress to raise the federal minimum wage and has signed an executive order requiring federal contractors to pay their employees at least $10.10 an hour. New overtime rules are of a piece with those efforts, but, to make a difference, they need to get done — and soon.


A version of this editorial appears in print on March 13, 2014,

on page A26 of the New York edition with the headline:

Extra Pay for Extra Work.

    Extra Pay for Extra Work, NYT, 12.3.2014,
    http://www.nytimes.com/2014/03/13/opinion/extra-pay-for-extra-work.html

The Inflation Obsession

MARCH 2, 2014
The New York Times
The Opinion Pages|Op-Ed Columnist
Paul Krugman

Recently the Federal Reserve released transcripts of its monetary policy meetings during the fateful year of 2008. And, boy, are they discouraging reading.

Partly that’s because Fed officials come across as essentially clueless about the gathering economic storm. But we knew that already. What’s really striking is the extent to which they were obsessed with the wrong thing. The economy was plunging, yet all many people at the Fed wanted to talk about was inflation.

Matthew O’Brien at The Atlantic has done the math. In August 2008 there were 322 mentions of inflation, versus only 28 of unemployment and 19 of systemic risks or crises. In the meeting on Sept. 16, 2008 — the day after Lehman fell! — there were 129 mentions of inflation versus 26 mentions of unemployment and only four of systemic risks or crises.

Historians of the Great Depression have long marveled at the folly of policy discussion at the time. For example, the Bank of England, faced with a devastating deflationary spiral, kept obsessing over the imagined threat of inflation. As the economist Ralph Hawtrey famously observed, “That was to cry ‘Fire, fire!’ in Noah’s flood.” But it turns out that modern monetary officials facing financial crisis were just as obsessed with the wrong thing as their predecessors three generations before.

And it wasn’t just a bad call in 2008. Much supposedly informed opinion has remained fixated on the supposed threat of rising prices despite being wrong again and again. If you spent the last five years watching CNBC, or reading the Wall Street Journal opinion pages, or for that matter listening to prominent conservative economists, you lived in a constant state of alarm over runaway inflation, which was coming any day now. It never did.

What accounts for inflation obsession? One answer is that obsessives failed to distinguish between underlying inflation and short-term fluctuations in the headline number, which are mainly driven by volatile energy and food prices. Gasoline prices, in particular, strongly influence inflation in any given year, and dire warnings are heard whenever prices rise at the pump; yet such blips say nothing at all about future inflation.

They also failed to understand that printing money in a depressed economy isn’t inflationary. I could have told them that, and in fact I did. But maybe there was some excuse for not grasping this point in 2008 or early 2009.

The point, however, is that inflation obsession has persisted, year after year, even as events have refuted its supposed justifications. And this tells us that something more than bad analysis is at work. At a fundamental level, it’s political.

This is fairly obvious if you look at who the inflation obsessives are. While a few conservatives believe that the Fed should be doing more, not less, they have little if any real influence. The overall picture is that most conservatives are inflation obsessives, and nearly all inflation obsessives are conservative.

Why is this the case? In part it reflects the belief that the government should never seek to mitigate economic pain, because the private sector always knows best. Back in the 1930s, Austrian economists like Friedrich Hayek and Joseph Schumpeter inveighed against any effort to fight the depression with easy money; to do so, warned Schumpeter, would be to leave “the work of depressions undone.” Modern conservatives are generally less open about the harshness of their view, but it’s pretty much the same.

The flip side of this antigovernment attitude is the conviction that any attempt to boost the economy, whether fiscal or monetary, must produce disastrous results — Zimbabwe, here we come! And this conviction is so strong that it persists no matter how wrong it has been, year after year.

Finally, all this ties in with a predilection for acting tough and inflicting punishment whatever the economic conditions. The British journalist William Keegan once described this as “sado-monetarism,” and it’s very much alive today.

Does any of this matter? It’s true that the Fed hasn’t surrendered to the sado-monetarists. Notably, it didn’t panic in 2011, when another blip in gasoline prices briefly raised the headline rate of inflation, and Republicans began inveighing against the “debasement” of the dollar.

But I’d argue that the clamor from inflation obsessives has intimidated the Fed, which might otherwise have done more. And it has also been part of a general climate of opposition to anything that might address our continuing jobs crisis.

As I suggested, we used to marvel at the wrongheadedness of policy makers during the Great Depression. But when the Great Recession struck, and we were given a chance to do better, we ended up repeating all the same mistakes.

A version of this op-ed appears in print on March 3, 2014,

on page A25 of the New York edition with the headline:

The Inflation Obsession

    The Inflation Obsession, NYT, 2.3.2014,
    http://www.nytimes.com/2014/03/03/opinion/krugman-the-inflation-obsession.html

Small Business,

Joining a Parade of Outsourcing

 

FEB. 15, 2014
The New York Times
By PHYLLIS KORKKI

Going abroad for cheap labor isn’t just for big businesses anymore. Thanks to the rise of online job marketplaces, small businesses are increasingly using foreign contract workers to lower their costs.

It’s a trend that has the potential to redistribute global wealth, say a group of researchers in a recent working paper published by the National Bureau of Economic Research.

For businesses hiring people for one-time projects in areas like software development, website design, customer service and translation, there is no longer a need to stay local. A company in New York can arrange for someone in Uzbekistan to create its website, for example. And chances are that the Uzbek worker will be willing to work for much less pay than a comparable one in New York.

But finding those people and dealing with payment isn’t something that a typical business has time to handle. That’s where online marketplaces like oDesk, Elance (which recently merged with oDesk), Freelancer and Guru come in. They post workers’ skills and portfolios, solicit and publish reviews, and arrange for payment, taking a cut of each transaction.
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Michael Waraksa

ODesk created its online marketplace in 2005, and the company has grown quickly since then. The number of employers billing on the site per quarter rose by more than 900 percent from 2009 to 2013; in that same period, the number of working freelancers per quarter rose about 1,000 percent.

Activity on these sites consists mainly of companies in high-income countries hiring workers in low-income ones, said Ajay Agrawal, a professor of entrepreneurship at the University of Toronto and one of the authors of the study. Contractors in low-income countries with the right skills can receive a substantial wage boost by participating in an online marketplace, he said. “They can go on the platform and see which jobs are in most demand and learn those skills.”

Contractors from Bangladesh and the Philippines, for example, “earn significantly more than local minimum wages, perhaps partly explaining their disproportionate use of the platform,” according to the paper. Technology skills tend to command higher wages. On average, software developers were able to make around $16 an hour, whereas administrative support paid $4, the paper said. (Projects can also be performed at a fixed rate instead of an hourly one.)

But might an American business hesitate to hire someone halfway across the globe — especially in a non-English-speaking country? The quality of work produced will always be an issue for online marketplaces, wherever the workers are based. That’s why the ratings and reviews on the sites are so important.

Amanda Pallais, an assistant professor of economics and social studies at Harvard, ran an experiment involving oDesk transactions. It showed that on average, contractors who had ratings with their profiles greatly increased their earnings and rates of employment. (This was the case even though negative ratings were included in the averages.)

The digital outsourcing of contract work is “good for American small business — that’s who’s really using this,” Professor Agrawal said. It’s also helping to raise the standard of living for workers in developing countries. The rise of these marketplaces will increase global productivity by encouraging “better matching between employers and employees,” he said.

The trend isn’t so good for freelancers in the United States and other high-income countries, who can’t compete against a contractor in, say, the Philippines, who bids $5 an hour for a tech-related job. It’s similar to the effect that occurred when American companies began outsourcing their work to factories abroad — and one that is likely to be debated as online labor continues to grow.

A version of this article appears in print on February 16, 2014,

on page BU3 of the New York edition with the headline:

Small Business, Joining a Parade of Outsourcing.

    Small Business, Joining a Parade of Outsourcing, NYT, 15.2.2014,
    http://www.nytimes.com/2014/02/16/business/
    small-business-joining-a-parade-of-outsourcing.html

Don’t Sell Cheap U.S. Coal to Asia

 

FEB. 12, 2014
The New York Times
By MICHAEL RIORDAN

EASTSOUND, Wash. — FROM where I live on Orcas Island in Puget Sound, north of Seattle, I can see Cherry Point across the wind-whipped waters of the Salish Sea. This sandy promontory jutting into Georgia Strait has become the focus of heated debate here in the Pacific Northwest.

Peabody Energy, Carrix and other corporations hope to build a shipping terminal at Cherry Point to export nearly 50 million metric tons of coal to Asia annually. They ballyhoo the jobs the terminal may bring to our region but say nothing about the profits they will reap from selling subsidized coal.

Opponents decry the prospect of the dirty, smelly, noisy trains blocking railroad crossings all across Washington State as they transport coal here from the Powder River Basin in Montana and Wyoming. They also warn that coal dust from the terminal will pollute nearby waters and harm our dwindling populations of herring, threatened Chinook salmon and endangered killer whales.

But much larger issues of national and global concern are at stake. The low-sulfur Western coal, strip-mined from federal lands, is valuable public property. The federal government’s leasing of these lands at low cost to strip miners made some sense a few decades ago when the United States needed low-sulfur coal to reduce the amount of sulfur dioxide that was being emitted by coal-burning power plants and causing acid rain. But today, as utilities convert to cheap natural gas and American coal use declines, mining companies are seeking customers in China, Japan and Korea.

Shipping this subsidized coal to Asian countries to help them power their factories, which undercut American manufacturers, makes little sense. Yes, this coal will help those countries produce cheap consumer goods for sale in stores across the United States. But it will also promote the continued transfer of industrial work to Asia, especially if the Trans-Pacific Partnership goes through. Is that good for American workers?

