[YEDG] March 9th, Puerto Rico The 51st state?
박주하
Hi there!
Here is Serena, this week's facilitator.
I am sending this material in advance just in case some of you want to print it out!
I hope to see you all,,
Ciao ciao from Serena,
Venue: Coffeenie (Sinchon station # 7, just besides Grand mart)
Time: March 9th 09:30~11:30
Puerto Rico
The 51st state?
America may not want what its Caribbean outpost now does
Nov 17th 2012 | NEW YORK | From the print edition
Longing to be American
VOTERS may have voted for more of the same in America on election day, but in Puerto Rico they opted for decisive change. In a two-stage plebiscite—the island’s fourth referendum regarding its relationship with the United States—54% of the electorate voted to change Puerto Rico’s current status as a self-governing “commonwealth”, and 61% wanted the new form of government to be full American statehood. It was the first time a majority of boricuas, as the islanders are known, has voted to become the 51st state. In both the last two plebiscites, held in 1993 and 1998, only 47% chose that option.
The United States gained control of Puerto Rico in 1898, following the Spanish-American War. Puerto Rico set up its own government in 1952, and its residents do not pay federal income taxes to Washington on their local earnings. Nonetheless, it is still effectively a colony: boricuas are subject to American law even though they cannot vote for president or Congress.
Puerto Ricans broadly agree on their preferred status: in a 1967 referendum, 60% voted for a commonwealth they were told would be gradually enhanced. In this scheme, they would keep their American citizenship, currency, defence and tax exemptions, But they would also receive long-sought-after improvements, possibly including a “compact” making their relationship with the United States permanent. They might also gain the right to control immigration, sign treaties, act independently in international groups and choose which federal laws (such as the minimum wage) would apply to them.
Unfortunately, this proposal is legally flawed. According to Christina Duffy Ponsa of Columbia Law School the only permanent way of belonging to the United States is through statehood. Any other status approved by one Congress could be revoked later. Similarly, Congress could exempt Puerto Rico from any given law, but could not let the island exclude itself from federal legislation at will. A presidential task force has concluded that the only permissible status options are statehood, free association, continuation of the current commonwealth status or independence.
As a result, when the ruling pro-statehood party won a legislative vote last year to hold a new referendum, it did not put “enhanced commonwealth” on the ballot. Residents were first asked whether to continue with the current arrangement, and then what other form of government they would prefer: statehood, independence or “sovereign free association”, a voluntary, reversible collaboration with the United States that has been adopted by some Pacific island groups. Supporters of the status quo could choose a second-best option, but many left the second question blank.
Support for statehood has increased over the years, as ties between the island and the mainland grow closer. There are now more boricuas in the continental United States than in Puerto Rico itself, and American film, television and sports have gained popularity. Moreover, because of the Earned Income Tax Credit, a cash-transfer scheme for the working poor, many Puerto Ricans would gain more than they lose by becoming subject to federal income tax. But even among the rich and among Puerto Ricans without close links to the rest of the United States, the framing of the question ensured that statehood would prevail among the options for change. Both independence and sovereign free association would have put the islanders’ American citizenship at risk.
The vote will not have immediate consequences. Congress would have to pass a law admitting Puerto Rico for it to become a state. With a fiscal squeeze looming at the start of 2013 lawmakers will have their hands full in the coming months. And the island’s government is unlikely to push the issue aggressively following the election as governor of Alejandro García Padilla, who supports a continued commonwealth.
Moreover, the Republican-controlled House of Representatives has little incentive to address the topic. According to exit polls, 83% of boricuas on the mainland voted for Barack Obama. Statehood would add two Senate seats and a House delegation of five, the same size as Oregon’s and probably as reliably Democratic.
Unless the island holds another vote that yields a different result, however, Puerto Rico has now officially requested statehood. If Democrats retake the House in 2014, they would be well-advised to try to add a 51st star to the flag.
Social mobility
A memo to Obama
Want to make America less unequal? Here are some suggestions
Mar 1st 2014 | From the print edition
Memo To: Barack Obama, President of the United States
From: Your Shadow Council of Economic Advisers
Subject: Mobility
Dear Mr President,
You and John Boehner, the Republican House Speaker, don’t agree on much these days. Yet for a few sentimental seconds during your state-of-the-union message, you were in harmony. That was when you described America as the country where “the son of a barkeeper is Speaker of the House” and “the son of a single mom can be President of the greatest nation on Earth.” If Democrats and Republicans agree on one thing, it is that America is the land of opportunity, where the humblest child can grow up to fame and fortune.
Sadly, the numbers tell a drearier story. America is not a particularly mobile place; a child born in the poorest fifth of society has only a 9% chance of making it to the top fifth. And because incomes have become much more unequal, it is much worse now to be stuck at the bottom.
