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Alan Barber, (202) 293-5380 x 115
the early 1990s through the peak of the last business cycle, relatively
low U.S. unemployment rates seemed to make the United States a model
for the rest of the world's economies. The Organization for Economic
Cooperation and Development (OECD), the International Monetary Fund
(IMF), and other international organizations all praised the U.S.
unemployment performance and urged the rest of the world's rich
countries to emulate the "flexibility" of the U.S. model.1
The case for the superiority of the U.S. model was always exaggerated.2
For one thing, it tended to ignore the relatively lower performance
of the U.S. on broader quality-of-life measures like the Human
But even when limited to differences in unemployment, the case for
the U.S. model was overstated. From the 1990s on, the United States did
have lower unemployment rates than several large European economies,
such as France, Germany, Italy, and Spain,4
but many smaller European economies with large welfare states and high
levels of labor-market regulation regularly did as well or better on
unemployment than the United States. In 2000, for example, at the peak
of the late 1990s economic boom, when the U.S. unemployment rate stood
at 4.0 percent, Austria (3.7 percent), the Netherlands (2.8 percent),
Norway (3.4 percent), and Switzerland (2.6 percent) all had lower
unemployment rates than the United States; and rates in Denmark (4.3
percent) and Ireland (4.2 percent) were not far behind.5
The current economic crisis, however, has turned the case for the U.S. model almost entirely on its head. As Figure 1
illustrates, according to the most recent internationally standardized
data from the OECD, the United States is now tied for the fourth
highest unemployment rate among the major OECD countries. In March
2009, the U.S. unemployment rate was 8.5 percent,6
only lower than Spain (17.4 percent), Ireland (10.6 percent), and
France (8.8 percent), and level with Portugal. Sixteen other major OECD
economies had a lower unemployment rate, including Denmark (5.7
percent), Germany (7.6 percent), Italy (6.9 percent), the Netherlands
(2.8 percent), and Sweden (8.0 percent).
The United States is also one of the countries where the unemployment
rate has increased most since 2007. Between 2007 and March 2009, the
U.S. unemployment rate rose 3.9 percentage points. Only Spain (up 9.1
percentage points) and Ireland (up 6.0 percentage points) saw bigger
increases over the same period. In France, the increase in the
unemployment rate was only 0.5 percentage points. In four countries,
the most recent unemployment rate is actually lower than it was in
2007: Belgium (down 0.2 percentage points), Germany (down 0.8
percentage points), Greece (down 0.5 percentage points), and the
Netherlands (down 0.4 percentage points).
OECD Harmonized Unemployment Rate in 21 Countries
Source: OECD (2009). Data refer to
March 2009, except Norway (February 2009), United Kingdom (January
2009), Italy and Greece (December 2008), and Switzerland and New
Zealand (Fourth Quarter, 2008).
As Figure 2 demonstrates, in March 2009 - for the first time
in the period covered by published data from the European Union's
statistical agency, Eurostat - the unemployment rate in the United
States was equal to the unemployment rate in the first fifteen member
countries of the European Union (EU-15).7
The sharp rise in unemployment since December 2007 has driven the
unemployment rate in the United States to a point where it is now
identical to that of Europe. If recent trends continue, the United
States will surpass Europe's unemployment rate as soon as
internationally comparable data for April are available.8
Unemployment Rate in the United States and EU-15, 1993-2009
Source: Eurostat (2009).
Brooks, David. 2005. "Fear and Rejection," New York Times, (June 2).
Bureau of Labor Statistics. 2008. "International Comparisons of Annual
Labor Force Statistics, 10 Countries, 1960-2007," Washington, DC:
Bureau of Labor Statistics.
Eurostat. 2009. "Harmonized unemployment rate by gender," Luxembourg: European Commission. Accessed, May 14, 2009.
Goolsbee, Austan. 2007. "Economic Scene: How the U.S. Has Kept the
Productivity Playing Field Tilted to Its Advantage," New York Times,
Howell, David. 2005. Fighting Unemployment: The Limits of Free Market Orthodoxy, Oxford: Oxford University Press.
International Monetary Fund. 2003. "Unemployment and Labor Market
Rigidities: Europe versus North America," World Economic Outlook (May),
Washington, DC: IMF.
Organization for Economic Cooperation and Development. 1994. OECD Jobs
Study, Evidence and Explanations, Part I: Labor Market Trends and
Underlying Forces of Change, Paris: OECD.
Organization for Economic Cooperation and Development. 2009. "OECD Harmonised Unemployment Rates," (May 11) Paris: OECD.