The coal is extracted from federal lands so cheaply that taxpayers should be outraged. A 2012 study by the nonprofit Institute for Energy Economics and Financial Analysis concluded that the government’s failure to obtain fair market value for coal mined in the Powder River Basin had deprived taxpayers of almost $1 billion annually over the past 30 years. Last year, the Interior Department’s inspector general similarly reported that the agency was failing to collect sufficient lease payments. And last week, the Government Accountability Office concluded that the coal leasing program run by the Bureau of Land Management operates without sufficient oversight to ensure that fair lease prices are being paid and does not fully account for export sales in evaluating these fees.

“Taxpayers are likely losing out so that coal companies can reap a windfall and export that coal overseas, where it is burned, worsening climate change,” said Senator Edward J. Markey, a Massachusetts Democrat, who requested the study.

When coal companies can strip mine Western coal for less than $10 a ton and sell it in Asia for nearly 10 times as much, lucrative profits can be banked all along the global supply chain. No wonder the Australian coal company Ambre Energy is planning to build two coal terminals on the Columbia River. In all, those terminals and the one proposed for Cherry Point could ship 100 million metric tons of coal to Asia annually.

Asian nations hungry for energy have much looser pollution regulations and will pay dearly for coal, despite its noxious impacts on health and the environment. The health impact of coal emissions has recently become obvious in China, where this pollution contributed to 1.2 million premature deaths in 2010, according to the Global Burden of Disease study, published in The Lancet, a British medical journal.

And this pollution is unfortunately not confined to Asia. Wafted aloft on winds blowing across the Pacific, it reaches North America, depositing fine particles, mercury and other toxins on land and in water. Carbon dioxide emitted by burning coal adds inexorably to the global overburden of greenhouse gases warming the planet. Projected exports from Cherry Point alone could result in over 100 million metric tons of carbon dioxide annually. The gas has already begun to boost the acidity of near-shore waters, threatening Washington’s shellfish industry.

The billions of tons of coal burned in Asia every year contribute markedly to global warming. Should the United States be selling them subsidized coal and encouraging this impending disaster?

Our nation needs a new, transparent, clean-energy policy that no longer turns a blind eye to the many negative impacts of coal burning — or to companies trying to sell coal to other nations playing catch-up in the global economy. A cornerstone of this policy must be the rational use of our vast reserves of Western coal as we ramp down the overuse of what is, by far, the dirtiest fossil fuel.

Is our economy to become a resource economy like Australia’s, exporting mineral wealth to Asia in return for mining and shipping jobs, plus cheap consumer goods? Should we support this Faustian bargain by selling our coal so inexpensively? What kinds of jobs and living conditions do we really want to foster, and where? These are questions a rational and much-needed, 21st-century energy policy would address.

A great and growing plume of carbon dioxide continues to rise over Asia as transnational corporations are shifting manufacturing operations overseas. We can take a resolute stand at Cherry Point and begin to halt this boondoggle. A good first step would be one Senator Markey advocates: a moratorium on new coal leases.

Michael Riordan, a physicist,

is the author of “The Hunting of the Quark.”

A version of this op-ed appears in print on February 13, 2014,

on page A27 of the New York edition with the headline:

Don’t Sell Cheap U.S. Coal to Asia.

    Don’t Sell Cheap U.S. Coal to Asia, NYT, 12.2.2014,
    http://www.nytimes.com/2014/02/13/opinion/dont-sell-cheap-us-coal-to-asia.html

Conflict in Oil Industry, Awash in Crude

FEB. 12, 2014
The New York Times
By CLIFFORD KRAUSS

HOUSTON — T. Boone Pickens has personified the nation’s oil industry for more than a generation. So when he made an offhand comment at a conference here a few weeks ago expressing reservations about lifting the nation’s ban on exports of crude oil, he startled some of his old allies in the business.

Scott Sheffield, chief executive of Pioneer Natural Resources and one of the top oil executives in the state, picked up the phone to have a chat. “We had lunch and he made sense,” said Mr. Pickens, who has since revised his position.

Chalk one up for the oil producers, who have begun lobbying the Obama administration, Congress and the public to let them export the bounty of crude oil flowing out of new shale fields across the country.

Opposing them are their erstwhile cousins, the independent refiners, who insist that they need abundant, economical domestic supplies of oil so they can compete with foreign refiners.

It is a rare clash in a deeply guarded industry that involves arguments over national security, pricing at the pump and, after all is said and done, who will get a bigger share of earnings from the current drilling rush.

“What we have here is a food fight for the profits that will come either from exports of crude oil or exports of refined products,” said Amy Myers Jaffe, executive director of energy and sustainability at the University of California, Davis, who testified before Congress recently in favor of lifting the ban. “It’s like an argument inside a family business but one that could result in huge market distortions that can either hurt the consumer or our national security.”

Producers like Mr. Sheffield warn that a mounting glut of certain grades of oil in some regions of the country will eventually force a halt to unprofitable drilling if exports are not allowed.

“Nobody wants the collapse of the oil industry,” Mr. Sheffield said in an interview. “You would be importing crude oil from the Middle East all over again.”

On the other side of the debate are some of the nation’s biggest refiners, who argue against unlimited exports of crude oil even as they export increasing amounts of refined products like diesel and gasoline. To their way of thinking, the oil producers are merely trying to increase their profits at the expense of American consumers.

“They are seeking the highest price available,” Bill Day, a vice president at the Valero Energy Corporation, a large independent refiner, said of the producers. “If anything, unlimited exports would raise the price of American crude to the international level, which is why the producers want this step to begin with.”

The debate began in earnest two months ago when Energy Secretary Ernest Moniz suggested at a New York energy conference that it might be time for the country to reconsider the export ban that was instituted in the 1970s, when OPEC oil embargoes threatened the American economy. Congress at the time made oil exports illegal except for some shipments to Canada. The ban on exports of Alaskan North Slope crude was lifted in 1996.

The topic has renewed interest thanks to the oil industry’s reversal of fortunes in recent years. Only seven years ago the country’s domestic oil production appeared to be in a downward spiral. But with the advent of new extraction techniques, entire new fields were opened, replacing oil imports from unfriendly or unruly places like Venezuela and Nigeria.

Suddenly parts of the Midwest and Gulf of Mexico regions are overflowing with superior grades of crude, leading to a slump in prices and a gap of as much as $10 between American oil benchmark prices and the dominant world Brent price.

Even under current restrictions, crude exports are growing quickly. Shipments to Canada have already roughly tripled since 2012 to around 200,000 barrels a day. Some analysts say they think that figure will double by the end of the year.

While the entire oil industry has profited from all the domestic production, which has increased by about 60 percent to eight million barrels a day since 2005, refiners have particularly benefited. American refiners became darlings of Wall Street by buying cheaper domestic crude and now export 3.4 million barrels a day of gasoline, diesel and other refined products, mostly to Latin America and Europe.

Not surprisingly, both the producers and the refiners say they are on the side of consumers and national security, and each side has academic and consultancy reports to back up its position.

The producers argue that if they could freely export, they would increase world oil supplies, forcing down the international Brent benchmark crude price, which in turn would reduce the price of gasoline at the pump. “The American consumer is held captive by the restrained market,” said Jack Ekstrom, a vice president at the Whiting Petroleum Corporation, a major producer in the North Dakota Bakken shale field. “When you have additional supplies coming on to market, the price naturally comes down.”

Executives at the refineries, which struggled for decades, counter that adding another million barrels of United States oil of daily supply to a global market of 90 million barrels a day will make little difference. Instead, they say, domestic crude prices will climb higher and with them gasoline prices.

“The export ban works,” Graeme Burnett, chairman of Monroe Energy, which operates Delta Air Lines’ refinery in Trainer, Pa., told a Senate Energy Committee hearing last month. “We still have a long way to go to protect against oil market volatility and achieve true energy independence.”

Refinery executives concede that they cannot argue against free trade when they are exporting products themselves. Michael C. Jennings, chief executive of the HollyFrontier Corporation, said in an interview that he could support ending the oil export ban as long as other regulations that he said penalize the refiners, including federal mandates for the refining of expensive biofuels, were also reformed.

Such sweeping energy reforms are not likely to be enacted by Congress soon. But in their talks with Commerce Department officials and members of Congress, refiners and producers appear to be closing in on some short-term compromises.

Some executives have suggested that Commerce Department officials could approve swaps of lighter American crudes to Mexico for their heavier sour crudes without violating current oil export regulations. That would give the producers another market and give refiners more oil to process.

There appears to be growing support for recharacterizing condensates, the hydrocarbon liquids used for petrochemical production, from crude to natural gas liquids, so they might be exported under current regulations. That would ease gluts in Rocky Mountain and South Texas fields where drilling has already slowed.

And perhaps more oil could be sent to countries with free trade agreements with the United States.

Such compromises, some executives say, could look something like the arrangements for export of liquefied natural gas from the United States. While gas producers supported exports and some chemical companies opposed them, the Obama administration responded by approving export terminals slowly to gauge the impact on domestic energy prices in the future.

“The middle ground could probably be accomplished without any additional legislation,” said Stephen H. Brown, a vice president for federal government affairs at the Tesoro Corporation, a major Texas refiner, “and I think that is what this administration is probably hoping for.”

Such actions by the Commerce Department, Mr. Sheffield said, could be a “relief valve that would push off the problem for another two years.”

But after that, he and other executives said, the country will probably again face a glut of high-quality crudes if current production trends continue.

A version of this article appears in print on February 13, 2014,

on page B1 of the New York edition with the headline:

Conflict in Oil Industry, Awash in Crude.

    Conflict in Oil Industry, Awash in Crude,
    NYT, 12.2.2014,
    http://www.nytimes.com/2014/02/13/business/
    energy-environment/an-oil-industry-awash-in-crude-argues-over-exporting.html

The Case for a Higher Minimum Wage

FEB. 8, 2014
The New York Times
By THE EDITORIAL BOARD

The political posturing over raising the minimum wage sometimes obscures the huge and growing number of low-wage workers it would affect. An estimated 27.8 million people would earn more money under the Democratic proposal to lift the hourly minimum from $7.25 today to $10.10 by 2016. And most of them do not fit the low-wage stereotype of a teenager with a summer job. Their average age is 35; most work full time; more than one-fourth are parents; and, on average, they earn half of their families’ total income.

