Tag Archives: economy

How the Feds Helped Bankrupt Puerto Rico

Puerto Rico is full crisis mode, as signaled by Governor Alejandro García Padilla warning that the island’s debts are “not payable.” This is partially the fault of the island’s own government. The commonwealth has piled up a debt much larger as a percentage of GDP than any other state.

All major parties are to blame for over-promising and overspending, and the Puerto Rican government deserves most of the responsibility for the situation it finds itself in. Nevertheless, it is not entirely their fault.

The US federal government has many laws that disproportionately, and often inadvertently, harm the island. Policies that have little impact on the mainland can have dire consequences in Puerto Rico, partially because it’s a territory rather than a state, and partially because of the particulars of the island’s economy. A recent report on the island by economist Anne Krueger and others contains many such instances.

Read the rest on the PanAm Post here.

Review – Disinherited: How Washington Is Betraying America’s Young

Government is shortchanging young people on everything from education and healthcare to employment and retirement, according to Manhattan Institute senior fellow Diana Furchtgott-Roth and policy analyst Jared Meyer, co-authors of the forthcoming book Disinherited: How Washington Is Betraying America’s Young.

“This betrayal is not intentional,” they begin. “In this book we lay out the scope of the problem and what will be necessary to solve it. Plainly stated, Washington is robbing America’s young. Our country is facing a crisis, and change is essential in order for young people to achieve the future they deserve.”

In retirement, Millennials will be at a dismal financial crossroads, relative to their parents and grandparents, according to the author pair.

“They can either pay substantially higher taxes than their parents do, while not receiving any more benefits, or they can pay the same rate as their elders and receive far fewer benefits,” the write. “Both outcomes are grossly unfair … If trends continue, workers could be paying a combined employer-employee payroll tax rate of 32 percent in 2050 just to cover Medicare and Social Security payments.”

The book also examines state pension and healthcare expenditures, which are massively underfunded in many states (in part due to unrealistic investment return assumptions and various accounting sleights of hand), leading the authors to wonder whether the bankruptcy of a state would require a federal bailout from future taxpayers, e.g. today’s young.

On education, Furchtgott-Roth and Meyer give evidence of the effectiveness of charter schools in states ranging from New York to Arizona and Louisiana, where the Obama administration’s Department of Justice (DOJ) sued to block school vouchers in the name of fighting desegregation. However, the pair points out, “Desegregation expert Christine Rossell looked at Louisiana’s voucher program and found that in most districts, voucher programs actually reduced racial imbalance. The DOJ has since withdrawn the suit, but the fact that it was filed at all on such spurious grounds underscores the extreme hostility of the federal government to state initiative to improve education.”

Disinherited takes a harsh stance against secondary school administrators who push students into four-year college degree programs, eventually leading them to be saddled with an average of $25,000 in debt that cannot be discharged in bankruptcy. Yet many of these degrees have little value in the marketplace, with the New York Federal Reserve estimating 44 percent of recent graduates work in jobs that do not require a bachelor’s degree. And Wells Fargo found that one-fourth of millennials do not think college was worth the cost.

Read the rest at Opportunity Lives…

Millennials Don’t Want to Join Unions, Here’s Why

Unions are in trouble. Membership is declining, public pension plans are dangerously underfunded, and young workers are not interested in diverting a portion of their paychecks to dues that offer them few benefits in return. Half the states have passed “right to work” legislation that says that workers cannot be forced to join a union as a condition of employment. In the face of these challenges, the union membership rate has fallen to a 100-year low.

Membership rates continue to fall as traditionally unionized industries such as steel and textiles move offshore and younger workers choose the non-union sector. Only 4 percent of employed 16 to 24 year-olds are union members, and the membership rate for workers 25 to 34 years old is less than 10 percent. Union shops tend to value tenure over skill, and merit bonuses are nowhere to be found. Young workers are the first to be fired, even if they are more competent than experienced employees. Workers aged 45 to 64 have the highest union participation rate at 14 percent.

Given the costs of joining a union, it is unsurprising that unionization rates increase with age and few young people clamor to sign up. Younger workers already ask what that FICA tax is doing in their paycheck, and union dues add another 2 percent to 4 percent tax. United Food and Commercial Workers dues range from <href=”#dues”>$19 to $60 a month, according to the union’s website. Initiation fees can add another $50 to $100, the price of a year’s worth of Netflix.

Reasonable people would expect union bosses to reevaluate unpopular policies in an attempt to attract and retain new members. Reasonable people would be mistaken. Rather than competing in the labor market, union bosses favor influencing government policy by doubling down on political donations.

Unions are required to file annual financial and membership data with the Department of Labor, and recently-released LM-2 forms show that unions continue to struggle to gain new members.

United Food & Commercial Workers International Union membership has fallen 4 percent from its peak in 2009, to 1.3 million. Over this same time, employment has risen by 7 percent. Service Employees International Union membership has fallen 2 percent from its peak in 2011, to 1.9 million. AFL-CIO membership has fallen 7 percent from its peak in 2005 to 12.7 million, although membership has risen over the past few years.

Read the rest at Townhall…