Schmitt, John and Dean Baker. 2006a. "Missing Inaction: Evidence of Undercounting of Non-Workers in the Current Population Survey," Center for Economic and Policy Research Briefing Paper.
Schmitt, John and Dean Baker. 2006b. "The Impact of Undercounting in the Current Population Survey," Center for Economic and Policy Research Briefing Paper.
*John Schmitt is a Senior Economist, Hye Jin Rho is a Research
Assistant, and Shawn Fremstad is BTG Project Director at the Center for
Economic and Policy Research in Washington, D.C. They would like to
thank the Ford Foundation for financial support.
The Center for Economic and Policy Research (CEPR) was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives. In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.(202) 293-5380
The treasury secretary's warning came as a Biden administration official said the president won't invoke the 14th Amendment in order to avoid a first-ever U.S. default.
U.S. Treasury Secretary Janet Yellen on Friday warned Congress that the United States government will run out of money to pay its bills on June 5 if lawmakers don't reach an agreement to raise the nation's debt ceiling.
"Based on the most recent available data, we now estimate that Treasury will have insufficient resources to satisfy the government's obligations if Congress has not raised or suspended the debt limit by June 5," Yellen wrote in a letter to House Speaker Kevin McCarthy (R-Calif.).
"We have learned from past debt limit impasses that waiting until the last minute to suspend or increase the debt limit can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States," Yellen noted. "In fact, we have already seen Treasury's borrowing costs increase substantially for securities maturing in early June."
Earlier this month, Yellen said that the so-called "X-date"—the day on which the first-ever U.S. default will occur—could come as early as June 1.
"If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests," she stressed in Friday's letter.
\u201cJanet Yellen updates the X date\u2026 it is now next Monday, June 5.\n\nLetter to Congress:\u201d— Julie Tsirkin (@Julie Tsirkin) 1685132574
As The New York Timesnotes:
Ms. Yellen's letter comes as the White House and House Republicans have been racing to agree on a deal that would lift the nation's $31.4 trillion borrowing cap and prevent the United States from defaulting on its debt. The Treasury Department hit the debt limit on January 19 and has since been employing accounting maneuvers to ensure the United States can continue paying its bills on time...
On Friday, she detailed that the federal government is due to make more than $130 billion in scheduled payments during the first two days of June—including payments to veterans and Social Security and Medicare recipients—leaving the Treasury Department with "an extremely low level of resources"...
While negotiators have been in round-the-clock talks, no deal has been announced. Still, the contours of an agreement between the White House and Republicans are taking shape. That deal would raise the debt limit for two years while imposing strict caps on discretionary spending not related to the military or veterans for the same period.
Biden administration officials and congressional Democrats have accused Republicans of "hostage-taking" during the debt limit standoff, an allegation embraced by Rep. Matt Gaetz (R-Fla.) earlier this week.
Scores of Democratic lawmakers and progressive advocates have called on President Joe Biden to exercise his constitutional authority and invoke the 14th Amendment—which states in part that "the validity of the public debt of the United States... shall not be questioned."
However, Deputy Treasury Secretary Wally Adeyemo said Friday that Biden will not invoke the 14th Amendment.
"The 14th Amendment can't solve our challenges," Adeyemo asserted on CNN. "Now, ultimately, the only thing that can do that is Congress doing what it's done 78 other times, raising the debt limit."
"We don't have a Plan B that allows us to meet the commitments that we've made to our creditors, to our seniors, to our veterans, to the American people," Adeyemo added ominously.
"Banning buying homes based on citizenship and registering your property did not bode well in history," said one lawmaker. "This is the Republicans rewriting the Chinese Exclusion Act."
Days after a group of Chinese citizens sued Florida's government over its new law restricting Chinese citizens from purchasing property in the state, U.S. Rep. Al Green this week warned of a "proliferation" of such bans and unveiled federal legislation to prohibit them.
The proposal would affirm that federal law, such as the Fair Housing Act, takes precedence over state bans restricting who can and cannot legally purchase real estate or farmland. It would also allow people to sue in federal court and have a right to court-ordered relief including an injunction if they've been harmed by bans like the one approved by Republican Florida Gov. Ron DeSantis.
The Fair Housing Act explicitly prohibits discrimination in housing based on national origin, race, sex, gender identity, religion, and disability.
Despite the long-standing law, Florida this month became the latest state to pass restrictions on property ownership, targeting Chinese, Russian, Iranian, Syrian, Cuban, Venezuelan, and North Korean citizens. DeSantis claimed Chinese people have been "gobbling up" land in the state and said the law is intended to stop the Chinese Communist Party from gaining influence and spying in the state.
