Economic Growth

House Transportation and Infrastructure chairman Jim Oberstar (D-MN) is putting the heat on his committee to finalize the next surface transportation bill in time for President Obama to sign it into law before the current legislation expires on September 30, 2009. The last bill--known as SAFETEA-LU--arrived two years late, forcing Congress to reauthorize the previous bill 12 times in order to avoid cutting off critical transportation funding to states. This past Tuesday, the Journal of Commerce reported that Oberstar is really, really committed to making sure that such a fiasco does not happen again. He plans to introduce the new bill, which is expected to carry a $450bn price tag, later this month--well before SAFETEA-LU's expiration date--and "members of Congress, administration officials and advocacy groups of all stripes have rushed to put their stamp on the legislation."...

The employment numbers came out on Friday with a loss of 345,000 jobs in May and many market participants took this to be a positive development. We don't. The positive market reaction does confirm our view that despite bad news, there is potential to reflate asset bubbles and drive a jobless recovery based on consumption among the plutonomy. But this jobs report and the reaction to it, affirms our view that if a recovery does take place, it is increasingly unlikely that it will be based on broad based middle-class job growth and prosperity.

We thought it may be useful to point out a few facts and highlights from the headline numbers and the specifics of the May's jobs report to keep it in perspective...

Numerous stories have run in western newspapers about Premier Wen Jiabao's statement that he was worried about the future of the US dollar. My Lexis search for "Wen Jiabao, concern safety dollar" turned up 48 results since March 13, six from the New York Times alone.

The recent media attention on China's "threat to drop" US dollars is misleading. Today, in an interview with the Financial Times, Guo Shuqing, chairman of China Construction Bank, righted China's official position by saying, "In the short term, I don't think we can find another currency to replace the US dollar."...

While you're sitting in traffic sometime this summer, take a moment to think about the transportation reauthorization bill that will soon be working its way through Congress. It sounds arcane, but $450bn pieces of legislation don't come around everyday--and many transit advocates view this as a once-in-a-generation opportunity to fundamentally reshape America's transportation priorities.

The last go-around, 2005's $286bn Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (or SAFETEA-LU), is more well-known as a battleground in the earmark wars (remember the "Bridge to Nowhere"?) than as groundbreaking transportation legislation. That's because it stuck to the familiar principles of favoring highways over transit and using the gas tax to fund improvements...

Consumer confidence increased dramatically in May, but it may be too soon to consider this optimism as a sign of recovery.

The Conference Board, a non-profit association of businesses, provides a regular consumer confidence survey that is composed of two parts, one that measures respondents' view of the present situation and another that measures expectations. While the present situation results show modest improvements but remain relatively gloomy, the overall survey results were buoyed by an improvement of expectations. Unfortunately, these rising expectations may result more from recent increases in stock prices rather than signals of a strong economic recovery. (See John Authers and Mark Hulbert.)...

It turns out that residential real estate wasn't the only asset class for which investors overpaid during the credit bubble earlier this decade. New analysis by Barron's suggests that the U.S. highway privatization push from 2005 to 2007 was a symptom of "global infrastructure-investing mania and the ready availability of cheap debt financing," and that states which pulled the trigger on major deals are now enjoying the benefits of investors' irrational exuberance.

The Barron's piece looks in particular at the 75-year lease of the Indiana Toll Road to Australia's Macquarie and Spain's Cintra. "It was the best deal since Manhattan was sold for beads," says Mitch Daniels, the state's Republican governor. The 2006 deal netted $3.8bn for the Hoosier State, about 40 times annual revenue--a very high price for any asset, even one as durable as a highway. Since then, 2008's gas price spike and a deep recession have caused unforeseen volatility in toll revenues, which could decrease by 6% this year. Barron's values the Toll Road at no more than $1.5bn, or 10 times annual revenue...

On May 12th, the Social Security trustees issued their annual report on the state of Social Security, which concluded that the program's trust fund will be unable to pay the entirety of its promised benefits starting in 2037-four years earlier than had previously been projected before the start of the current recession. Opponents of Social Security jumped on this accelerated timeline in order to beat the drum about the program's imminent collapse-just as New America's Michael Lind predicted they would in his Salon column last week.

But, as Lind noted in this week's column, rumors of Social Security's demise are greatly exaggerated, more a product of political ideology than fiscal reality. For example, as Lind points out, the measurements of "Social Security's unfunded liabilities [are] over an infinite time horizon and assumes there are no changes made between now and eternity"-an unrealistic state of affairs, but a convenient one for those looking to cause panic and shrink the program...

All that glimmers is not gold--including a Gilded Age. The "Second Gilded Age" is what commentators and analysts were calling our time even before the recent economic meltdown. Whether in the late nineteenth century or today, the hallmark of a Gilded Age is a combination of extravagant wealth and widening inequality.

In a Gilded Age the rich get a lot richer, sometimes by any means necessary (Bernie Madoff and Allen Stanford, anyone?). And over the past thirty years or so, the rich have definitely gotten a lot richer. Case in point: the share of the total national income that the top decile of income earners claimed in 2006 was comparable to levels seen right before the Great Depression...

As Paul Testa over at New America's New Health Dialogue blog pointed out yesterday, the Senate Finance Committee held a hearing on financing health care reform on Tuesday, and the issue of tax exclusions for employer-sponsored health care played a front-and-center role in the proceedings. As Testa notes:

Much of the discussion focused on the current tax treatment of employer-sponsored health insurance. Unlike wages, health benefits received through an employer are not treated as taxable income. In 2008, the cost of the tax exclusion for employer-sponsored care totaled more than $226 billion in lost revenue...

As was pointed out at a recent New American Contract event on tax expenditures and social policy, the employer-sponsored insurance (ESI) exclusion is the largest tax expenditure--a stipulation of the tax code that provides for tax credits, breaks or refunds, for specific circumstances. But not everyone is a fan...

The U.S. federal minimum wage will increase to $7.25 an hour on July 24th, and not a day too soon, considering the economic hardships that so many blue-collar Americans are currently enduring. But as you can see from the graph below, even with this boost, the U.S. minimum wage clocks in at well below historical standards when you control for inflation (in other words, a worker in 1968 could buy a lot more with the minimum wage of his time than one can today)...