None of that, however, has softened the hearts of opponents, including congressional Republicans and low-wage employers, notably restaurant owners and executives.

This is not a new debate. The minimum wage is a battlefield in a larger political fight between Democrats and Republicans — dating back to the New Deal legislation that instituted the first minimum wage in 1938 — over government’s role in the economy, over raw versus regulated capitalism, over corporate power versus public needs.

But the results of the wage debate are clear. Decades of research, facts and evidence show that increasing the minimum wage is vital to the economic security of tens of millions of Americans, and would be good for the weak economy. As Congress begins its own debate, here are answers to some basic questions about the need for an increase.

 

WHAT’S THE POINT OF THE MINIMUM WAGE? Most people think of the minimum wage as the lowest legal hourly pay. That’s true, but it is really much more than that. As defined in the name of the law that established it — the Fair Labor Standards Act of 1938 — the minimum wage is a fundamental labor standard designed to protect workers, just as child labor laws and overtime pay rules do. Labor standards, like environmental standards and investor protections, are essential to a functional economy. Properly set and enforced, these standards check exploitation, pollution and speculation. In the process, they promote broad and rising prosperity, as well as public confidence.

The minimum wage is specifically intended to take aim at the inherent imbalance in power between employers and low-wage workers that can push wages down to poverty levels. An appropriate wage floor set by Congress effectively substitutes for the bargaining power that low-wage workers lack. When low-end wages rise, poverty and inequality are reduced. But that doesn’t mean the minimum wage is a government program to provide welfare, as critics sometimes imply in an attempt to link it to unpopular policies. An hourly minimum of $10.10, for example, as Democrats have proposed, would reduce the number of people living in poverty by 4.6 million, according to widely accepted research, without requiring the government to tax, borrow or spend.

 

IS THERE AN ALTERNATIVE? No. Other programs, including food stamps, Medicaid and the earned-income tax credit, also increase the meager resources of low-wage workers, but they do not provide bargaining power to claim a better wage. In fact, they can drive wages down, because employers who pay poorly factor the government assistance into their wage scales. This is especially true of the earned-income tax credit, a taxpayer-provided wage subsidy that helps lift the income of working families above the poverty line.

Conservatives often call for increases to the E.I.T.C. instead of a higher minimum wage, saying that a higher minimum acts as an unfair and unwise tax on low-wage employers. That’s a stretch, especially in light of rising corporate profits even as pay has dwindled. It also ignores how the tax credit increases the supply of low-wage labor by encouraging more people to work, holding down the cost of labor for employers. By one estimate, increasing the tax credit by 10 percent reduces the wages of high-school educated workers by 2 percent.

There are good reasons to expand the tax credit for childless workers, as President Obama recently proposed. It is a successful antipoverty program and a capstone in the conservative agenda to emphasize work over welfare. But an expanded E.I.T.C. is no reason to stint on raising the minimum wage — just the opposite. A higher minimum wage could help offset the wage-depressing effect of a bolstered E.I.T.C., and would ensure that both taxpayers and employers do their part to make work pay.

 

HOW HIGH SHOULD IT BE? There’s no perfect way to set the minimum wage, but the most important benchmarks — purchasing power, wage growth and productivity growth — demonstrate that the current $7.25 an hour is far too low. They also show that the proposed increase to $10.10 by 2016 is too modest.

The peak year for the minimum wage was 1968, when its purchasing power was nearly $9.40 in 2013 dollars, as shown in the accompanying chart. Since then, the erosion caused by inflation has obviously overwhelmed the increases by Congress. Even a boost to $10.10 an hour by 2016 (also adjusted to 2013 dollars) would lift the minimum to just above its real value in 1968. So while it is better than no increase, it is hardly a raise.

The situation is worse when the minimum wage is compared with the average wages of typical American workers, the ones with production and nonsupervisory jobs in the private sector. From the mid-1960s to the early 1980s, when one full-time, full-year minimum wage job could keep a family of two above the poverty line, the minimum equaled about half of the average wage. Today, it has fallen to one-third; to restore it to half would require nearly $11 an hour, a better goal than $10.10.

The problem is that the average wage, recently $20.39 an hour, has also stagnated over the past several decades, despite higher overall education levels for typical workers and despite big increases in labor productivity. People are working harder and churning out more goods and services, but there’s no sign of that in their paychecks. If the average wage had kept pace with those productivity gains, it would be about $36 an hour today, and the minimum wage, at half the average, would be about $18.

That is not to suggest that the hourly minimum wage could be catapulted from $7.25 to $18. A minimum of $18 would be untenable with the average hovering in the low $20s. But it does confirm that impersonal market forces are not the only, or even the primary, reason for widespread wage stagnation. Flawed policies and changing corporate norms are also to blame, because they have allowed the benefits of productivity gains to flow increasingly to profits, shareholder returns and executive pay, instead of workers’ wages.

DOES IT KILL JOBS? The minimum wage is one of the most thoroughly researched issues in economics. Studies in the last 20 years have been especially informative, as economists have been able to compare states that raised the wage above the federal level with those that did not.

The weight of the evidence shows that increases in the minimum wage have lifted pay without hurting employment, a point that was driven home in a recent letter to Mr. Obama and congressional leaders, signed by more than 600 economists, among them Nobel laureates and past presidents of the American Economic Association.

That economic conclusion dovetails with a recent comprehensive study, which found that minimum wage increases resulted in “strong earnings effects” — that is, higher pay — “and no employment effects” — that is, zero job loss.

Evidence, however, does not stop conservatives from making the argument that by raising the cost of labor, a higher minimum wage will hurt businesses, leading them to cut jobs and harming the low-wage workers it is intended to help. Alternatively, they argue it will hurt consumers by pushing up prices precipitously. Those arguments are simplistic. Research and experience show that employers do not automatically cope with a higher minimum wage by laying off workers or not hiring new ones. Instead, they pay up out of savings from reduced labor turnover, by slower wage increases higher up the scale, modest price increases or other adjustments.

Which brings the debate over raising the minimum wage full circle. The real argument against it is political, not economic. Republican opposition will likely keep any future increase in the minimum wage below a level that would constitute a firm wage floor, though an increase to $10.10 an hour would help tens of millions of workers. It also would help the economy by supporting consumer spending that in turn supports job growth. It is not a cure-all; it is not bold or innovative. But it is on the legislative agenda, and it deserves to pass.

A version of this editorial appears in print on February 9, 2014,

on page SR10 of the New York edition with the headline:

The Case for a Higher Minimum Wage.

    The Case for a Higher Minimum Wage, NYT, 8.2.2014,
    http://www.nytimes.com/2014/02/09/opinion/sunday/
    the-case-for-a-higher-minimum-wage.html

The Post Office Banks on the Poor

FEB. 7, 2014
The New York Times
By MEHRSA BARADARAN

ATHENS, Ga. — PEOPLE like to complain about banks popping up like Starbucks on every corner these days. But in poor neighborhoods, the phenomenon is quite the opposite: Over the past couple of decades, the banks have pulled out.

Approximately 88 million people in the United States, or 28 percent of the population, have no bank account at all, or do have a bank account, but primarily rely on check-cashing storefronts, payday lenders, title lenders, or even pawnshops to meet their financial needs. And these lenders charge much more for their services than traditional banks. The average annual income for an “unbanked” family is $25,500, and about 10 percent of that income, or $2,412, goes to fees and interest for gaining access to credit or other financial services.

But a possible solution has appeared, in the unlikely guise of the United States Postal Service. The unwieldy institution, which has essentially been self-funded since 1971, and has maxed out its $15 billion line of credit from the federal government, is in financial straits itself. But what it does have is infrastructure, with a post office in most ZIP codes, and a relationship with residents in every kind of neighborhood, from richest to poorest.

Last week, the office of the U.S.P.S. inspector general released a white paper noting the “huge market” represented by the population that is underserved by traditional banks, and proposing that the post office get into the business of providing financial services to “those whose needs are not being met.” (I wrote a paper years ago suggesting just such an idea.) Postal banking has a powerful advocate in Senator Elizabeth Warren, Democrat of Massachusetts, who has publicly supported the plan.

The U.S.P.S. — which already handles money orders for customers — envisions offering reloadable prepaid debit cards, mobile transactions, domestic and international money transfers, a Bitcoin exchange, and most significantly, small loans. It could offer credit at lower rates than fringe lenders do by taking advantage of economies of scale.

The post office has branches in many low-income neighborhoods that have long been deserted by commercial banks. And people at every level of society have a certain familiarity and comfort in the post office that they do not have in more formal banking institutions — a problem that, as a 2011 study by the Federal Deposit Insurance Corporation demonstrated, can keep the poor from using even the banks that are willing to offer them services.

Many will oppose the idea of a governmental agency providing financial services. Camden R. Fine, chief executive of the Independent Community Bankers of America, has already called the post office proposal “the worst idea since the Ford Edsel.” But the federal government already provides interest-free “financial services” to the largest banks (not to mention the recent bailout funds). And this is done under an implicit social contract: The state supports and insures the banking system, and in return, banks are to provide the general population with access to credit, loans and savings. But in reality, too many are left out.

It wasn’t always this way. In 1910, President William Howard Taft established the government-backed postal savings system for recent immigrants and the poor. It lasted until 1967. The government also supported and insured credit unions and savings-and-loans specifically created to provide credit to low-income earners.

But by the 1990s, there were essentially two forms of banking: regulated and insured mainstream banks to serve the needs of the wealthy and middle class, and a Wild West of unregulated payday lenders and check-cashing joints that answer the needs of the poor — at a price.

