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During the late 1990s and early 2000s, Chilean economists Sergio de Castro and Ernesto Fontaine traveled the world explaining how their neoliberal economic policies helped write what’s often described as one the biggest success stories in South American politics. That story goes as follows. After the start of the Cold War, the US government facilitated […]

It’s complicated.

Signs advertise VAT exemption at Pingo Doce Telheiras supermarket on April 18, 2023 in Lisbon, Portugal. (Horacio Villalobos#Corbis / Corbis via Getty Images)

Consumption taxes are not a major topic in US politics because they are rarely proposed, especially on the federal level. When consumption taxes are brought up, the discussion tends to devolve into a debate about whether they are regressive or not. As with most progressivity or regressivity debates, this one tends to be muddled and confused because we don’t actually use those two words consistently across different policy topics.

In the context of tax policy, the way you determine whether a tax is progressive or regressive is by adding up how much tax each person is being charged and then dividing that amount by their income. If the resulting percentages go up as incomes go up, then that is considered a progressive tax. If the percentages go down as incomes go up, then that is considered a regressive tax. If the percentages are the same across the income distribution, then that is considered a flat tax.

In the context of spending policy, the way you determine whether a spending program is progressive or regressive is by adding up how much money each person gets from the program. You do not divide that amount by income. Instead, you just look directly at the dollar amounts. If those amounts go up as incomes go up, then that is considered a regressive program. If those amounts go down as incomes go up, then that is considered a progressive program. If the amounts are the same across the income distribution, then that is considered a flat benefit.

The fact that the same words have different meanings in different contexts is an unfortunate feature of the way language works, but it is especially unfortunate in this context because “taxes” and “spending” are fungible categories and it really would be better if we could talk about them with a common set of word meanings.

When it comes to consumption taxes, there are two facts that are pertinent to understanding whether they are progressive or regressive:

Richer people consume more than poorer people.
Poorer people spend a larger share of their income on consumption than richer people.

Because richer people consume more than poorer people, taxing consumption results in richer people paying more consumption tax than poorer people pay. But because poorer people spend a larger share of their income on consumption than richer people, taxing consumption results in poorer people paying a higher percentage of their income toward consumption tax than richer people pay.

So if you divide the dollar amounts involved by income, as is typical in tax policy, consumption taxes are regressive. If you do not divide the dollar amounts involved by income, as is typical in spending policy, consumption taxes are progressive. Because a consumption tax is a tax, under common usage, it is correctly described as “regressive.”

But there is actually an exception to the way we use these words in the context of tax policy that is worth dwelling upon a bit. When we are talking about raising taxes, we use “regressive” and “progressive” in the tax policy way already discussed. But when we are talking about cutting taxes, we actually use the words the same way that we use them when talking about spending policies. This is presumably because cutting taxes kind of feels like spending money because, relative to the baseline where we don’t cut taxes, it kind of is.

This came up recently in a Finnish debate about the application of the country’s 24 percent value-added tax (VAT) to electricity. After Russia invaded Ukraine, electricity prices across Europe skyrocketed, including in Finland. This naturally led lawmakers to consider various ways of providing consumers relief from the energy price shock. One such proposal was to temporarily reduce the VAT on electricity from 24 percent to 10 percent.

Is reducing the VAT on electricity by 14 percentage points progressive or regressive? As always, the question turns on whether you divide the tax savings by each person’s income or not.

If you look only at electricity consumption, you find that rich households in Finland consume five times as much electricity as poor households do. But, if you divide that electricity consumption by income, you find that poor people spend about four times as much on electricity as rich households do as a share of their respective incomes.

If we apply the spending-policy meanings of the words, we would say that cutting the VAT on electricity is very regressive: it gives five euros to the rich for every one euro it gives to the poor. But if we apply the tax-policy meanings of the words, we would say that it is very progressive: the tax savings for the poor are four times what they are for the rich after dividing by income.

Because this is a tax cut and not a tax increase, and is specifically a tax cut aimed at achieving a spending-program type goal (providing electricity subsidies), it appears to have been analyzed by at least some Finnish commentators using the spending-policy word meanings and was thus criticized as horribly regressive.

When the words are used this way, and they often are, you can wind up in a somewhat hilarious linguistic quagmire where it is “regressive” to implement a consumption tax and “regressive” to repeal it. Thus, in Finland, the 24 percent VAT is “regressive” because the poor spend more of their income on consumption than the rich. But also repealing the 24 percent VAT is “regressive” because the rich receive far more euros from such a repeal than the poor do.

If we put the imprecision of language aside — and stop putting so much weight on what label can be applied to what policy — the actual distributive stakes of a consumption tax are fairly straightforward. Because consumption taxes take more dollars from the rich than the poor, they are generally good, especially since the public programs they help finance tend to provide at least as much benefit to the poor as the rich. But insofar as other kinds of taxes — like income and wealth taxes — take even more dollars from the rich than the poor, those taxes are better than consumption taxes, holding all else equal.

Of course, ultimately, it is not really possible to analyze one piece of an overall distributive system and decide whether it is itself good or bad. What matters is whether the system as a whole achieves your overall distributive goals. Put differently: distributive justice can only really be coherently evaluated at the level of the overall system, not at the level of each particular institution in that system.

So try not to get yourself too worked up about each and every fiscal policy measure and whether, and under what meanings, that measure is progressive or regressive. Such debates are equivocal at best, irrelevant at worst.