"That is not in the best interests of Florida to have the Chinese Communist Party owning farmland, owning land close to military bases," said the governor, who announced his 2024 presidential campaign this week.
Utah Gov. Spencer Cox, also a Republican, signed a ban on Chinese companies buying property in March, and the Texas Legislature had advanced a similar bill targeting companies and government entities headquartered in China, Russia, North Korea, and Iran.
According to the National Agricultural Law Center, 21 states have laws restricting foreign ownership of farmland. More than 30 states have drafted or advanced legislation to either tighten those restrictions or introduce new ones.
"I don't think we ought to allow 50 states to have the opportunity to pass laws that can impact foreign affairs, which really is the province of the executive branch of the federal government," Green told HuffPost on Thursday. "I don't think we should wait until we get 30, 50, whatever number of different laws to act."
The measures have drawn comparisons to the so-called "alien land laws" that were in place in the early 20th century before being struck down by courts and state legislatures. The laws prohibited Chinese and Japanese immigrants from owning land and "severely exacerbated violence and discrimination against Asian communities," according to the ACLU, which is representing the plaintiffs in the lawsuit filed in Florida this week.
"Banning buying homes based on citizenship and registering your property did not bode well in history... This is the Republicans rewriting the Chinese Exclusion Act," said Rep. Grace Meng (D-N.Y.) this week, referring to the 1882 law that banned Chinese workers from immigrating to the United States.
\u201c\u2026when you ask me why we worry about anti-China rhetoric\u2026 many people can\u2019t differentiate between someone who works for the CCP from an average Chinese American. These laws will increase anti Asian suspicion & hate. https://t.co/z7j9TuyfA3\u201d— Grace Meng (@Grace Meng) 1684285341
Contrary to DeSantis' claim that Chinese citizens are buying large amounts of property across Florida, according to the U.S. Department of Agriculture's Farm Service Agency, foreigners owned only 3.1% of farmland at the end of 2021, and about a third of that land was owned by Canadians. Less than 1% of the land—0.03% of all farmland in the U.S.—was owned by Chinese citizens or entities.
"Hey, hey! What we knew would happen: Make the wealthiest pay their fair share and it finances investments in education, transportation, and more," said Rep. Pramila Jayapal.
Proponents of progressive taxation on Friday pointed to data showing Washington state stands poised to reap $849 million in revenue during the first year of its capital gains tax as proof that taxing the rich works—and could serve as a template for federal legislation.
The Seattle Timesreports that when Washington state lawmakers passed this fiscal year's budget, they anticipated collecting $248 million in revenue from the 7% tax on the sale or exchange of stocks, bonds, and certain other assets above $250,000.
However, the legislators were pleasantly surprised when figures showed the state has collected over $600 million more than that.
While the amount collected could change after around 2,500 taxpayers who applied for extensions file their returns, progressives welcomed the windfall that will fund public schools, early childhood education, and building and repairing schools across the state.
"Hey, hey! What we knew would happen: Make the wealthiest pay their fair share and it finances investments in education, transportation, and more," tweeted Congressional Progressive Caucus Chair Pramila Jayapal (D-Wash.).
\u201cTurns out taxing the rich is a really good idea and can help fund our public schools https://t.co/HX2dPp63UX\u201d— Robert Cruickshank (@Robert Cruickshank) 1685113329
Jayapal touted federal legislation she introduced with Sen. Elizabeth Warren (D-Mass.) in 2021—the Ultra-Millionaire Tax Act—that would levy a 2% annual tax on the net worth of households and trusts above $50 million, plus a 1% annual surtax on billionaires.
An analysis by University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman found that the legislation would bring in at least $3 trillion in revenue over 10 years without raising taxes on 99.95% of American households worth less than $50 million.
Last month, Warren, Sen. Bernie Sanders (I-Vt.), and Rep. Jimmy Gomez (D-Calif.) introduced the For the 99.5% Act, which would impose a 45% tax on estates worth between $3.5 million and $10 million, a 50% tax on estates worth between $10 million and $50 million, a 55% tax on estates worth between $50 million and $1 billion, and a 65% tax on estates valued at over $1 billion.
Meanwhile, congressional Republicans are trying to repeal the estate tax entirely—and pass other tax policies to serve the rich.
Back at the state level, California, New York, Illinois, Maryland, Connecticut, and Hawaii have also introduced wealth tax bills this year, while Washington's law was upheld by that state's Supreme Court in March.
"If the federal government won't act," California Assemblymember Alex Lee (D-24) said while introducing a wealth tax bill in January, "we the states will."