People need credit to increase their financial prospects — that’s the theory behind government backing of student loans and mortgages. The Latin root of the word “credit” is credere — to believe. But belief is something that mainstream lenders lack when it comes to assessing the creditworthiness of the poor. And yet establishing credit not only allows individual families and communities to grow wealth, but also allows our economy to do so. Everyone benefits.

There is, of course, a certain irony in the post office, cash-strapped and maxed out on credit, looking to elbow in on the business of check-cashing and payday-loan storefronts. And while the U.S.P.S. white paper stresses that its own offerings, rates and fees would be “more affordable,” a note of alarm is raised when it highlights the potential bonanza that providing financial services to the financially underserved could yield, stating that the result could be “major new revenue for the Postal Service” estimated at $8.9 billion a year. It’s a plan that could indeed save the post office, which last year recorded a $1 billion operating loss.

In this potential transaction between an institution and a population that are both in need, it would be wise to look back a century ago, at the last time a similar experiment was conducted. In 1913, the chief post office inspector, Carter Keene, declared that the postal savings system was not meant to yield a profit: “Its aim is infinitely higher and more important. Its mission is to encourage thrift and economy among all classes of citizens.” Any benefit to the post office’s bottom line should not come at the expense of those who can least afford it.

Mehrsa Baradaran is an assistant professor of law

at the University of Georgia, specializing in banking regulation.

A version of this op-ed appears in print on February 8, 2014,

on page A19 of the New York edition with the headline:

The Post Office Banks on the Poor.

    The Post Office Banks on the Poor, NYT, 7.2.2014,
    http://www.nytimes.com/2014/02/08/opinion/the-post-office-banks-on-the-poor.html

The Economic Road Ahead

JAN. 31, 2014
The New York Times
By THE EDITORIAL BOARD

Economists, politicians and investors gave the latest economic growth report, released on Thursday, a generally warm reception: The estimated annual growth rate in the fourth quarter of 2013, a decent 3.2 percent, could bode well for further growth this year. But there are, on balance, more reasons for caution than for optimism.

Republican intransigence on spending will continue to impede growth. It will not do as much damage as last year, when budget cuts and the government shutdown trimmed nearly a percentage point from growth in the fourth quarter alone. But Republicans’ refusal to renew expired federal unemployment benefits will hurt, as will their expected opposition to a higher minimum wage and other policies.
Related Coverage

President Obama in Wisconsin Thursday. Mr. Obama said in his State of the Union speech on Tuesday that 2014 should be a “breakout year” for the economy.

Economic fundamentals remain worrisome. Much of the fourth-quarter growth came from bolstered consumer spending. But much of that spending was for bigger outlays on household utilities and groceries, necessary expenditures that are hardly indications of surging consumer sentiment. Spending on homes and cars, which does reflect rising demand and confidence, was disappointing. The residential housing sector contracted in the fourth quarter, for the first time since 2010, and motor vehicle sales slowed from the third to the fourth quarter.

Whether housing and vehicle sales will recover quickly is an open question. In the recent past, housing has been strengthened by favorable interest rates and low home prices; light-truck sales were aided by the related surge in housing construction. Eventually, however, the health of home and car buying is inseparable from the health of the job market and the availability of credit — especially, in the case of homes, for first-time buyers. Good jobs and ample credit are still hard to come by. Another risk is the possibility that interest rates will rise in the wake of Federal Reserve efforts to gradually withdraw stimulus.

The report also does not inspire confidence in business investment, which has been subpar for some time, to spur the economy. The only bright spot in the fourth quarter was a jump in spending on equipment, which appears to be tied to tax-motivated buying at the end of last year.

At bottom, the economy is where it has been before in the recovery that began, officially, in mid-2009. Aggregate growth numbers look encouraging, but the drivers of the growth look shaky and, in any event, are still too weak to translate into more good jobs, higher pay and a better life for most Americans. Nor is there any guarantee that the benefits of stronger growth, when and if it materializes, will be broadly shared; to date, what growth there has been has largely benefited those at the top of the income and wealth ladder, a dynamic that becomes more entrenched the longer it endures.

Congress could help, with government spending, labor reforms and other policies to support job creation and higher wages and, by extension, consumption and investment. But legislative solutions are not in the cards. President Obama’s recent executive efforts to create jobs and increase pay are positive, but modest.

Cautious optimism is better than utter despair, but the emphasis still falls on “cautious.”

A version of this editorial appears in print

on February 1, 2014, on page A22

of the New York edition with the headline:

The Economic Road Ahead.

    The Economic Road Ahead, NYT, 31.1.2014,
    http://www.nytimes.com/2014/02/01/opinion/the-economic-road-ahead.html

Revenue and Profit Rise at Google,

but Mobile Is a Persistent Challenge

By CLAIRE CAIN MILLER
The New York Times
JAN. 30, 2014

SAN FRANCISCO — There is no denying that Google has become a mobile company. Now, Google — along with shareholders, industry partners and advertisers — is trying to figure out what that means.

In mobile advertising, Google is wrestling with how to make as much money on phones as it has on the ads that appear on desktop computers. Its fourth-quarter earnings report on Thursday showed that it is continuing to struggle with lower ad prices on phones. Yet some of the new types of ads it has introduced have paid off handsomely, as have mobile businesses like the Play store for Android devices.

But in other areas, like manufacturing smartphones, Google has decided that the business is better left to someone else. On Wednesday, it announced that it would sell Motorola Mobility, which it bought less than two years ago for $12.5 billion, to Lenovo for $2.91 billion. Motorola’s $384 million loss in the fourth quarter contributed to Google’s failure to meet analysts’ earnings expectations for the quarter.
Google's stock activity over the last three months.

Google executives would prefer that people stop talking about mobile at all.

“People aren’t distinguishing what they’re doing on different screens, so advertisers should be more agnostic about where they reach the user,” Nikesh Arora, Google’s chief business officer, said on a conference call with analysts. “The fundamental tenet is not to speak about mobile, mobile, mobile. It’s really about living with the users. What device are you on? What’s your question? How can we assist you? That’s a much broader and richer set of activities for us.”

And while everyone else is still obsessing about smartphones, Google has moved on to new kinds of devices and even robots. Eyewear with tiny computers called Google Glass is expected to be sold to consumers this year, and the company recently bought robotics companies and agreed to acquire Nest Labs, which makes Internet-connected thermostats and smoke detectors.

“While Apple hasn’t even put out a bigger phone, Google is leading in wearables with Google Glass. It’s got driverless cars. It’s wiring up homes with tremendous Internet speed connections,” said Colin Gillis, an analyst at BGC Partners. “Something’s got to pay off.”

To shore up their control and acquire new companies, Google’s founders, Larry Page and Sergey Brin, proposed in 2012 a new class of nonvoting shares.

On Thursday, Google announced that its board had approved the stock deal. Though some finance experts have doubted whether it would benefit shareholders, the news contributed to an increase of about 4 percent in Google shares in after-hours trading.

“It’s a little bit like, ‘This is my company; if you don’t like it, hit the highway,’ ” Mr. Gillis said.

Shareholders and equity analysts are also trying to figure out how to value today’s Google. Its stock price rose 25 percent since its last quarterly earnings announcement, yet Google has performed below analysts’ expectations more often than not in the last two years, and it did so again in the fourth quarter.

The company reported fourth-quarter revenue of $16.86 billion, an increase of 17 percent over the year-ago quarter. Net revenue, which excludes payments to the company’s advertising partners, was $13.55 billion, up from $11.34 billion. Net income rose 17 percent to $3.38 billion, or $9.90 a share. Excluding the cost of stock options and the related tax benefits, Google’s profit was $12.01 a share, up from $10.65 a year ago.

Analysts had expected revenue of $16.75 billion and earnings, excluding the cost of stock options, of $12.26 a share.

The fourth quarter is generally Google’s strongest because it makes money from retail advertisers during the holiday shopping season. Last quarter, that was even more pronounced because of the success of Google’s product listing ads, a new kind of ad with photos that Google requires retailers to buy to be included in its shopping listings.

In the fourth quarter, the price advertisers paid each time someone clicked on one of those ads rose 80 percent from the year before, compared with 11 percent growth in typical text search ads, according to Adobe, which manages ad spending for 1,200 advertisers.

Another new type of ad program from Google, called enhanced campaigns, lumps mobile ads with desktop ones and is expected to help Google’s mobile ad business grow. Nonetheless, the price advertisers pay when people click on smartphone ads is still about a third of the price of desktop ads, in part because people make purchases from mobile ads a quarter as often as they do on computers.

In the fourth quarter, the cost per click on ads declined 2 percent from the quarter before and 11 percent from the year before, continuing a two-year trend of declining prices.

Despite Google’s mobile challenges, among web businesses it might be the biggest beneficiary so far of consumers’ shift to mobile devices. Google services are the top web property on smartphones, reaching 87 percent of the mobile audience through apps and mobile browsing, according to comScore. (Facebook is next with 85 percent.)

And Google earned 42 percent of all mobile ad revenue in the United States last year, significantly more than any other company, according to eMarketer. Its share of mobile revenue, however, was down from 50 percent the year before and is not growing as quickly as that of Twitter, Apple and Facebook.

“It’s safe to say they figured out mobile advertising,” said Jordan Rohan, an analyst at Stifel Nicolaus. “Google’s problem is it’s 50 percent of online advertising, so it’s hard to grow as fast.”

Google benefited in the quarter from a brisk business in its Play store for buying things like apps and music on Android devices, and from widely distributing Google’s services on Android phones, which have a 52 percent market share in the United States, according to comScore. On YouTube, 40 percent of the time spent watching videos comes from mobile devices.

In November, Google announced that Nielsen would measure its traffic the way it does on TV channels, which is expected to help YouTube court advertisers.

