Minimum wage sinking — not ‘stuck’

New analysis from the Economic Policy Institute illustrates just how much we underestimate the impact of inaction on the minimum wage when we talk of it being “stuck,” “frozen,” or “held down,” at $7.25.

In reality, as EPI’s David Cooper shows, the wage actually declines year by year, because its buying power doesn’t keep pace with inflation. The $7.25 national minimum wage that took effect in 2009 would be $8.29 in today’s dollars. Put another way, the value of the minimum wage has declined 12.5 percent since Congress last raised it.

For Iowa, the situation is even worse, because the Iowa Legislature passed and Governor Chet Culver signed a $7.25 minimum wage that took effect a year and a half before the national increase. When the Legislature returns in January, it will have been 10 years since the last minimum-wage increase, while costs to families have kept rising.

EPI also points out that at its high point in 1968, the federal minimum wage was equal to $9.90 in today’s dollars. Tie it to increases in average wages, and the figure is $11.62. Tie it to productivity, and the figure is $19.33.

Click the link below for an interactive version of the above graphic:
http://www.epi.org?p=132305&view=embed&embed_template=charts_v2013_08_21&embed_date=20170802&onp=132309&utm_source=epi_press&utm_medium=chart_embed&utm_campaign=charts_v2

It seems settled in the current political environment that our minimum wage is stuck — there’s that word — at $7.25. There is no movement in either Des Moines or Washington to raise it, even though 29 states currently are above that level, including all but Wisconsin among our neighbors.

In fact, the state of Iowa forced repeal of local minimum wages where counties and cities demonstrated leadership that our legislative leaders could not, as those state leaders pandered to ideological myths and political talking points from an entrenched and bullying business lobby.

A $7.25 minimum wage is indefensible. Businesses paying at or near that wage benefit from the economy that taxpayers support through public services, not the least of which are law enforcement, fire protection and streets, let alone an educated work force. Yet they insist that we ask nothing in return, while their workers toil at wages so low they need other public supports — in food, health care, housing and energy assistance, all threatened by the current administration in Washington — just to keep their families going.

Think you’re done hearing about the minimum wage? Not if we can help it.

Mike Owen, executive director of the nonpartisan Iowa Policy Project

mikeowen@iowapolicyproject.org

Why Governor Reynolds is wrong

If the Governor cannot speak for the people of Iowa, who will do so?

As it has become clear that Iowa state leaders need to be more engaged publicly on the national health care debate, it was surprising to see Governor Kim Reynolds’ take on it.

“I’m focused on the things I can control.”

Well, if that is the standard for where the Governor should speak up, lock the office door and throw away the key. That’s not the way government works — or is supposed to work — in our American and Iowa tradition.

The Governor in our system has an important and powerful role, but rarely a controlling one.

What the Governor is not acknowledging, though she surely knows to be the case, is that her position is perhaps the best pulpit in the state of Iowa for speaking up on behalf of Iowans, to our elected representatives in the House and Senate in Washington, and to the President of the United States.

If she cannot speak for the people of Iowa, who will do so?

What is clear from the debate thus far in Washington is that more than 200,000 Iowans will lose health insurance if the current Affordable Care Act is repealed without a meaningful replacement.

In fact, the latest estimate from the Urban Institute finds 229,000 fewer Iowans would be insured in 2022 than if the ACA were kept in place — but the state would spend $29 million more as federal spending dropped by 28 percent.

The Governor’s comments to reporters repeated inaccurate talking points about ACA, avoiding both the state’s own role in undermining the individual insurance marketplace, and the principal way Iowans would lose insurance: the loss of the Medicaid expansion. That one piece of the ACA covers 150,000 Iowans now and is projected to grow to 177,000 in two years, but goes away under the Senate and House plans.

So, whether Governor Reynolds likes it or not, what is now a federal issue will become a state issue.

Right now, the things she has more direct influence upon are state budget choices, many of which already are difficult.

Imagine how much more difficult those choices become with 200,000 more people uninsured. What will the state do to make up for it? What budget control — or families’ control over their health care options — would be lost? Some members of the Legislature already are calling for a state-run program to step into the void.

If Governor Reynolds is uncomfortable with any of these possibilities she could call her friends Senator Grassley and Senator Ernst, or gather the microphones and cameras and raise awareness about the stakes for all Iowans.