Inequality is driven by technology and globalisation. It is therefore hard to fix. Your preferred solution—taxing the rich more—is a blunt-edged response to inequality and in any case anathema to Republicans. Mobility and opportunity, on the other hand, get their hearts pounding.
In your budget next week you’ll have a chance to offer concrete proposals for improving mobility. There are plenty out there; here, we highlight the best.
Caught in the safety net
Employment is essential to mobility. You know that; but while you have rightly tried to bolster the demand for labour, you’ve neglected the supply. The Congressional Budget Office (CBO) says that, by 2024, 2.5m fewer people will work because of the disincentives embedded in Obamacare. The fact is that all means-tested transfers, including Obamacare, discourage work, which can worsen mobility. Conversely, time spent on the job makes men and women more productive and valuable to their employers, leading to higher salaries later in life.
The solution is not to do away with means-testing or transfers, but to incentivise work in other ways. This is where the Earned Income Tax Credit (EITC) comes in. It costs $63 billion a year, but it is one of America’s most potent anti-poverty tools. Unlike most other parts of the safety net, it is contingent on work, and ample research shows that it boosts employment for those who get it.
But while a family can qualify for an EITC of up to $6,143, a childless adult’s benefits stop at a paltry $496: a poor incentive to work. It needs expanding, as you’ve said yourself. Marco Rubio, a Republican senator, suggests converting the credit to a wage subsidy, so that beneficiaries get the money regularly in their pay-cheque instead of once a year as a tax refund. A universal wage subsidy would be very expensive, but proponents describe it as a reverse payroll tax that would strengthen the connection to work. Mr Rubio has also proposed rolling all safety-net programmes into a single state-administered grant, similar to Britain’s “universal credit”. Simpler is usually better.
The minimally invasive wage
The centrepiece of your attack on inequality is your plan to raise the federal minimum wage from $7.25 an hour to $10.10 in stages, and then index it to inflation. The CBO has found that this will benefit 16.5m workers earning at or near the minimum wage, and will lift some 900,000 out of poverty.
The impact of the minimum wage on employment is usually said to be tiny. But the CBO says that your proposal would cost around 500,000 jobs, especially among teenagers; and teenage joblessness can crimp mobility later in life. So take the minimum wage out of politics and entrust it to a panel of technocrats, as Britain has done. They would set the timing, size and differentials, and thus reduce the risks.
Any negative effects of the minimum wage can be counteracted through the EITC. Isabel Sawhill and Quentin Karpilow of the Brookings Institution recommend coupling the higher minimum wage with a tripling of the childless EITC to $1,625, while requiring recipients to work more hours to qualify. They reckon this will reduce welfare payments and raise taxes enough to pay for the expanded EITC.
Between the dole and a hard place
America has traditionally offered skimpy unemployment insurance because it was quick to put the jobless back to work. No longer. At present a third of the unemployed, 3.7m, have been without a job for six or more months. Each month a quarter of the long-term unemployed drop out of the labour force altogether.
Much more needs to be done, especially for the hard to hire. A decade ago, Britain experimented with a new scheme that offered intensive counselling and training to the long-term unemployed, plus cash bonuses for those holding steady full-time work for two years. Five years later, beneficiaries were 11% more likely to be employed than the control group. Savings on UI and other benefits exceeded the programme’s cost by four to one.
To the best of their ability
Disability insurance (DI) was added to Social Security in 1954. Since then, it has become more generous and its eligibility has been relaxed. The number of beneficiaries has climbed from 1.5m in 1970 to 8.9m in 2013; the disability trust fund is scheduled to go bust in 2016.
Since people who end up on DI seldom leave, the key is to persuade them not to apply. Anyone who can work a bit should be classified as unemployed rather than disabled. In Denmark, for example, only the permanently incapacitated receive a benefit. When the Netherlands required employers to pay the first two years’ benefits for disabled employees, and to pay higher premiums if they put more workers in the programme, caseloads fell.
Training and gaining
Practical, vocational training is where America is weakest. There are plenty of training programmes: 47 spread across nine agencies, many targeting the same people. The real problem, though, is not duplication but lack of money—and ineffectiveness. In 2011 America spent a paltry 0.1% of GDP on “active” labour measures designed to put the unemployed back to work; the OECD average was 0.6% (see chart 1). Federal spending per head on retraining has fallen by a third in the past 20 years (see chart 2).
We know what works: listening to what local employers want. In New York, Boston and Milwaukee non-profit organisations did this, in some cases extracting commitments to hire. A two-year evaluation found that participants were earning $4,000 more in the second year than the control group. The labour department is now offering grants to community colleges that train students for jobs identified by local employers. You can build on this.
Moving up by moving out
Americans are usually quick to up sticks in search of a better life. But the share of Americans who move counties each year has been declining for nearly 30 years. Blame demography (older people change jobs less often), dual-earner couples (he wants to move; she doesn’t) and, recently, inability to sell a house.
