The Federal Reserve faces a fundamental question that will have an enormous impact on the livelihoods of millions of Americans—what is the lowest unemployment rate possible that doesn’t cause an unacceptable level of inflation?

Economists long have thought that the economy is at “full employment” at a rate of around five percent. Below that, employers would be forced to pay higher wages to attract and retain workers, which in turn would compel them to raise prices, sparking inflation. The theoretical trade-off between unemployment and inflation is what is known as the Phillips Curve.

However, while the current unemployment rate is extremely low at 3.6 percent, inflation remains below the Federal Reserve’s two percent target. Wages have risen, but below expectations. For this reason, some suggest that the Phillips Curve no longer applies.

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Guns and Suicide

Oct 21 2019

Suicide is the 10th leading cause of death in the United States, responsible for more American deaths than Parkinson’s disease, liver disease or hypertension. In 2017, the most recent year for which data are available, more than 47,000 Americans died by suicide—an average of 129 per day. The number of suicide deaths is dwarfed by the number of attempts—estimated at roughly 1.4 million in the United States that same year. More than 10 million American adults reported that they seriously thought about suicide in 2017.

The problem is getting worse. According to data from the Centers for Disease Control and Prevention (CDC), the age-adjusted rate of suicide in the United States rose by about 30 percent in the last two decades, with increases for almost every age group. The suicide rate has increased every year for the past decade.

The growing suicide rate in the United States is driven in large part by the lethality and easy accessibility of guns, which in 2017 were used in more than half of suicides. About 85 percent of those who attempt suicide with a gun die; without a gun, about 95 percent survive. Research shows that the impulse of suicide often is sudden and transitory, and nine of 10 survivors do not attempt again. An analysis of 14 scientific studies found that having access to a firearm triples the risk of death by suicide. 

Almost 60 million Latinos live in the United States, making up approximately 18 percent of the population. It is estimated that by 2060 approximately one in four people living in the United States will be Latino or of Hispanic heritage.

More than half of the Hispanic population lives in just five states—California, Texas, Florida, New York and Arizona—and more than 90 percent of all Hispanics live in metropolitan areas. However, those patterns are changing; there are now almost as many Hispanics in the South as in the West. States in other parts of the country, as well as some small cities and towns, also are experiencing rapidly growing Hispanic populations.

Approximately two-thirds of American Latinos were born in the United States. Twenty-two percent of Latinos are non-citizens and 13 percent are foreign-born individuals who have become American citizens. Latino immigrants have an important role to play in the U.S. economy. However, they tend to be less educated and earn less than the native-born population. Their children will be more likely than their parents to earn a higher education and achieve economic success.

Overall, Hispanics will take on an increasingly important role in the U.S. economy, which requires a growing number of workers to expand at a rate necessary to sustain general prosperity. Hispanics may play an outsized role because they are more likely than non-Hispanics to be working or seeking work and they are significantly more likely to be entrepreneurs.

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Retirement Insecurity

Aug 14 2019

When President Franklin D. Roosevelt signed the Social Security Act on August 14, 1935, one-quarter of the workforce was unemployed and half of all seniors lived in poverty. Since then, Social Security not only has prevented tens of millions of men and women from falling into poverty, it has become the bedrock of retirement security for all Americans.

However, for millions of Americans, the “three-legged stool” of retirement—Social Security, pensions and private savings—is coming apart. Since the late 1980s the percentage who receive traditional pensions has been cut almost in half. Furthermore, less than half of wage earners have defined contribution accounts like a 401(k) or IRA. One-third of near retirees—those ages 55-64—have neither a defined benefit pension nor a defined contribution plan.

As a result, half of American households are at risk of being unable to maintain their standard of living in retirement. Even those who take extraordinary steps—like working until 65 (five years past the current average retirement age), annuitizing all financial assets or reverse-mortgaging their homes—may not be able to maintain their living standards. Worse, forty percent of workers ages 50-60 who are not currently poor would be poor if were they retire at age 62. Women, Blacks and Hispanics are at substantially greater risk of being poor in retirement.


Introductory Letter

I am pleased to share the Joint Economic Committee (JEC) Democratic response to the 2019 Economic Report of the President. The JEC is required by law to submit findings and recommendations in response to the Economic Report of the President (the Report), which is prepared and released each year by the Council of Economic Advisers (CEA).

This year’s Report is substantially different from those of previous administrations, which largely were careful, research-based and data-driven assessments of the economy supported by mainstream economic theory. Instead, the 2019 Report misconstrues wellestablished facts, cherry-picks data, relies on economic theories widely rejected by mainstream economists and entirely omits critical subjects. As a result, it seems motivated more by politics than economics.

The Report, like President Trump, claims full credit for economic conditions that he mostly inherited from his predecessor. It altogether ignores the fact that average monthly job growth was stronger during the last two years of the Obama administration than the first two years of the Trump administration, the period examined in the Report. At the time of the president’s inauguration, the unemployment rate was 4.7 percent and trending down and the economy had added jobs for 76 straight months. The president implausibly has claimed that he has achieved an economic turnaround, a claim that has been refuted by the facts.

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