Thursday brought a somber but expected verdict as Judge Caroline H. Lennon found Alexis Saborit, 44, guilty of First Degree Premeditated Murder by Judge Caroline H. Lennon. Saborit had waived his right to a jury trial in the July 2021 killing of America Thayer, 55, in Minnesota, and the review hearing is now scheduled for June 1. The County Attorney, Ron Hocerav, believes this verdict will lead to a life sentence without the possibility of parole for Saborit.

Eyewitness accounts state that around 2:00 p.m. on the day of the killing, Saborit and Thayer were seen together in her Chrysler 300 at Memorial Park. Approximately 30 minutes later, multiple people saw a man attacking a woman in the same car at the intersection of Spencer Street and Fourth Avenue in Shakopee, roughly a mile from the park. Witnesses reported seeing the man pulling a decapitated body and a severed head out of the vehicle after striking the victim with a hand weight and chopping at the front seat passenger seat with a large knife.

In court records, Judge Lennon stated that the “aggressive and horrible nature of the attack adequately displays the defendant’s intention to kill Thayer” and noted that Saborit and Thayer had a “difficult relationship, marked by fights and verbal assaults as well as mutual threats.” It was clear that Thayer had wanted to end the relationship, and Saborit was aware of that because of knowledge of their bad relationship.

The tragedy of Thayer’s death has severely impacted her friends and colleagues. Her friend of five years, Nicky Kendrick, says Thayer was an incredibly wonderful person who was “always kind, so funny and had great stories to tell.” Her coworkers at MyPillow shared similar sentiments and descriptive, with Jamie Worley saying, “We all went there today, dropped off a rose and a teddy bear at her desk. Everyone was simply in tears as it’s such an emotional time.”

The unfair act of violence that ended America Thayer’s life has left a lasting mark of grief on her loved ones, who will continue to remember her kindness and stories. Meanwhile, Alexis Saborit will now face the consequences of his behavior and will likely serve a lifetime in prison.

Since the beginning of his administration, Eric Adams has publicly demonized homeless people in New York City while cutting social services and public institutions like schools and libraries. These attacks helped pave the way for the killing of Jordan Neely.

Protesters march to demand justice for Jordan Neely on May 6 in New York. (Andrew Lichtenstein / Corbis via Getty Images)

Even during his first months as mayor, Eric Adams was intent on dehumanizing the homeless. On February 17, 2022, the mayor declared that he gave New York Police Department (NYPD) officers a clear mandate to enforce Metropolitan Transit Authority (MTA) rules on the subway against drug use, littering, lying down on seats, and “using the subway for any purpose other than transportation” — measures designed to harass homeless people and force them out of the subway. Shockingly, Adams then said about homeless people: “You can’t put a Band-Aid on a cancerous sore. That’s not how you solve the problem. You must remove the cancer to start the healing process.”

By comparing the homeless to a cancerous tumor, Adams was publicly dehumanizing the homeless — and questioning their right to exist.

Adams’s words that day should be kept in mind when considering the heinous murder of Jordan Neely on May 1 on the F train at the Broadway-Lafayette stop by Daniel Penny, a twenty-four-year-old former marine. That murder is not an isolated incident; it comes in the context of an escalation in the criminalization of the homeless that has been a hallmark of Adams’s tenure. Just in September, when large numbers of migrants in need of humanitarian aid arrived in the city, many of whom were bused here by Republican governors in other states, Adams tried to “reassess” the city’s right-to-shelter law, which guarantees a bed to anyone who needs it. This week, he weakened the law in anticipation of more migrants. Adams has been willing to relocate and devalue the homeless of this city, treating them as an annoyance that he wishes would just go away.

To Adams and the defenders of this brutal killing, Jordan Neely was less than human. Never mind that Neely was agitated because he had no home, had no occupation, and had not eaten in days, a condition that could make anyone nervous. That he was highly emotional and erratic in public — behavior you can witness in any number of the city’s bars — doesn’t mean that he did not ultimately deserve protection and empathy from his fellow citizens and the City of New York.

In New York, homelessness tragically isn’t strange. Seventy thousand people are homeless in the city. Despite the fact that we live in the wealthiest country in history, many people have been conditioned to view ending homelessness as unattainable and hopelessly idealistic. So homelessness has become mundane. No one who lives in New York City is surprised to find themselves engaging with homeless people in public spaces. Money will be asked for; some will be given out of empathy and charity. Some homeless people will get closer to you than you’d like; others you may find charming. This is what happens in a city that has chosen to live with homelessness rather than end it.

On May 3, two days after Neely was left lifeless by a fellow citizen, Mayor Adams issued a statement of ambiguity toward the murder: “We cannot just blanketly say what a passenger should or should not do in a situation like that.” A human being was murdered, and Adams effectively said we can’t know if the murder was justified.

This is what happens in a city that has chosen to live with homelessness rather than end it.

Despite later statements arguing that Penny should not have killed Neely, this quote is troublesome. The initial reaction of New York City’s top executive expressed callous indifference to the murder of a human being. That indifference is reflected in his policymaking.

For all of Mayor Adams’s posturing about how much he loves this city, he is in fact cutting desperately needed social services and public institutions such as libraries and schools while increasing the police budget, at the same time he pops up at the swanky club Zero Bond and mentors shady businessmen. He doesn’t love working-class New York. By cutting social services that could keep people like Jordan Neely safe, Adams is hanging the homeless out for deadly chokeholds.

In the days after Neely’s murder, numerous publications ran articles about who Jordan Neely was. People deserve to know that Neely was a Michael Jackson impersonator who made people smile and laugh while doing the infamous crotch grab and moonwalk, and that he tragically started having mental health issues after his mother was murdered by her partner in 2007.