Again, there are members of the Legislature weighing in on that score as well. Perhaps they recognize that persuasion, and pushing for a critical mass of support behind an idea, is where “control” emerges.

 

owen-2013-57Mike Owen, executive director of the Iowa Policy Project

mikeowen@iowapolicyproject.org

 

Why not a special session?

Now is the time to be speaking frankly about the longer-term impacts of health care policy — and that might make a special session useful, sooner rather than later.

Long-term impacts could be decided in short order;
Might not our state lawmakers want to weigh in?

If anything has been clear about the current health-care debate in Washington, it is that little is clear — except the likelihood that (1) people will lose insurance coverage and thus access to health care, and (2) this will pose new challenges for state government.

That being the case, it seems a good time for the Legislature to return to Des Moines and sort it out, sooner rather than later. It will be easier for legislators to talk to their federal counterparts about all this before legislation passes than afterward.

Because of the Affordable Care Act (Obamacare), the Medicaid expansion serves about 150,000 Iowans, and would serve an estimated 177,000 Iowans in 2019 if preserved. But those Iowans — and some 55,000 more — would be in jeopardy of losing insurance under legislation pending in the Senate. If the enhanced federal share of funding for Medicaid expansion is reduced or eliminated under any legislation to come — and both the House and Senate bills currently would do this — states would have a choice: Fill in the gap or let people go uninsured.

Oh, and if you’re going to choose to fill in the gap, go ahead and plan now on what will have to be cut to compensate for it. K-12 education, perhaps? Even more cuts to the regents institutions? Child care? Water protection? Law enforcement and corrections?

Already, legislators and Governor Kim Reynolds are facing those kinds of questions amid a looming fiscal shortfall and speculation about a possible special session.

In The Des Moines Register this week, columnist Kathie Obradovich suggested Governor Reynolds “is prudent to wait until fall to make a decision on a special session but that doesn’t mean she should avoid talking about it. Now is the time to be speaking frankly with Iowans and individual legislators, identifying the causes and consulting on potential solutions.”

Now is also the time to be speaking frankly about the longer-term impacts of health care policy — and for that reason, waiting until fall might be too late. Legislative leaders and the Governor right now could be bringing in experts for a special session to discuss the potential impacts, and reach out to the congressional delegation, before decisions are made that restrict state budget choices for many years to come.
Unless, of course, they want to see budget crunches and special sessions more frequently.
Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

KanOwaSin: Low-road neighbors, together?

Think carefully about snake-oil pitches to follow the lead of Kansas and Wisconsin, putting Iowa on a fast track to the bottom.

Here we sit in Iowa, nestled between two political petri dishes where experiments have gone wrong, and wondering if our elected leaders may let the mad scientists loose on us as well.

Some politicians would like to turn Iowa into another Kansas, another Wisconsin, where tax-cut zealotry already has driven down economic opportunity.

Welcome to KanOwaSin. In the anti-tax ideologues’ world, we’d all look the same. Why not ​share a name?


​Before someone squeezes another drop of anti-tax, anti-worker snake oil on us, let’s get out the microscope.Our friends in Wisconsin tell us: Don’t become Wisconsin. Our friends in Kansas tell us: Don’t become Kansas — and Kansans already are turning off the low road.A couple of researchers in Oklahoma are telling us: Listen to those folks. From the abstract of their working report:

“The recent fiscal austerity experiments undertaken in the states of Kansas and Wisconsin have generated considerable policy interest. … The overall conclusion from the paper is that the fiscal experiments did not spur growth, and if anything, harmed state economic performance.”

 

Their findings are among the latest exposing the folly of tax-cut magic, particularly with regard to Kansas, which IPP’s Peter Fisher has highlighted in his GradingStates.org analysis that ferrets out the faulty notions in ideological and politically oriented policies that tear down our public services and economic opportunity.

Iowa has long been ripe for tax reform, due to a long list of exemptions, credits and special-interest carve-outs in the income tax, sales tax and property tax. These stand in the way of having sufficient resources for our schools, public safety and environmental protection.

Each new break is used to sell Iowans on the idea that we can attract families and businesses by cutting  — something we’ve tried for years without success, as Iowa’s tortoise-like population growth has lagged the nation.

On balance, this arrangement favors the wealthy over the poor. The bottom 80 percent pay about 10 percent of their income in state and local taxes that are governed by state law. The top 1 percent pay only about 6 percent. Almost every tax proposal in the last two decades has compounded the inequities.