“From a longer-term perspective, every piece of advertising becomes digital,” Mr. Arora said.

A version of this article appears in print on January 31, 2014,

on page B4 of the New York edition with the headline:

Revenue and Profit Rise at Google,

but Mobile Is a Persistent Challenge.

    Revenue and Profit Rise at Google, but Mobile Is a Persistent Challenge,
    NYT, 30.1.2014,
    http://www.nytimes.com/2014/01/31/technology/
    revenue-and-profit-rise-at-google-but-mobile-struggles-continue.html

Paranoia of the Plutocrats

JAN. 26, 2014
The New York Times

Rising inequality has obvious economic costs: stagnant wages despite rising productivity, rising debt that makes us more vulnerable to financial crisis. It also has big social and human costs. There is, for example, strong evidence that high inequality leads to worse health and higher mortality.

But there’s more. Extreme inequality, it turns out, creates a class of people who are alarmingly detached from reality — and simultaneously gives these people great power.

The example many are buzzing about right now is the billionaire investor Tom Perkins, a founding member of the venture capital firm Kleiner Perkins Caufield & Byers. In a letter to the editor of The Wall Street Journal, Mr. Perkins lamented public criticism of the “one percent” — and compared such criticism to Nazi attacks on the Jews, suggesting that we are on the road to another Kristallnacht.

You may say that this is just one crazy guy and wonder why The Journal would publish such a thing. But Mr. Perkins isn’t that much of an outlier. He isn’t even the first finance titan to compare advocates of progressive taxation to Nazis. Back in 2010 Stephen Schwarzman, the chairman and chief executive of the Blackstone Group, declared that proposals to eliminate tax loopholes for hedge fund and private-equity managers were “like when Hitler invaded Poland in 1939.”

And there are a number of other plutocrats who manage to keep Hitler out of their remarks but who nonetheless hold, and loudly express, political and economic views that combine paranoia and megalomania in equal measure.

I know that sounds strong. But look at all the speeches and opinion pieces by Wall Streeters accusing President Obama — who has never done anything more than say the obvious, that some bankers behaved badly — of demonizing and persecuting the rich. And look at how many of those making these accusations also made the ludicrously self-centered claim that their hurt feelings (as opposed to things like household debt and premature fiscal austerity) were the main thing holding the economy back.

Now, just to be clear, the very rich, and those on Wall Street in particular, are in fact doing worse under Mr. Obama than they would have if Mitt Romney had won in 2012. Between the partial rollback of the Bush tax cuts and the tax hike that partly pays for health reform, tax rates on the 1 percent have gone more or less back to pre-Reagan levels. Also, financial reformers have won some surprising victories over the past year, and this is bad news for wheeler-dealers whose wealth comes largely from exploiting weak regulation. So you can make the case that the 1 percent have lost some important policy battles.

But every group finds itself facing criticism, and ends up on the losing side of policy disputes, somewhere along the way; that’s democracy. The question is what happens next. Normal people take it in stride; even if they’re angry and bitter over political setbacks, they don’t cry persecution, compare their critics to Nazis and insist that the world revolves around their hurt feelings. But the rich are different from you and me.

And yes, that’s partly because they have more money, and the power that goes with it. They can and all too often do surround themselves with courtiers who tell them what they want to hear and never, ever, tell them they’re being foolish. They’re accustomed to being treated with deference, not just by the people they hire but by politicians who want their campaign contributions. And so they are shocked to discover that money can’t buy everything, can’t insulate them from all adversity.

I also suspect that today’s Masters of the Universe are insecure about the nature of their success. We’re not talking captains of industry here, men who make stuff. We are, instead, talking about wheeler-dealers, men who push money around and get rich by skimming some off the top as it sloshes by. They may boast that they are job creators, the people who make the economy work, but are they really adding value? Many of us doubt it — and so, I suspect, do some of the wealthy themselves, a form of self-doubt that causes them to lash out even more furiously at their critics.

Anyway, we’ve been here before. It’s impossible to read screeds like those of Mr. Perkins or Mr. Schwarzman without thinking of F.D.R.’s famous 1936 Madison Square Garden speech, in which he spoke of the hatred he faced from the forces of “organized money,” and declared, “I welcome their hatred.”

President Obama has not, unfortunately, done nearly as much as F.D.R. to earn the hatred of the undeserving rich. But he has done more than many progressives give him credit for — and like F.D.R., both he and progressives in general should welcome that hatred, because it’s a sign that they’re doing something right.

A version of this op-ed appears in print on January 27, 2014,

on page A19 of the New York edition with the headline:

Paranoia of the Plutocrats.

    Paranoia of the Plutocrats, NYT, 26.1.2014,
    http://www.nytimes.com/2014/01/27/opinion/krugman-paranoia-of-the-plutocrats.html

Microsoft Earnings Illustrate

Move to Devices and Services

From Software

JAN. 23, 2014
The New York Times
By NICK WINGFIELD

SEATTLE — A picture of the new Microsoft, one transformed from a software factory into a maker of devices and online services, came into sharper focus on Thursday.

The old Microsoft had an almost unmatched ability to chug out profits by selling software on discs to customers. The new Microsoft has an expanding portfolio of hardware products with decidedly lower margins.

That was clear on Thursday, when the company reported a happy 14 percent increase in revenue — in large part from brisk holiday sales of its new Xbox game console and Surface tablets — and a less happy 3 percent rise in profit.

The changing image of Microsoft was greeted positively by investors, who sent the company’s shares up more than 3 percent in after-hours trading after the release of its financial results. Microsoft management has been coaching Wall Street for some time to expect major changes in its business as it refashions itself to what it calls a devices and services company.

Apple, of course, is emblematic for that type of company. Apple’s success in new product categories like tablets and mobile phones — and Microsoft’s weakness in those areas — is a big reason Microsoft has taken the once unthinkable step of making its own computers and mobile phones, although both crimp profit margins.

The person driving that change at Microsoft has been Steven A. Ballmer, the chief executive. But if the vision is going to be seen through to the end, it will be by someone other than Mr. Ballmer, who is stepping down in the coming months. His successor was not named on Thursday as the search for a new leader dragged on.

The holidays are an especially strong time for hardware sales, and they offered a good test of the company’s evolving focus. The new Xbox One turned out to be one of the most highly sought gifts this year, and Microsoft’s new versions of the Surface tablet received better reviews than its first tablet offerings.

Those sentiments translated into sales. Microsoft sold 7.4 million Xbox consoles, including the Xbox One and the older Xbox 360, up from 5.9 million a year ago. And revenue from the Surface tablet more than doubled to $893 million from the previous quarter. In the last quarter, which was Microsoft’s second fiscal quarter and ended Dec. 31, revenue from devices and consumer hardware rose 68 percent, to $4.73 billion, growing far faster than any other part of the company.

The company reported net income in the quarter of $6.56 billion, or 78 cents a share. That was up from $6.38 billion, or 76 cents a share, a year ago. Microsoft’s revenue jumped 14 percent, to $24.52 billion.

Analysts surveyed by Thomson Reuters on average had expected the company to report earnings of 68 cents a share and revenue of $23.68 billion.

“The real growth you see is hardware,” said Brendan Barnicle, an analyst at Pacific Crest Securities. “It was the devices and consumer business driving everything in the quarter.”

That’s the good. The bad, though, is that Microsoft’s gross profit from the hardware business actually fell to $411 million, compared with $762 million a year ago, despite the surge in sales. One of the big reasons for the fall is that profit from new consoles like the Xbox One is almost always nonexistent when the devices are introduced, but they improve as component prices fall, manufacturing becomes more efficient and the audience of game buyers expands.

Microsoft’s performance in recent years has been hurt by slowing demand for PCs, and many consumers moved to mobile devices. Microsoft has tried to adapt to the rise of mobile devices by redesigning its Windows operating system to work better on touch devices, though the product hasn’t yet incited a PC buying spree.

In an interview, Amy E. Hood, Microsoft’s chief financial officer, said the PC market showed “signs of stabilization” but consumer demand for PCs was still soft.

Even if the 9 percent gross profit margin that Microsoft earned from its hardware business gets better, it is a long way from matching the profit of Microsoft’s commercial segment, the 83 percent gross profit margin business that encompasses the software and services it sells to corporate customers.

“It’s never going to be at 83 percent gross margins,” Ms. Hood said on a conference call with analysts. “It’s just a different business.”

Microsoft’s hardware ambitions are only getting bigger, too. The company is nearing the completion of its $7.2 billion deal to acquire Nokia’s handset business. Nokia ended the year on a down note, reporting on Thursday that its smartphone sales declined 7 percent despite major marketing efforts.

Ms. Hood advised analysts and investors to consider the profit of Microsoft’s overall business, rather than focusing in on one part of it. For all its challenges, Microsoft’s bottom line remains enviable compared with those of some more lionized companies, including Amazon.com and Salesforce.com. Microsoft’s commercial business, which includes databases, Office software for organizations and cloud computing services, rose 10 percent, to $12.67 billion, more than half of overall revenue.

Ted Schadler, an analyst at Forrester Research, said Microsoft’s results spoke to the growing appeal of products like the Surface in which hardware and software are tightly coupled, rather than Microsoft’s traditional approach of shipping software to independent hardware makers to put on their devices.

“What those numbers reflect to me is that people want that,” Mr. Schadler said.

A version of this article appears in print on January 24, 2014,

on page B3 of the New York edition with the headline:

Microsoft Earnings Illustrate Move to Devices and Services

From Software.

    Microsoft Earnings Illustrate Move to Devices and Services From Software,
    NYT, 23.1.2014,
    http://www.nytimes.com/2014/01/24/technology/
    holiday-sales-help-push-profit-up-at-microsoft.html

States Cutting Weeks of Aid to the Jobless

JAN. 21, 2014
The New York Times
By ANNIE LOWREY

RIEGELWOOD, N.C. — After losing her job as a security guard in June, Alnetta McKnight turned to food stamps and unemployment insurance to support herself and her 14-year-old son. But her jobless payments ran out after 20 weeks, and now they are living on close to nothing.