But that tragic backstory doesn’t justify what happened on that subway car. Neely’s life mattered. He was a human being, like any of us. When he declared that he was ready to die, it was a testament to his dire situation. A fifteen-minute lethal chokehold should not have been his fate. New York’s power brokers have decided that, just because they sleep on our city streets or trains, people like Neely are less than human.

Those who take the subway every day know how the conditions can cause annoyance and discomfort. But if we deserve to be safe, so do the homeless. Neely’s mental health issues exacerbated his dozen or so run-ins with police; his aunt, Carolyn Neely, says that “the system just failed him. He fell through the cracks of the system.” This was someone who needed help, not a death sentence. Just last April, the mayor carried out sweeps of encampments. The message was clear: the homeless were under attack by the city.

Earlier this week, the mayor changed his tune. “One of our own is dead, a black man, black like me, a man named Jordan, a name I gave my son,” Adams said. “One thing we know for sure, Jordan Neely did not deserve to die.” The mayor also said people who struggle with mental illness are “caught up in a cycle of violence, sometimes as the perpetrator, but more often as the victim.”

This statement is way too late. The mayor’s trite swagger, amid his closure of libraries and cuts to public goods like schools and social services, is paving the way for more Jordan Neely’s to become victims, jailed, or, worse, killed like Neely was that afternoon — in a city that claims to love him while viewing him as a cancer.

Bernie Sanders and Ilhan Omar want schools to abolish “school lunch debt” and feed all children at school free of charge. In a decent society, that would be uncontroversial — yet every Republican and many Democrats haven’t signed on.

Children have a right to eat a good meal before they’re expected to pay attention to their classes.
(John Moore / Getty Images)

Bernie Sanders and Ilhan Omar, along with seventeen colleagues in the Senate and seventy-four in the House, have just introduced legislation to “end child hunger in schools by offering free breakfast, lunch, dinner, and a snack to all students, preschool through high school, regardless of income, eliminating all school meal debt, and strengthening local economies by incentivizing local food procurement.”

The Universal Free School Meals Program Act of 2023 would, in other words, make sure that every student is treated the same at the school cafeteria and none of them accumulate “school lunch debt” — a combination of words that wouldn’t exist in a remotely decent society.

If you’re wondering who wouldn’t be in favor of that, a glance at the names missing from the cosponsor list gives you your answer:

The majority of Democrats in the House and Senate, plus all Republicans.

The Heritage Foundation Versus Hot Meals for Children

We already had universal free school meals as a temporary measure during the COVID-19 pandemic. At the time, the conservative Heritage Foundation warned that the program was “neither targeted nor likely to be temporary.” They quoted the libertarian economist Milton Friedman, who quipped, “Nothing is so permanent as a temporary government program.”

There’s some truth to Friedman’s complaint. Once a social program has been shown to work well and make ordinary people’s lives better, there’s a “danger” that it will be difficult for politicians to reverse it. Sadly, in this case Friedman was wrong. The temporary school meals program ended last September.

Heritage’s commentary, written by the foundation’s Will Skillman Senior Research Fellow in Education Policy Jonathan Butcher and former senior research fellow Darren Bakst, argued that providing “welfare” to students who didn’t need it was “wasteful” and “fiscally irresponsible.” They didn’t even try to argue that the actual sums of money involved in providing hot meals to every child who wants them were exorbitant — the article includes no dollar figure. Instead, they seem to find it obvious that it’s “irresponsible” to feed children before vetting their parents’ finances to make sure that they can’t afford to pay.

And in addition to this terrible irresponsibility, they argue, universal free school meals are unfair! “[T]he universal free meals system will take money from low income families and then use it to subsidize high income families who have no need for such welfare.”

This argument could apply to the public school itself as easily as to school lunch. A bolder version of Butcher and Bakst could reason that giving low-income students reduced tuition or exempting them from tuition entirely is one thing, but to simply let the children of doctors and lawyers attend public high schools for free amounts to taxing low-income people to pay for the education of high-income people. How unfair!

If they actually cared about the fairness argument, their minds would be put at ease by a reminder that if universal public goods are funded through progressive taxation, the wealthy end up shelling out much more than the equivalent of what they receive.

And as a matter of practicality, means-tested programs are far more politically vulnerable than universal ones. Many people are less motivated to preserve programs that they don’t think they’ll benefit from — and they may actively resent them if they fall into the inevitable gray zone of “could use the help” but not quite poor enough to qualify a “low-income.”

Compare the predictable backlash to attempts to cut Social Security to the way Bill Clinton was able to nix the AFDC (Aid to Families with Dependent Children) program in the 90s with little pushback — even though shuttering the program had grisly consequences for many low-income mothers. Or the way Republicans were able to pass symbolic repeals of the Affordable Care Act (“Obamacare”) many times during the final years of Obama’s presidency without being punished by voters, whereas even conservative parties in countries like Canada and the UK have to at least pretend to support maintaining their countries’ universal health care programs.

Don’t Single Out Poor Children

While I find these counterarguments compelling, if the conversation stops there I don’t think we’ve gotten to the core of the issue. Children have a right to eat a good meal before they’re expected to pay attention to their classes. They should be able to do so without jumping through hoops or being socially stratified.

My late friend Michael Brooks once wrote about the anxious look he’d see on his mother’s face when she was about to pay for groceries with her SNAP card — the Supplemental Nutritional Assistance Program, popularly known as “food stamps.” When I read that, I thought about the hundreds of times I went through the school lunch line when I was a kid and heard the cafeteria worker ask each kid, “Free or reduced lunch?”