For the coming 2018 legislative session, and for the election campaigns later that year, we are being promised a focus on income tax. Keep in mind, anything that flattens the income tax — the only tax we have that expects a greater share of income from the rich than the poor — steepens the overall inequity of our regressive system.

Thus, as always, the devil is in the details of the notion of “reform.” If “reform” in 2017 and beyond means more breaks for the wealthy, and inadequate revenue for traditional, clearly recognized public responsibilities such as education and public health and safety, then it is not worthy of the name.

So, when you hear about the very real failures of the Kansas and Wisconsin experiments, stop and think about what you see on your own streets, and your own schools. Think about the snake oil pitches to follow their lead, and whether you want Iowa on a fast track to the bottom.

That is the promise of Kansas and Wisconsin for Iowa.

Or, if you prefer, KanOwaSin.

—-

Dan S. Rickman and Hongbo Wang, Oklahoma State University, “Tales of Two U.S. States: Regional Fiscal Austerity and Economic Performance.” March 19, 2017. https://mpra.ub.uni-muenchen.de/79615/1/MPRA_paper_79615.pdf
Posted by Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org

Closing the books — why real math matters

Now that ​Governor Branstad has left office, the latest (and preliminary) job numbers are in, and they effectively close the books on the goal. We did not come close. Through six years and four months, Iowa jobs stood little over halfway to the five-year goal.

Or: How Governor Branstad claimed to reach his jobs goal but did not come close

As it all turned out, the job-growth goal set by former Governor Terry Branstad was at best ambitious, and never realistic.

With four previous terms behind him, and 12 years out of office, Branstad came back in 2010 with a goal of 200,000 new jobs in five years.



Nothing wrong with setting lofty goals. The biggest problem with this one was the way the longtime Governor decided to measure progress toward it. If the goal was never realistic, the counting method was never math.

Iowa’s economy produced 106,900 new jobs — the net job increase — through the Governor’s second round in office.

As late as April, the last jobs report released in Governor Branstad’s tenure, the official report from Iowa Workforce Development bore an extra line, ordered by someone, for “Gross Over-the-month Employment Gains,” from January 2011. And that line would, magically, put the state over the 200,000 mark — a year late, but more on that later.

There was no explanation with the report on how this special line was computed, but analysis showed the administration cherry-picked job gains to come up with the “gross” figure. Job categories that showed a loss in a given month were simply ignored.

It was as if a business reported its sales but not its expenses, or a football team counted its own touchdowns but not those it gave up. The number, then, was literally meaningless as an indicator of anything happening in the economy.
 

Last week, IWD released its first report on monthly job numbers since Governor Kim Reynolds took office, and the “gross” gains line was gone from the official spreadsheet.

So, for the sake at least of history, a little context:
— Through the five years of the Governor’s goal, Iowa produced 92,100 new jobs.

— Through the end of the Governor’s tenure, Iowa produced 106,900 new jobs.

In fact, we didn’t reach 200,000 under even the Governor’s counting gimmick until January of this year, a year late. Meeting the goal would have required 60 months averaging over 3,300 net new jobs a month. Instead, we have seen far less:



The slow pace of recovery should not have been a surprise to anyone. Iowa and the nation had just come out of a shorter and less severe recession in 2001. The pace of that recovery — up until the Great Recession hit — was quite similar to what we have seen over the past six years before even the latest pace slowed down.

The actual job numbers and what they may illustrate remain more important than Governor Branstad’s spin on them. It would be a mistake to devote undue further attention to the fake numbers.
Likewise, it would be a mistake to attribute any general job trends — positive or negative, even legitimately derived with actual math — principally to state efforts. Much larger forces are at work. Plus, overselling the state role feeds poor policy choices, namely to sell expensive and unaccountable tax breaks, supposedly to create jobs, at the expense of the public services that make a strong business environment possible and make our state one where people want to raise families.
Iowa needs more jobs and better jobs. To understand whether we’re getting them
requires responsible treatment of data, and honest debate with it.
owen-2013-57Posted by Mike Owen, executive director of the Iowa Policy Project

Rosy forecasts bring thorny budgets

Odd that Governor Branstad, burned so early in his tenure by overly rosy revenue estimates, would let this happen to his very own lieutenant governor as she took office.

Capitol-DSC_0119-7inA memo from the Legislative Services Agency (LSA) indicates a higher-than-anticipated cost of a special-interest sales-tax break primarily for manufacturers.