“I worked for 26 years; I lost my job through no fault of my own,” Ms. McKnight said, sitting in her darkened living room — she keeps the lights off to save money — in this small town about 20 miles from Wilmington, N.C. “This is what I get?”

Had Ms. McKnight been laid off a year earlier, she almost certainly would have qualified for more than a year of unemployment insurance payments, helping keep her family out of penury while she sought another position. But last July, North Carolina sharply cut its unemployment program, reducing the maximum number of weeks of benefits to 20 from 73 and reducing the maximum weekly benefit as well.

The rest of the country is now following North Carolina’s lead. A federal program supplying extra weeks of benefits to the long-term unemployed expired at the end of 2013, and congressional Democrats failed in an effort to revive it. About 1.3 million jobless workers received their last payment on Dec. 28. Starting on Jan. 1, the maximum period of unemployment payments dropped to 26 weeks in most states, down from as much as 73 weeks.

The unemployment rate in North Carolina has plummeted since the state significantly reduced its unemployment benefits last July. Economists said that some of the reduction was due to jobless workers’ finding work, but more was due to workers’ dropping out of the labor force altogether.

With that move, the country’s safety net for jobless workers has undergone a sudden transformation, from one aimed at providing modest but sustained protection to workers weathering a tough labor market to one intended to give relatively short-term aid before spurring workers to accept a job, any job.

It is still early, but the results in North Carolina suggest that there are both gains and losses from cutting back on support for the jobless. The state’s unemployment rate has plummeted to 7.4 percent from 8.8 percent, the sharpest drop in the country. In part, that is because more jobless workers are connecting with work. But an even greater number of workers have simply given up on finding a job.

North Carolina’s move also highlights a sharp political divide that is now playing out on the national stage. In Washington, Democrats are making an election-year charge that Republicans are pulling the safety net from under struggling families at a time when the economy remains weak and is operating far below its potential.

“North Carolina still has a higher-than-average unemployment rate, so this is important to this state,” President Obama said last week as he unveiled plans for a new manufacturing research center in Raleigh. “Folks aren’t looking for a handout. They’re not looking for special treatment. There are a lot of people who are sending out résumés every single day, but the job market is still tough.”

Republicans, in response, say that Democrats have done nothing but make unemployment and poverty more comfortable, while overseeing scant job growth. They argue that what they see as overly generous government support only encourages dependency and that a thinner safety net would actually be more effective, pointing to North Carolina’s falling jobless rate as prime evidence.

“Employers were telling me they had vacant jobs, but people would say, ‘Hold that job until my unemployment benefits end.’ ” said Gov. Pat McCrory, a Republican who is the prime mover behind the policy. “I heard that time and time again. Now, employers are telling us that people are coming in and filling out applications to accept jobs, not to meet the requirements of unemployment.”

Nonpartisan economists said it was difficult to definitively show the impact of the change to the unemployment insurance program on the state’s labor market. Employment increased from June through November by more than 22,000 people (reaching a total of over 4.3 million). But for every worker who found a job, more than two dropped out of the labor force entirely, according to the latest survey by the Bureau of Labor Statistics, which recorded a decline of over 50,000 from June through November.

It is hard to separate the effects of the unemployment cutbacks from overall changes in the regional and national economy.

“We don’t have enough data to know what is happening for sure,” said Mark Vitner, who studies the regional economy for Wells Fargo.

He said it was clear, though, that some of the unemployed were prodded back to work. “If someone had been receiving unemployment benefits for a long enough time, odds are they exhausted their savings, and they’re probably going to go ahead and take a job they wouldn’t have been taking previously,” he said.

Nationally, economists expect the economy to respond much as North Carolina’s has. The unemployment rate, currently at 6.7 percent, is likely to fall further, both as the number of discouraged workers rises and as more unemployed workers accept positions. Michael Feroli of JPMorgan Chase has estimated that the loss of extended benefits might lead to a 0.25 to 0.5 percentage-point drop in the unemployment rate.

But statistics don’t tell the full story. North Carolina still has nearly 350,000 listed as officially unemployed, and many more, including those living in depressed rural areas, have given up even looking for a job. For them, the safety net is gone, and largely out of sight, countless families have slipped deeper into poverty.

That includes Ms. McKnight’s. She still applies for jobs every day, and is hoping to be retrained as a certified nurse’s assistant. But in the meantime, she has sold her son’s dirt bike. She has stopped sending money to her mother, who has cancer, or to her daughter in college. A friend sold a set of decorative car rims to help her pay her electric bill. She has started visiting a local food bank for groceries.

“Two interviews so far out of 150 applications,” Ms. McKnight said. “If unemployment were for a year or a year and a half, that’s enough time to get established and get a job. Now, it’s over before it starts. That’s not enough time to find a job in an economy as bad as it is.”

Even conservative proponents of the North Carolina policy said there were downsides along with the upsides: Many jobless workers are accepting jobs for far less pay than they made before, and in many communities, there are simply not enough jobs.

“We anticipated that in more urban areas, and with younger workers, there would be a bigger impact,” Governor McCrory said, pointing to improvements in the state’s major cities. By contrast, he said, rural areas might be hardest hit, and job retraining and economic development initiatives were what those areas needed.

For now, that is little consolation for those who have lost a critical lifeline. “Our economies have been deconstructed,” said the Rev. Mac Legerton, the executive director of the Center for Community Action, a nonprofit in nearby Lumberton, one of the poorest communities in the state.

“We’re having to build new economies, which takes a significantly long period of time,” he said. “The assistance from extended unemployment benefits really provides one of the very few support systems for people who’ve been impacted by decisions far beyond their control.”

A version of this article appears in print on January 22, 2014,

on page A1 of the New York edition with the headline:

States Cutting Weeks of Aid to the Jobless.

    States Cutting Weeks of Aid to the Jobless, NYT, 21.1.2014,
    http://www.nytimes.com/2014/01/22/business/
    states-cutting-weeks-of-aid-to-the-jobless.html

Growth in Jobs

Slows Sharply to 3-Year Low

JAN. 10, 2014
The New York Times
By NELSON D. SCHWARTZ

Just when it seemed as if the economy was finally accelerating, the latest employment figures once again confounded expectations of better days ahead.

The government said on Friday that employers added jobs at the slowest pace in three years in December, reversing three months of steadily rising hiring that had persuaded economists and policy-makers at the Federal Reserve that the labor market had finally turned the corner.

Wintry weather, however, may have exaggerated the weakness, and the unexpectedly grim data immediately set off a debate among economists as to whether they were an anomaly or an indication of a more significant slowdown in the economy.

But even after accounting for factors like cold temperatures and snow that may have inhibited hiring, many experts cautioned that other trends, like average hourly earnings and the labor participation rate, were hardly encouraging.

On Capitol Hill, the lackluster economic picture in December may strengthen the hand of Democrats who are pushing to extend unemployment benefits to 1.3 million Americans whose coverage expired at the end of the year.

Since midsummer, the job market had been trending upward, with employers adding 241,000 workers in November, a robust performance that helped persuade the Fed to begin easing its vast stimulus program. But the latest data called into question whether the central bank’s optimism was premature.

Employers added just 74,000 jobs last month, the Labor Department said, a far cry from the 200,000 that economists had been looking for, and well below the monthly average increase of 182,500 over the course of 2012 and 2013.

The one apparent bright spot in Friday’s report — a sharp drop in the unemployment rate to 6.7 percent from 7 percent — was tarnished because it largely resulted from people exiting the work force rather than because they landed jobs. The work force shrank by 347,000 in December, reversing a big gain from November, and returning the proportion of Americans in the labor force to its October level of 62.8 percent, the lowest in 35 years.

While some of that decline is because of demographic factors like an aging population and rising retirements, Ms. Coronado said she was particularly troubled by how many prime-age workers were dropping out.

Among workers aged 45 to 54, the participation rate dropped 0.4 percentage point to 79.2 percent, the lowest since 1988. For workers 55 and older, the participation rate edged down only 0.1 percentage point. “It just keeps dropping and dropping,” she said. “It’s depressing, as it’s not just older workers retiring.”

After initially dropping in the wake of the Labor Department report Friday morning, stocks recovered later in the day as investors shifted their focus away from the labor market to what they hope will be more buoyant results as companies report fourth-quarter earnings in the next few weeks.

Some economists, impressed by other recent data showing steadily rising economic output, private surveys showing healthier payroll gains, a growing manufacturing sector, and increased exports, suggested that December’s figures represented a statistical fluke rather than another of the so-called swoons that have been a recurring feature of the fitful recovery that has followed the Great Recession.

“My advice is to ignore this number,” said Nariman Behravesh, chief economist at IHS. “A lot of other indicators are showing strength. It was largely noise last month, and the Fed will see it the same way, unless there is other evidence that gives them pause.”

Most experts say the Federal Reserve will stick with its plan to gradually taper its stimulus program when policy-makers meet later this month, but future reductions could be delayed if payroll gains remain weak in February and March.

Even as optimists like Mr. Behravesh insisted that December’s data was not a sign that the recovery was ebbing, they say it makes sense to remain focused on the labor market. “This is the weak spot in the economy,” he said. “Output has recovered and is above the prerecession level. But employment is still about two million below where it was when the recession started.”

Although retailing posted decent gains as the holiday shopping season reached its peak in December, the figures suggested that other areas of the economy that had been healthy for most of 2013 reversed course as the year drew to a close, significantly cutting into overall job creation.

For example, the construction industry lost 16,000 jobs in December, an about-face from the 2013 average monthly gain of 10,000 jobs. Similarly, health care employment fell by 6,000, compared with monthly gains of 17,000 in 2013 and 27,000 in 2012. The average workweek in the private sector fell to 34.4 hours, a drop of a tenth of an hour and another sign of softness in the economy.