Even then, that viscerally bothered me. It seemed obvious that asking children to publicly announce their parents’ income level at school was wrong. I don’t remember what happened if anyone just forgot their lunch money — I don’t think the abomination of “school lunch debt” was a feature of the East Lansing public school system back then — but why on earth should anyone have to worry about any of this?

Even if you believe, as I very much do not, that inequality among adults is justifiable on meritocratic grounds, surely an absolute baseline that any halfway decent person could agree to is that children should all be treated the same while they’re at school.

And yet.

Democrats and Republicans Versus Hot Meals for Children

It’s to be expected that the market-worshipping ghouls at the Heritage Foundation would be against feeding children without first scrutinizing their parents’ bank accounts. It’s far more revealing that none of the alleged populists in the GOP are cosponsoring the Universal Free School Meals Act.

I don’t see J. D. Vance’s name on there. Or Marco Rubio. Or Josh Hawley. Or any other Republican. And seventeen Democratic senators — plus Bernie, an independent who caucuses with Democrats — adds up to only about a third of the Democrats in the Senate. The proportion of House Democrats cosponsoring is similar.

And again: these are the numbers for a bill to feed children. A bill to eliminate “school meal debt.”

A society where any of this is controversial is deeply sick.

In 1967, Milton Friedman launched a counterrevolution in economics that overturned the Keynesian theory of inflation. Three years later, economist James Tobin issued a powerful theoretical rebuttal — but in the economics mainstream, it’s been all but forgotten.

Economists Milton Friedman (L) and James Tobin (R). (Bettmann / Hulton Archive via Getty Images)

Milton Friedman revolutionized macroeconomics with his 1967 presidential speech to the American Economics Association (AEA), which presented a theory of the so-called natural rate of unemployment for the first time. That speech, which played a major role in discrediting the brand of Keynesianism that prevailed in postwar liberal economic policy thinking, remains one of the most frequently cited papers in all of economics.

Much less well remembered is the rebuttal to Friedman’s ideas issued by another future Nobel Laureate economist in another AEA presidential address, four years later: Yale University’s James Tobin. Tobin’s dueling theory of inflation held out the possibility of an alternative path for economics and macroeconomic policy, but it has seldom received the same recognition, or the same scholarly interest.

Jacobin’s Seth Ackerman spoke with Thomas Palley, coeditor of the Review of Keynesian Economics and former AFL-CIO assistant director of public policy, about why Tobin’s inflation theory matters today, and why the issue of inflation continues to perplex both the economics mainstream and the Left.

Seth Ackerman

You have always been a critic of economics orthodoxy. A few weeks ago I interviewed James Forder, who wrote a book I’m a big fan of — I’m sure you know it — called Macroeconomics and the Phillips Curve Myth.

In that book, Forder exposes as a myth the story everyone is told about inflation in the 1960s and 1970s: about how a blinkered, Keynesian-dominated economics profession had this very naïve view of inflation and didn’t understand the importance of inflation expectations in determining inflation, and as a result they let inflation get out of control.

What’s interesting to me is that the supposedly “naive” view that is alleged to have been so widespread in the ’60s is actually not so different — in its conclusions — from your own view.

Over the years you have developed a theoretical basis for the view that there is a potentially stable trade-off between unemployment and inflation that policy makers can exploit. In other words, policy makers can choose to have somewhat higher inflation and somewhat lower unemployment, or they can choose the opposite sort of policy, and either one can potentially be a stable policy choice.

I want to ask you about those ideas, but first I’d like to hear your take on what the economics establishment currently says about inflation, and why you disagree with it.

Thomas Palley

Well, the first thing to note about inflation is that there are many different kinds of inflation. They all have different logics and different effects, and that’s something that is not taught in textbooks but ought to be. It’s also something that the economics profession doesn’t really get, or at least does not emphasize sufficiently.

I distinguish between six major kinds of inflation. One is demand-pull inflation, which is the story of “too much money chasing too few goods” — that’s the nutshell way of talking about it.

A second form of inflation is conflict inflation, which is conflict between capital and labor over the distribution of income.

A third form of inflation is supply-side inflation, which concerns global commodity price shocks. Here, the classic example is the OPEC oil price shocks of the 1970s.

A fourth form of inflation is imported inflation, when inflation is caused by exchange-rate depreciation and a rise in the price of imports — and I suppose to the extent that our current inflation is supply-chain inflation, it could be interpreted as fitting in this category.

The fifth form of inflation is what I call high inflation. This is often associated with large budget deficits and dysfunctional politics where a government needs funding, but it can’t get it together to fund itself with appropriate taxation, so budget deficits are the way they do it, which produces inflation.

Lastly, the sixth form of inflation is hyperinflation, which is a rare event. It’s usually associated with wars in which the supply side of the economy has been destroyed, or with failed states or kleptocratic governments that have destroyed the conditions for doing business.

The Phillips curve is about demand-pull inflation. The controversies raised by Milton Friedman were about the Phillips curve, which means that they are about demand-pull inflation.

The orthodox story that is told today is that there’s a temporary, short-run, negative trade-off between unemployment and inflation — or at least that the economy generates a pattern of outcomes in the short run that looks like such a trade-off. But if policy makers try and exploit that trade-off, it will crumble, and they will be forced to go back to what is called the natural rate of unemployment — only now with a higher inflation rate than before and no reduction in unemployment.