We could not afford it when Governor Terry Branstad attempted to implement it by rule in 2015, or when a scaled-back version passed in 2016, and we cannot afford it now.

But it appears likely that the new break is at least part of the reason sales-and-use taxes are flattening out, putting fresh pressure on the budget even after FY2017 cuts and continued reliance of state policy makers to push tax breaks that divert millions from critical services such as education.

There is great irony in this report coming as Governor Branstad was turning over the keys to Kim Reynolds, especially given this comment in the LSA piece by senior fiscal legislative analyst Jeff Robinson:

One potential explanation for the recent sales/use tax downturn is an underestimated fiscal impact of the sales/use tax exemption for manufacturing supplies and replacement parts. For proposed legislation in previous years, estimates of the impact of exempting manufacturing supplies and replacement parts from the State sales/use tax had been much higher.

As Robinson suggests, there was ample reason to think the cost would be “much higher” and that should have been taken into account in revenue estimates and crafting the FY17 budget.

Likewise, the four of us were present in the Iowa House chamber in 1983 when new Governor Branstad proposed a sales-tax increase, just a few months after bludgeoning his election opponent, Roxanne Conlin, with a “tax and spend” refrain. The new Governor inherited a budget shortfall right out of the gate, a product of overly rosy revenue projections by the Ray administration.

To be fair to Governor Ray, the farm crisis was unfolding back then, and the landscape was not necessarily as clear.

This time, the continuing revenue problem is due principally to out-of-control tax giveaways, which have accelerated long since Governor Ray left office. Just this one perk for manufacturing was expected to cost $21.3 million from the state budget.* However, the latest LSA analysis suggests, the cost to the state may be two or three times what was expected.

Odd that Governor Branstad, burned so early in his tenure by optimistic revenue estimates, would let this happen to his very own successor as she took office. Maybe he just forgot.

We did not forget.

 

* That cost figure grows to $25.6 million when including the dedicated revenue for local school infrastructure, and $29.2 million when including lost local-option tax revenue.

Posted by IPP Executive Director Mike Owen, IPP Founder David Osterberg, IPP Board President Janet Carl, and IPP Board Member Lyle Krewson. Owen was the Statehouse correspondent for the Quad-City Times and Osterberg, Carl and Krewson were state representatives from Mount Vernon, Grinnell and Urbandale, respectively — in 1983.

Sales-tax break didn’t add jobs

Whatever can be said about the expensive new sales-tax break for business, creating jobs in manufacturing is not one of them.

Pushes for lower taxes on business routinely come with promises for more jobs. On that score, the more-costly-than-expected manufacturing sales-tax break has not produced for Iowans.

Since the start of the current fiscal year, when the new law took effect, Iowa manufacturing jobs are even lower than where they started. Clearly the new break did not cause the drop — a decline in manufacturing jobs started over two years ago after some recovery from the 2007-09 Great Recession. Iowa lost more than 30,000 manufacturing jobs from the peak in those years and never fully recovered. Manufacturing jobs dipped below 211,000 in April for the third time in six months, to nearly their lowest level in five years.

Thus, whatever can be said about the expensive new sales-tax break for business, creating jobs in manufacturing is not one of them.

It does appear the break is more costly than had been expected. An April memo from the Legislative Services Agency (LSA) has received significant attention in recent days, as sales-tax revenues are on pace to be down about $100 million from what was expected for the fiscal year ending June 30. The cost of the sales-tax break for an expanded list of items used in manufacturing had been projected at $21.3 million for the state.

The LSA analysis suggests that at least part of the unexpected revenue loss might be due to underestimated costs of that special sales-tax break.

It is true that the manufacturing sales-tax break was promoted on larger grounds than just job growth. In a break from its usual promotion of a hodgepodge of inequitable breaks creating a severely unbalanced playing field, the business lobby had promoted this as a fairness issue for businesses. That political strategy worked.

But increasing jobs was the steady drumbeat from Governor Branstad for his economic policies throughout the six years of his return to office in 2011, so it is reasonable to look for any job impacts.

In this case, none are immediately apparent. What we can see is that without the change, and with more careful budget projections, new Governor Kim Reynolds quite likely would not be facing the added revenue challenges she has before her.

owen-2013-57Posted by IPP Executive Director Mike Owen

mikeowen@iowapolicyproject.org