Some groups fared better than others, despite the broad weakness in the data. For example, the number of jobs held by women increased 75,000, even as those held by men dropped by 1,000. Men were especially hurt by the construction sector decline, while women benefited more from the growth in retailing. At the same time, the labor participation rate among workers with some college or more rose slightly, but was more than offset by a fall in participation among people with a high school diploma or less.

Economists cautioned that month-to-month volatility in the payrolls report was common, and the numbers could be revised upward in the future. The Labor Department revised the number of jobs created in November to 241,000 from 203,000.

And there have been other big month-to-month swings in 2013. After a 172,000 gain in June, payrolls advanced by just 89,000 in July, only to jump by 238,000 in August.

On Wall Street, the Standard & Poor’s 500-stock index finished the day up 4.24 points or 0.23 percent, at 1,842.37. The Dow Jones industrial average edged lower 7.71 points or 0.05 percent, closing at 16,437.05. The Nasdaq composite index gained 18.47 points or 0.44 percent, ending the week at 4,174.67.

In the market for government bonds, the price of the benchmark 10-year Treasury note rose 29/32 to 99 2/32, sending its yield down to 2.86 percent from 2.96 percent late Thursday.

Michael Hanson, senior United States economist at Bank of America Merrill Lynch, estimated that even if weather did subtract 75,000 to 100,000 jobs from payroll gains, December hiring was nevertheless somewhat anemic. Nor does the weather explain why average hourly earnings increased by only 0.1 percent in December, about half the average percentage increase for the last 12 months.

“You can’t say it’s the weather, wash your hands and be done with it,” he said. “Even with a generous interpretation, job growth was softer than it has been recently.”

A version of this article appears in print on January 11, 2014,

on page A1 of the New York edition with the headline:

Growth in Jobs Slows Sharply To 3-Year Low.

    Growth in Jobs Slows Sharply to 3-Year Low, NYT, 10.1.2014,
    http://www.nytimes.com/2014/01/11/business/
    economy/us-economy-added-only-74000-jobs-in-december.html

No Jobs, No Benefits, and Lousy Pay

JAN. 10, 2014
The New York Times
By THE EDITORIAL BOARD
The Opinion Pages|Editorial

There is nothing good to say about the December employment report, which showed that only 74,000 jobs were added last month. But dismal as it was, the report came at an opportune political moment. The new numbers rebut the Republican arguments that jobless benefits need not be renewed, and that the current minimum wage is adequate. At the same time, they underscore the need, only recently raised to the top of the political agenda, to combat poverty and inequality.

The report showed that average monthly job growth in 2013 was 182,000, basically unchanged from 2012. Even the decline in the jobless rate last month, from 7 percent in November to 6.7 percent, was a sign of weakness: It mainly reflects a shrinking labor force — not new hiring — as the share of workers employed or looking for work fell to the lowest level since 1978. That’s a tragic waste of human capital. It would be comforting to ascribe the dwindling labor force mainly to retirements or other long-term changes, but most of the decline is due to weak job opportunities and weak labor demand since the Great Recession.

One result is that the share of jobless workers who have been unemployed for six months or longer has remained stubbornly high. In December, it was nearly 38 percent, still higher by far than at any time before the Great Recession, in records going back to 1948.

And yet, nearly 1.3 million of those long-term unemployed had their federal jobless benefits abruptly cut off at the end of last year, after Republicans refused to renew the federal unemployment program in the latest budget deal. Each week the program is not reinstated, another 72,000 jobless people who otherwise would have qualified for benefits will find there is no longer a federal program to turn to. Worse, in the Senate this week, after a show of willingness to discuss renewing the benefits, Republicans objected to a bill to do just that. They had demanded that a renewal be paid for, but they didn’t like how Democrats proposed to do that — with spending cuts at the end of the budget window in 2024 in exchange for relief today.

There was no need to pay for the benefits, which have such a crucial and positive effect — on families, the economy and poverty — that it would be sound to renew them even if the government borrowed to do so. But Republicans would rather criticize President Obama’s handling of the economy than help those left behind.

A similar dynamic is developing around the drive for a higher minimum wage. In the December jobs report, the average hourly wage for most workers was $20.35. That means that the minimum wage, at $7.25 an hour, is only one-third of the average, rather than one-half, as was the case historically. Raising the wage to $10.10 an hour, as Democrats have proposed, would help to restore the historical relationship. But even that would fall far short of the roughly $17 an hour that workers at the bottom of the wage scale would be earning if increased labor productivity were reflected in their pay, rather than in corporate profits, executive compensation and shareholder returns.

Republicans, however, are opposed to any increase, as if the numbers don’t speak for themselves. Their stance also dismisses research, and common sense, which says that raising the wages of low- and moderate-income workers is essential for lessening both poverty and inequality.

Instead, in the past week, they have introduced ostensibly “antipoverty” ideas, most prominently Senator Marco Rubio’s plan to transform federal safety net programs into state block grants, another of the shopworn Republican ideas that also include privatizing federal services and slashing domestic spending. Block grants have allowed states to disregard the needs of the least fortunate. The proposal would set back the debate on wages, poverty and inequality.

The December jobs report is telling Congress what it needs to do. Unfortunately, that will not lead to action anytime soon.

A version of this editorial appears in print on January 11, 2014,

on page A18 of the New York edition with the headline:

No Jobs, No Benefits, and Lousy Pay.

    No Jobs, No Benefits, and Lousy Pay, NYT, 10.1.2014,
    http://www.nytimes.com/2014/01/11/opinion/no-jobs-no-benefits-and-lousy-pay.html

Obama Speaks of Better Days for Economy,

With Asterisk

January 7, 2014
The New York Times
By MICHAEL D. SHEAR

WASHINGTON — Only moments after the Senate advanced an emergency extension of unemployment insurance benefits on Tuesday, President Obama stood on an East Room stage full of people without jobs and defied the traditional logic of White House strategy that normally emphasizes good news over bad.

The president, who sought to dramatize the need for Congress to extend the benefits, delivered what amounts to his broader economic message for 2014: Despite an improving economy, too many people are being left behind. The tableau demonstrated the challenge for Mr. Obama as he seeks to advertise the financial recovery while arguing for action to help a still-besieged middle class.

“Our businesses have created more than eight million new jobs since we hit bottom,” Mr. Obama said while somber-looking unemployed Americans, invited to the event by the White House, served as his backdrop. “America’s getting stronger and we’ve made progress.” But the president quickly added that “we’ve got to do more to make sure that all Americans share in that growth” and warned that “there are still a lot of people who are struggling.”

A short time before Mr. Obama spoke, the Senate voted to move forward on the extension of the unemployment benefits, winning the votes of six Republicans to overcome a filibuster by a vote of 60-37. The bill still faces debate, negotiation and another vote in the Senate before possibly moving on to the House.

In opposing the unemployment legislation, some Republican lawmakers found themselves arguing against their own political story line that Mr. Obama’s economy was still anemic. Instead, they said that the nation’s financial straits had improved to the point that an emergency extension of the benefits was no longer justified.

In 2008, Senator John McCain of Arizona, then the Republican presidential nominee, tripped over a similar rhetorical challenge when he said at a rally that “the fundamentals of our economy are strong” but added immediately that “these are very, very difficult times.”

Mr. Obama, then Mr. McCain’s opponent, seized on the phrase that the American economy was fundamentally strong and rode it to the White House.

Now it is the president who must find a way to navigate a complex economy. White House officials say that Mr. Obama intends to focus this year on trying to narrow the gap between the rich — who have profited from rising incomes, increasing home values and a 30 percent gain in the stock market — and everyone else.

To do that, Mr. Obama plans to campaign in 2014 for universal preschool, an increase in the minimum wage and an administration effort to make college less expensive for the middle class.

That approach, which White House officials have foreshadowed for weeks, is rooted in statistics that are at best mixed for Mr. Obama. He is presiding over an economy that has improved sharply in the five years since 2009, when it was buckling under the weight of a severe recession, but decades-long shifts in technology and globalization have left more people out of work for extended periods than at any other time in the past 50 years.

Like Mr. Obama, President Ronald Reagan also ended his fifth year with unemployment at 7 percent after a devastating recession. But Mr. Reagan was sunnier in public as the country’s financial fortunes turned around, and ran for re-election in 1984 with an advertising campaign that declared “It’s morning again in America” for a country weary of economic distress. Mr. Obama has chosen to be more restrained in his enthusiasm.

“There is a reality in politics, as in life, that you have to play the hand you are dealt,” said Geoff Garin, a veteran Democratic pollster. “The question comes down to whether you think Americans have a capacity for nuance. President Obama has always operated on the presumption that they do, and that is the approach he is taking now in talking about the economy.”

With congressional elections on the horizon and his legacy at stake, Mr. Obama does at times peddle economic good news like any other president, as he did at a news conference last month when he said, “I firmly believe that 2014 can be a breakthrough year for America.” He repeated that line on Tuesday.

But to make the case for his agenda and to convince skeptical Republicans in Congress, Mr. Obama is also emphasizing how the recovery has fallen short. In a speech in December that aides described as a preview of the president’s State of the Union address later this month, Mr. Obama spoke in depth about the economic problems he still confronts.

“The basic bargain at the heart of our economy has frayed,” Mr. Obama said.

The president’s language is to some degree the latest version of what critics call the muddled economic message the White House has been delivering for years. In 2009 and 2010, Mr. Obama and his top economic advisers regularly pointed to minor improvements in the economy even as they acknowledged the suffering that many felt. Now that the economic recovery is moving more quickly, the administration remains cautious about declaring victory.

“We could be an administration that just comes in here and tells you nothing but the good news that’s happened, or the improvement,” Gene Sperling, the president’s top economic adviser, said Monday. “But that’s not what we’re about.”