Friedman did a service by framing the argument. The problem is that I think he came out on the wrong side of that argument.

Basically, that view is the legacy of Milton Friedman. Though I am critical of the Friedman view, I still think he made an important contribution. He focused on the issues that were at stake, which are: how are wages set, what is the role of inflation expectations, and is there a systematic trade-off between inflation and unemployment that can inform policy, especially monetary policy. He did a service by framing the argument. The problem is that I think Friedman came out on the wrong side of that argument.

Seth Ackerman

How so?

Thomas Palley

Well, I think there is such a thing as a systematic Phillips curve. And if James Forder thinks there isn’t, I would disagree with him. Now, I am aware of Forder’s argument that Friedman engaged in some strawman rhetoric. But Friedman’s challenge was basically reasonable. Why do I say that? Well, if you go back to the early 1960s, there was a widespread belief that there was a systematic trade-off between inflation and unemployment that policy could use. People believed in the “structural Phillips curve.” Friedman questioned the long-run existence of that trade-off using very conventional economic theory.

Now, he also said that economists had forgotten about inflation expectations. And that’s where the strawman argument creeps in, because economists certainly were aware of inflation expectations, and they were also aware that expectations could shift the Phillips curve. That’s very clear in the famous 1960 article by Paul Samuelson and Robert Solow. If you read it, they do talk about inflation expectations being important, and how changing inflation expectations would eventually affect the position of the Phillips curve.

That said, economists had not fully worked through the logic and implications of that, and that’s what Friedman did. So, to repeat, Friedman showed that when you used conventional theory and you added inflation expectations and took them seriously, the Phillips curve would slowly dissolve if policy makers tried to take advantage of it. Instead of getting lower unemployment with higher inflation, in the end you would just get higher inflation and unemployment would return to its so-called natural rate regardless.

Seth Ackerman

It sounds like what you’re saying is that if you believe in a stable long-run unemployment-inflation trade-off, it doesn’t necessarily imply that you don’t understand the role of inflation expectations. Whereas Forder perhaps too easily leaves an impression that one automatically implies the other.

Thomas Palley

Yes. Friedman’s work clearly did shake things up: economists did believe that there was a policy-exploitable trade-off, and that’s why what he said was so controversial. So my read on Friedman is that he overstated the claim that economists were unaware of inflation expectations, but on the other hand — and this is what’s important — he showed that if you used conventional economic theory about how wages are set, you didn’t get the Phillips curve that economists were working with.

So he showed that their macroeconomics was inconsistent with their own theory. And the logic is very simple. Conventional theory says that wages are set to balance the labor market and ensure full employment. If you follow that logic through, if policy tries to overstimulate the economy beyond the point of full employment, then wages will just rise faster to restore the balance, and you just end up at the natural rate of unemployment again, but now with persistent higher inflation. I don’t think economists had really pieced that all together.

Now, this is where Friedman gets lucky. In 1967 he makes this argument about the Phillips curve dissolving. And then lo and behold, it suddenly starts to dissolve. The Phillips curve that people had been watching in the early 1960s, which was a very nice curve that seemed to offer some very palatable policy trade-offs, suddenly began to dissolve — it started to become steeper and to move.

Friedman gets lucky. In 1967 he makes this argument about the Phillips curve dissolving. And then lo and behold, it suddenly starts to dissolve.

And one reason was surely because of inflation expectations kicking in. But there were also other reasons. And that’s why I made those comments about different kinds of inflation. So, for example, income-distribution conflict kicked in. The 1960s and early 1970s were increasingly a period of conflict between capital and labor over the profit share.

And then in the late 1960s and early 1970s, you had a commodity price boom, which was followed by the huge OPEC oil price shocks. Those supply shocks also had the effect of amplifying the conflict inflation.

Under those circumstances, the Phillips curve essentially dissolved, because inflation was being determined by so many factors. And that dissolution was taken as proof that Friedman was right.

Now, here’s the twist. As I interpret it, the economics profession willingly went along with the story that Friedman was right. And there’s a reason for that. Friedman had based his case on conventional theory. And the economics profession is not in the business of challenging conventional theory. In fact, the exact opposite is true. It’s in the business of defending conventional theory.

The Phillips curve was always an observed empirical relationship, a statistically fitted relationship. The challenge was always going to be to provide a theoretical explanation of that observed relationship. Friedman showed that economic theory didn’t have an explanation that supported a policy trade-off and that, therefore, there was need for new theory. The Left didn’t have a theory either, even though it wanted to believe that the trade-off existed. All the Left had was a conflict theory of inflation. And that’s where James Tobin comes in.

The economics profession is not in the business of challenging conventional theory. In fact, the exact opposite is true.

Seth Ackerman

Right. So what was Tobin’s intervention in the inflation debate?

Thomas Palley

Tobin was the one economist who tackled the problem and really looked for a new theoretical explanation. And I have to say, I was a graduate student at Yale and took his macroeconomics class, and his work has deeply informed my own thinking.

Tobin’s basic idea is that we need to think of the economy as consisting of many sectors, or what you might think of as many small economies that are aggregated together into a national economy. Each sector is being hit by random disturbances. Demand and spending are shifting between these sectors. And this is going on all the time. At any moment, some sectors are at full employment, and others are below full employment.

Tobin realized that inflation might be a way of helping the economy rebalance faster. This is the vision he lays out very clearly in his AEA presidential address in 1971.

The problem is that sectors below full employment have a hard time rebalancing, because there’s resistance to wage cuts — and for very good reasons. I’ve written about this. First, employers are always looking to cut wages no matter what the conditions are. That’s a fundamental piece of the structure of capitalism. So how can you trust an employer who says, “I need to cut wages because business conditions are bad?” How is a worker going to be able to trust that? Employment is a very conflicted relationship, and as a result it’s hard to push wage cuts through, even if they are needed. Second, workers are debtors. For instance, most of us have mortgages, so wage cuts increase the burden of debts, and they’re going to be resisted for that reason.

The secret sauce is to increase demand everywhere. That restores full employment in sectors that have unemployment, but it causes inflation in sectors already at full employment. And that’s where you begin to get the possibility of a trade-off. The more demand you throw in, the more sectors will be at full employment, the faster inflation will be — but also fewer sectors will have unemployment because they’ve adjusted faster back to full employment.

Seth Ackerman

But then the obvious question is, why wouldn’t Friedman’s story about inflation expectations kick in at that point? People see higher prices, that gets incorporated into wage bargains, and inflation just keeps accelerating.

Thomas Palley

Well, that’s exactly right. Tobin never quite figured out how to answer that. And I would say I regard that as being my small contribution here. What you can say is that in sectors with unemployment, workers know full well what the inflation rate is. They’re not fooled. They can open a newspaper, they watch TV, and they’ll get the inflation rate. But if you’re in a depressed sector, you may decide to settle for slightly less of a wage increase. You won’t be fully compensated for inflation, and thereby you’ll effectively take a small wage cut relative to the rest of the economy. Meanwhile, the sectors at full employment will fully incorporate inflation expectations.

In sectors with unemployment, workers know full well what the inflation rate is. They’re not fooled.

The key is recognizing that the degree to which sectors incorporate expected inflation in their wage settlement will depend on local conditions. You get less feed-through of inflation expectations in depressed sectors, and you get full feed-through of inflation expectations in sectors at full employment.

One way you might illustrate this is the metaphor of elevators and escalators. Mainstream economists think of labor markets as being like elevators. You have a shock to the local labor market. The next period, the local labor market resets wages, and it quickly goes back to full employment. So the labor market is like an elevator. An elevator shoots back up to full employment — quick adjustment.

The implicit Tobin view is that labor markets are like escalators. You have a shock; the local labor market then slowly adjusts back to full employment. Faster demand growth is a way of speeding up the escalator so that you get to full employment sooner. But the cost is inflation in those labor markets elsewhere that are already at full employment.

Of course, for economic theory the issue is to precisely identify that argument and show how it works, which is where technical modeling enters and gets tricky. That took time, and that’s part of the tragedy. Tobin was very quick out of the gate in 1971 with a counter to Friedman’s argument in his presidential address. But the precise argument and formal modeling of it took a lot longer. And by then, the economics profession had sort of moved on and was not in a mood for listening.

Seth Ackerman

So far have you managed to interest other economists in this kind of research program?

Thomas Palley

No, they’re not interested in my particular argument, but they have picked up on a related argument by George Akerlof and his coauthors.

One thing I will say on this point is that one of the great pities is that progressives never really embraced Tobin and his view of the economy. Because if you take the approach that I do, where there have to be different theories of inflation to describe different types of inflation, his thinking fills a gap in their thinking. It provides an explanation of the Phillips curve trade-off, which most progressives believe in but lack an explanation of.

However, progressives in the 1970s and 1980s did not join with Tobin. In my view there are two reasons for that. One reason is that Tobin was quite mainstream in his thinking on some aspects of economic theory, especially income distribution. He believed in the neoclassical marginal productivity theory of income distribution — which I don’t believe in, by the way — which contributed to suspicion and rejection of Tobin by the Left. A second reason is that the Left insists on seeing all inflation in developed economies as conflict inflation. The Left tends not to appreciate different types of inflation, and that’s also been a cause of difference between me and my progressive colleagues.

Seth Ackerman

How do you see the current inflation situation?

Thomas Palley

If I had been at the Fed in 2022, I would also have been voting for raising interest rates. In my view, it’s not just inflation that warranted higher interest rates. An even more important reason was asset-price bubbles and house-price inflation. Asset-price bubbles end in busts, and asset-price inflation is a very unfair way to distribute the fruits of economic activity. It’s not a good way to run an economy, and it’s not good for working families.

Asset-price bubbles end in busts, and asset-price inflation is a very unfair way to distribute the fruits of economic activity.

I’ve worked in Washington for over twenty-five years, and I’ve never yet come across a progressive who has argued for raising interest rates. I think that may be because progressives always view inflation as conflict inflation, which makes them against raising interest rates. In conflict inflation raising rates is tacitly siding with employers. In contrast, I carry in the back of my mind many theories of inflation, and one of them is Tobin’s Phillips curve theory. Given that, I’m much more open to the possibility that an increase in interest rates can be needed to tame excess demand. I think that is relevant to current conditions, along with the asset-price bubble problem.

Seth Ackerman

Yet you also advocate a higher inflation target.

Thomas Palley

Yes. We may need to tame inflation and we may also need a higher inflation target. That is not inconsistent. In my own work, I talk of the “backward bending Phillips curve,” which generates an optimal rate of inflation that I call the minimum-unemployment rate of inflation or MURI — the rate of inflation that will deliver the minimum unemployment rate. I think that is what policy should aim for. And I would say it’s somewhere between 3 percent and 6 percent. That’s quite a wide range, but we can take a midpoint, say around 4 to 5 percent.