David Axelrod, who was Mr. Obama’s senior adviser at the beginning of his first term, said the president had always had to confront what he called a “duality” in the economy.

“The economy is indisputably much better than it was a few years ago and far better than it was when he took office,” Mr. Axelrod said. “But there are structural ramifications that have created this long-term unemployment.”

Mr. Axelrod said it would be wrong for Mr. Obama to try to ignore the economic struggles of so many people.

“I think to pretend that ‘It’s morning in America’ is a misreading of the times in which we live,” he added. “The great challenge for us is how do we build an economy for the future that allows for people who work hard to move up. He should not run away from that issue. He should own it.”

Stuart Stevens, who was the chief strategist for Mitt Romney’s presidential campaign in 2012, said that Mr. Obama was trying to have it both ways by embracing the economy’s improvement even as he focused on people who were not doing well.

“The message seems to be,” Mr. Stevens said, “the economy is great — send emergency relief!”

    Obama Speaks of Better Days for Economy, With Asterisk, NYT, 7.1.2014,
    http://www.nytimes.com/2014/01/08/us/politics/obama.html

The Bubble Is Back

January 5, 2014
The New York Times
By PETER J. WALLISON

WASHINGTON — IN November, housing starts were up 23 percent, and there was cheering all around. But the crowd would quiet down if it realized that another housing bubble had begun to grow.

Almost everyone understands that the 2007-8 financial crisis was precipitated by the collapse of a huge housing bubble. The Obama administration’s remedy of choice was the Dodd-Frank Act. It is the most restrictive financial regulation since the Great Depression — but it won’t prevent another housing bubble.

Housing bubbles are measured by comparing current prices to a reliable index of housing prices. Fortunately, we have one. The United States Bureau of Labor Statistics has been keeping track of the costs of renting a residence since at least 1983; its index shows a steady rise of about 3 percent a year over this 30-year period. This is as it should be; other things being equal, rentals should track the inflation rate. Home prices should do the same. If prices rise much above the rental rate, families theoretically would begin to rent, not buy.

Housing bubbles, then, become visible — and can legitimately be called bubbles — when housing prices diverge significantly from rents.

In 1997, housing prices began to diverge substantially from rental costs. Between 1997 and 2002, the average compound rate of growth in housing prices was 6 percent, exceeding the average compound growth rate in rentals of 3.34 percent. This, incidentally, contradicts the widely held idea that the last housing bubble was caused by the Federal Reserve’s monetary policy. Between 1997 and 2000, the Fed raised interest rates, and they stayed relatively high until almost 2002 with no apparent effect on the bubble, which continued to maintain an average compound growth rate of 6 percent until 2007, when it collapsed.

Today, after the financial crisis, the recession and the slow recovery, the bubble is beginning to grow again. Between 2011 and the third quarter of 2013, housing prices grew by 5.83 percent, again exceeding the increase in rental costs, which was 2 percent.

Many commentators will attribute this phenomenon to the Fed’s low interest rates. Maybe so; maybe not. Recall that the Fed’s monetary policy was blamed for the earlier bubble’s growth between 1997 and 2002, even though the Fed raised interest rates during most of that period.

Both this bubble and the last one were caused by the government’s housing policies, which made it possible for many people to purchase homes with very little or no money down. In 1992, Congress adopted what were called “affordable housing” goals for Fannie Mae and Freddie Mac, which are huge government-backed firms that buy mortgages from banks and other lenders. Then, as now, they were the dominant players in the residential mortgage markets. The goals required Fannie and Freddie to buy an increasing quota of mortgages made to borrowers who were at or below the median income where they lived.

Through the 1990s and into the 2000s, the Department of Housing and Urban Development raised the quotas seven times, so that in the 2000s more than 50 percent of all the mortgages Fannie and Freddie acquired had to be made to home buyers who were at or below the median income. To make mortgages affordable for low-income borrowers, Fannie and Freddie reduced the down payments on mortgages they would acquire. By 1994, Fannie was accepting down payments of 3 percent and, by 2000, mortgages with zero-down payments. Although these lenient standards were intended to help low-income and minority borrowers, they couldn’t be confined to those buyers. Even buyers who could afford down payments of 10 to 20 percent were attracted to mortgages with 3 percent or zero down. By 2006, the National Association of Realtors reported that 45 percent of first-time buyers put down no money. The leverage in that case is infinite.

This drove up housing prices. Buying a home became preferable to renting. A low or nonexistent down payment meant that families could borrow more and still remain within the monthly payment they could afford, especially if it was accompanied — as it often was — by an interest-only loan or a 30-year loan that amortized slowly. In effect, then, borrowing was constrained only by appraisals, which were ratcheted upward by the exclusive use of comparables in setting housing values.

Today, the same forces are operating. The Federal Housing Administration is requiring down payments of just 3.5 percent. Fannie and Freddie are requiring a mere 5 percent. According to the American Enterprise Institute’s National Mortgage Risk Index data set for Oct. 2013, about half of those getting mortgages to buy homes — not to refinance — put 5 percent or less down. When anyone suggests that down payments should be raised to the once traditional 10 or 20 percent, the outcry in Congress and from brokers and homebuilders is deafening. They claim that people will not be able to buy homes. What they really mean is that people won’t be able to buy expensive homes. When down payments were 10 to 20 percent before 1992, the homeownership rate was a steady 64 percent — slightly below where it is today — and the housing market was not frothy. People simply bought less expensive homes.

If we expect to prevent the next crisis, we have to prevent the next bubble, and we will never do that without eliminating leverage where it counts: among home buyers.

Peter J. Wallison, a senior fellow

at the American Enterprise Institute,

was a member of the Financial Crisis Inquiry Commission.

    The Bubble Is Back, NYT, 5.1.2014,
    http://www.nytimes.com/2014/01/06/opinion/the-bubble-is-back.html

Fired? Speak No Evil

January 2, 2014
The New York Times
By WILL BLYTHE

I WAS fired the other day. I believe the preferred phrase is “terminated,” which is how my former employer, Byliner, a digital publishing company and subscription service in San Francisco, put it. I was informed that our “burn rate” was too high, that we needed to show investors that we were serious about reducing it, and that while my loss of a job was unfortunately going to be a part of that reduction, this had nothing to do with the quality of my work. Soon thereafter, an email arrived from the company’s founder and chief executive saying how much he had enjoyed working with me.

Around the same time, a termination agreement pinged into my inbox. Much of it set forth standard-issue language resolving such matters as date of termination, the vesting of options, the release of all claims against the company, and the return of company property. I think I get to keep last year’s Christmas gift of an iPad, and the previous year’s bottle of wine has long been drunk, but I must send back any company files in my possession. So far, so good.

What brings me up short is clause No. 12: No Disparagement. “You agree,” it reads, “that you will never make any negative or disparaging statements (orally or in writing) about the Company or its stockholders, directors, officers, employees, products, services or business practices, except as required by law.” If I don’t agree to this nondisparagement clause, I will not receive my severance — in this case, the equivalent of two weeks of pay. Two weeks? Must be hard times out in San Francisco, or otherwise why the dirt parachute — and by the way, is that the sort of remark I won’t be allowed to make if I sign clause No. 12?

I would prefer not to, as Bartleby the Scrivener put it so succinctly in Herman Melville’s classic tale of bureaucratic resistance. When I shared that inclination with one of my superiors at Byliner, the news traveled up the chain of command. And I was soon informed that the president wished to assure me that there is nothing unusual about such clauses, that media people like herself sign them all the time, and that Byliner might even agree to a mutual nondisparagement clause. That means that if I don’t say anything mean about the company, its representatives won’t say anything unkind about me.

You might say, what’s the big deal? Sign the damn thing already! And indeed, it’s true, as Byliner implied, that nondisparagement clauses prohibiting individuals from saying or writing anything that might have a negative effect on a corporation are increasingly common — used in most settlement agreements and about a quarter of executive employment agreements.

To make the choice of nondisparagement even easier for a prospective signee, there is no established body of law precisely defining “disparagement.” Several state laws suggest that for former employees to violate a nondisparagement contract, their statements must be not only disparaging but also untrue. This means that it would probably be hard for a company to prove disparagement in the courts.

So if nondisparagement agreements are downright ordinary and at the same time difficult to enforce, why not sign and take the severance?

Because as quaint as this may seem, giving up the right to speak and write freely, even if that means speaking or writing negatively, strikes me as the unholiest of deals for a writer and an editor to accept. Though such clauses don’t technically violate the First Amendment — I’d be explicitly agreeing to forfeit my right to speak freely if I signed clause No. 12 — such a contract has a paralyzing effect on the dissemination of the truth, with all of truth’s caustically cleansing powers. To disparage is but one tool in a writer’s kit, but it’s an essential one. That a company would offer money for my silence, which is what this boils down to — well, I’ve seen many a mob movie about exactly that exchange.

The increased prevalence of nondisparagement agreements is part of a corporate culture of risk management that would have us say nothing if we can’t say anything nice. And yet it occurs to me that if a company isn’t strong enough to be reproached, then it simply isn’t strong enough, period.

Mind you, I’m not looking to disparage Byliner. The company has made a few mistakes in my view (firing me perhaps being a relatively minor one), but what fledgling enterprise does not screw up from time to time during its shakedown phase? It’s not that I necessarily want to disparage, but I want the freedom to do so, to be able to criticize, to attack, to carp, to excoriate, if need be. I want to tell the truth, even if it isn’t pretty.

That’s why I won’t sign clause No. 12. Byliner can keep the money. I’ll keep my self-respect.

Will Blythe, former editor at large for Byliner,

is the author of “To Hate Like This Is to Be Happy Forever.”

Fired? Speak No Evil, NYT, 2.1.2014,
http://www.nytimes.com/2014/01/03/opinion/fired-speak-no-evil.html