If you push inflation above 5 percent, it’s quite likely that your Phillips curve is going to start bending backward, and you’re going to lose some of the benefits of inflation. The precise level is something that you’d only find out by experimentation. But a long time ago I did a short empirical paper that basically tried to make the argument. What I found was that the duration of spells of unemployment declined with higher inflation, which is proof of the escalator at work. If inflation is speeding up the escalator, unemployment spells will be shorter because you get to the top faster.

One of the ironies of the moment is that, in my view, we’re in the inflation sweet spot but we’re trying to push it below the sweet spot.

Seth Ackerman

So your views may have coincided with Larry Summers’s views at some earlier point, but at this point, where he really wants to see the labor market get a lot more slack, that’s where you depart from him.

Thomas Palley

Yes, exactly. Unfortunately, I often find myself caught between sides on these issues. I think Larry Summers was right on the need to get going and raise interest rates — though also for additional reasons than those that he gave. But now he’s in danger of being wrong by pushing too far.

Conversely, progressives were wrong in opposing interest rate increases in 2022. But at some stage they will be right if the Fed persists with raising rates — and I have to say, at 5 percent I begin to get a bit anxious. Right now, there’s good reason for an interest-rate pause.

On Thursday, May 11, a grim discovery was made at an Arby’s restaurant in New Iberia, Louisiana. An employee of the restaurant uncovered another employee’s body in the eatery’s freezer.

The New Iberia Police Department was immediately called to the scene and began their investigation. Authorities have not released the employee’s identity and do not suspect foul play. Sgt. Daesha Hughes, a spokesperson for the police department, said the case is still being investigated.

The Arbys in question released a statement claiming their full cooperation with the police. According to their statement, the restaurant cannot further comment on the matter due to the current active investigation.

How this employee ended up in the restaurant’s freezer is a mystery. Furthermore, many questions still need to be answered.

What started as an ordinary day quickly became an unexpected tragedy when a woman’s lifeless body was found inside a restaurant’s freezer. Although the authorities are currently still investigating the situation, it goes without saying that the people of New Iberia are hoping to find closure soon.

Сви чланци Глобалног истраживања могу се читати на 51 језику тако што ћете активирати дугме Преведи веб локацију испод имена аутора.

Да бисте добили дневни билтен Глобал Ресеарцх-а (изабрани чланци), кликните овде.

Кликните на дугме за дељење изнад да бисте …

The post Da li bi vaspitači trebalo da postavljaju granice adolescentima? appeared first on Global Research.

Mia Corte, a 20-year-old student at the University of Georgia, experienced a sudden and unexpected storm that uprooted a tree, critically injuring her last Tuesday afternoon, as reported by Fox 5.

Mia was sending a video of the storm to her boyfriend just moments before her phone died at 5:04 PM, thought to be the exact time the tree landed on her. Medics quickly rushed her to Piedmont Athens Regional Hospital, where she was treated for severe head trauma and extensive bodily injury.

Mia is a rising junior and communication sciences and disorders major at UGA. Her parents told the outlet that they consider her a brave spirit and a real fighter, which is exactly what she needs to make a recovery.

While the neurologists advise Mia to take a break and wait four to six weeks to do nothing, she is determined to take her classes online this summer. They have emphasized that she has a long road ahead of her.

The Corte family is amazed by the amount of love and support they have received from the Athens community, UGA, and the hospital staff.

Mia Corte, a young UGA student, experienced a heavy storm that brought a tree upon her, critically injuring her last Tuesday. Doctors, police officers, and hospital staff from the Athens community have come together to show compassion and dedication to Mia’s healing process. Despite her severe injuries, Mia remains hopeful, determined to continue her studies online this summer.

On May Day, South Korean construction union leader Yang Hoe-dong took his own life by setting himself on fire rather than accept the state’s anti-union charges against him. Yang is a brutal casualty of the South Korean president’s war on labor.

South Korean construction union leader Yang Hoe-dong. (KCTU via Labor Notes)

A South Korean union leader has ended his life, enraged in anger and humiliation as the government attempted to bring racketeering charges against him over union activity.

On the morning of May Day, Yang Hoe-dong, a chapter leader of a national construction workers’ union, set himself on fire at a courthouse where he was summoned to a hearing for the review of an arrest warrant for him. He was pronounced dead at the hospital the following day.

The death was in protest of attacks by the government of President Yoon Suk-yeol on the 160,000-strong Korean Construction Workers Union (KCWU) and its rival union since February, when Yoon declared some of the unions’ activity “construction thuggery” and tried to eliminate it.

South Korea’s construction industry is marred generally by organized crime and corruption. There are two national unions: the KCWU, an affiliate of the 1.1 million-member independent Korean Confederation of Trade Unions (KCTU); and the KUCLU, which was expelled in January from the smaller and more conservative Federation of Korean Trade Unions (FKTU) for its leaders’ embezzlement of union funds. To a lesser extent, it is also tainted by mob interests.

The remarks by President Yoon, himself a former prosecutor general, gave a further green light to the police, who had already launched a two-hundred-day crackdown on construction-site irregularities starting in December 2022.

By the end of March, twelve members of the two unions were under detention and sixty-three were being prosecuted. Unionists made up more than 77 percent of the 2,863 individuals investigated or questioned during the first half of the intense police campaign.

The police were rewarded for treating unionists as mobsters. Out of nineteen merit-based promotions for police officers, six were awarded based on their roles in the crackdown, according to the independent daily Kyunghyang, which cited police data.

Union in the Crosshairs

The Yoon government appeared to have set its sights on the KCWU because it is one of the fastest-growing and most strident branches of the KCTU. Between 2016 and 2020, the construction workers’ union more than doubled in size from seventy-eight thousand members to 159,000, helping the parent KCTU to replace the FKTU as the country’s largest union league.

A combination of a red-hot real estate market and hard work by organizers like Yang led the leap in growth. Most of all, the KCWU, formed in March 2007, was well positioned to benefit from two landmark wins.

In 2001, a twenty-eight-day national work stoppage by tower crane operators won the first-ever national collective bargaining agreement for construction workers. That laid the groundwork for a rudimentary form of a closed-shop labor contract two years later, mandating contractors to hire union workers exclusively.

The KCWU was the only national union that walked off the job in solidarity with a national strike by truckers in November of last year.

Although it often goes unsaid publicly, the conservative government looks askance at the KCWU because of some leaders’ alleged ties to the Jinbo Party, a regrouping from the Unified Progressive Party, outlawed in 2014 by the Constitutional Court for alleged connections to North Korea.

In March, the police executed search warrants on two local offices of the KCTU on allegations that the union made illicit donations to the Jinbo Party. In an editorial in April, Chosun Ilbo, the country’s largest conservative daily, criticized the KCWU for allegedly keeping a Jinbo leader on the payroll of a construction project despite her absence from the site. Conservatives abhor the infusion of labor militancy with what they regard as pro–North Korea fringe politics.

In a by-election in the same month, the Jinbo Party won its first-ever seat in the National Assembly.

Legacy Practices and Vicious Legislation

To date, the massive crackdown has turned up little evidence of corruption tied to the KCWU. Still, the Yoon government could jail its leaders by criminalizing legacy practices at construction sites.

In South Korea, the multilayered labyrinth of subcontracts often shortens construction time to risky levels, forcing workers to work longer and dangerously — while it exempts construction conglomerates from accountability.

In the city of Gwangju, the facade of a high-rise condominium under construction collapsed in January 2022, killing six workers and three passengers of a bus hit by debris.

The project, initiated by HDC Hyundai Development Company, had lost at least three months of construction time after a series of subcontracts before it finally landed with a mob-influenced contractor who further cut corners. HDC Hyundai, the country’s ninth-largest contactor, was only fined 400 million won ($302,000), compared with its $11 billion market volume.

Long before they had a union, tower-crane operators and other workers had negotiated “monthly stipends” — akin to a combination of overtime and risk allowances — on top of their regular pay, in return for working longer or flouting the safety code to meet construction schedules. In February, the civil court ruled that the stipends were part of “normal pay.”

Also, many chapters of the construction unions need contractors to pay their full-timers like Yang during projects as part of collective bargaining, because it is these full-timers who convene and recruit workers for construction sites — often union and nonunion alike.

The Yoon government has brought unprecedented criminal charges against these two practices, invoking two notorious statutes. Yang and his union comrades were charged under the Law on Punishment of Violent Acts, South Korea’s answer to the United States’ Racketeer Influenced and Corrupt Organizations (RICO) Act, and the penal code on the obstruction of business, first introduced by the Japanese colonial master to ban industrial action during the Second Sino-Japanese War of 1937–1945.

The Korean RICO, which carries prison sentences of up to twenty years, has been scarcely used directly against labor unions because any such charge would likely contradict the right to collective bargaining. The government and corporations, meanwhile, regularly use the legacy penal clause, also still in effect in Japan but rarely used there, to suppress union activity, as it stipulates punishment for “a person who damages the credibility or obstructs the business of another person by spreading false rumors or by the use of fraudulent means.”

The Yoon government appears bent on impairing national unions’ bargaining power by stripping them of union status. In March, regulators treated a KCWU chapter as a business organization of contractors and fined it 169 million won ($129,000) for antitrust infringements.

Fair Game

It was humiliation, not fear of prison, that drove Yang to death. “I am setting myself afire today because my rightful union activity is regarded [by the government] as an obstruction of business and racketeering,” he wrote in one of the notes he left, this one addressed to his fellow union members. “My self-worth can’t tolerate this.”

“Why do many people have to die or be jailed . . . for approval ratings for Yoon’s prosecutorial dictatorship?” Yang wrote in another note to the country’s four opposition parties, pointing to the prosecutor-turned-president’s labor-bashing to rally his conservative base. “Please put an end to the Yoon regime,” he implored. “Please free the innocent detainees.”

Yoon was elected last year on an anti-labor and pro-business platform, pledging to reform labor practices and pensions. While the two areas are in dire need of updating in light of an aging population and the rise of precarious jobs, Yoon’s reforms are aimed at helping employers at the expense of the livelihoods of ordinary workers.

Legislatively, few can push back on his agenda. The main opposition party, the Democratic Party of Korea (DPK), which controls a majority of the three-hundred-seat national assembly, is focused solely on keeping its top leader out of jail for bribery. Despite varying degrees of left and populist leanings, nine legislators of the remaining three minor parties are content with being auxiliary to the DPK.

A third note from Yang to his family remains undisclosed.

A Union Man

Yang began to work as a rod buster — shaping the steel rebar rods and mesh used in construction — after graduating from high school. In 2019, he joined a KCWU chapter in the northeastern province of Gangwon. Three years later, he became a district organizer.

Yang’s last six months were very taxing, both emotionally and financially, as many contractors severed ties with the KCWU, citing government pressure or a cooling construction market. Yang often shared his own pay with union members who were in more desperate need of employment. He is survived by his wife and twin teenage daughters.