But employment was 12 percentage points higher among people who moved than people who didn’t, according to a Hamilton Project study covering 2005 to 2008. Michael Strain of the American Enterprise Institute recommends cash assistance for those who move if a new job is at least a two-hour drive away.
Get ’em while they’re young
So far we have focused on Americans of working age; but the very young need your attention, too. Research shows that poverty can damage learning (and hence prospects) in children as young as five. This is why everyone wants to expand pre-school education. But the most successful interventions start very early; are intensive, also involving home visits, health and nutrition care; and cost a bundle. You need to rethink your proposal for universal “high-quality” pre-school for four-year-olds. Better to concentrate the money on a smaller, younger, truly disadvantaged group of children.
Coming up with ideas is easier than paying for them. But it can be done. We spend vast sums on entitlements for the rich elderly that do nothing to help mobility or narrow inequality. If you can persuade your fellow Democrats to rein in entitlements, Mr Boehner may convince Republicans to relent on taxes. America would get its grand bargain—and the promise of a more mobile society.
From the print edition: United States
김은영
Dear all,
Pls below find the articles we will discuss on march 23rd and the direction to the new venue.
Best regards
Sophia
Venue: Coffeenie (Sinchon station # 7, just besides Grand mart)
Time: March 9th 09:30~11:30
http://www.economist.com/news/americas/21598653-costly-brazil-dysfunctional-argentina-bureaucratic-mexico-our-correspondents-go-shopping
iPhonenomics
One phone, many countries
Costly Brazil, dysfunctional Argentina, bureaucratic Mexico. Our correspondents go shopping for the same Apple product
APPLE products are designed to say something about their owners. They also tell you something about the countries in which they are sold. Latin America’s allure as a consumer market was underlined on February 15th, when the technology firm opened its first retail store on the continent, in Rio de Janeiro. Apple wants a bigger slice of the region’s smartphone market, which has been growing faster than any region outside Asia (see chart). But the glass screen of the iPhone 5s, Apple’s flagship smartphone, also reflects Latin America’s economic diversity.
Start with Brazil, the region’s biggest consumer market. Despite sluggish economic growth, Apple chose to plant its flag there for a reason. The country is among the top five markets for smartphones in the world. Last year was the first when more smartphones were sold in Brazil than traditional mobile phones, according to Abinee, an electronics-industry association; it was also the year when tablet sales overtook those of desktop computers. As many as 1,700 people queued up to be among the first on Apple’s Rio premises.
iPhones are beyond the reach of most people in all the countries of Latin America, but the sticker shock is particularly striking in Brazil. A 16GB iPhone 5s costs 2,519 reais ($1,076), compared with an average monthly income of just under 2,000 reais in the main metropolitan regions. That makes Brazil the dearest, in dollar terms, of the countries where Apple has stores; the tax-inclusive price of a 16GB iPhone 5s in the United States is around $700.
The fault lies with the infamous custo Brasil (Brazil cost), the exorbitant cost of doing business in the country. The high price of the iPhone 5s is largely due to tariffs and state and federal taxes on imports, says Luis Fernández of Deloitte. He calculates that a gizmo which a foreign supplier sells for 1,000 reais could end up being resold at 2,017 reais, with taxes amounting to 900 reais, or 45%, of that sum. Brazil’s government has introduced tax incentives for companies ready to assemble gadgets in the country. But even then, the custo Brasil hits home: iPads and older iPhones assembled locally still cost more than they do in the United States, thanks to high labour costs and expensive commercial rents.
iWatering
At least wannabe iPhone users in Brazil can get their hands on the things. In Venezuela the shortages that have hit everything from basic groceries to catfood had caught up with the gadget market well before the unrest that started in February.
Since 2010 telecoms service providers in Venezuela have been barred from purchasing direct from manufacturers and must go through a government intermediary, Telecom Venezuela. But Telecom is no longer authorising purchases by the providers, and their shelves are bare of phones. In the run-up to the December local elections, President Nicolás Maduro also forced retailers, especially of electronic goods, to slash their prices. Samsung-branded shops in Caracas look as if they have been looted.
A Venezuelan determined to get his hands on a 5s has a couple of options: either bring one in personally or buy one via MercadoLibre, Latin America’s equivalent to eBay. But only a tiny minority of Venezuelans can afford the phone in any case. Because of the huge gap between the official and unofficial exchange rates, goods that are imported at the black-market rate are out of reach to most. It would take the average earner nigh on two years to have enough to buy an iPhone.
Venezuela is a law unto itself, but neither is Argentina any place to buy the 5s. In 2009 President Cristina Fernández de Kirchner passed a law that was designed to promote industry in Tierra del Fuego, the southernmost tip of the country and a splendidly daft place to locate a high-tech cluster. Devices that are assembled in the Patagonian province benefit from a 60% reduction in excise taxes. Samsung and BlackBerry did decide to start producing in Tierra del Fuego as a result: their devices are widely available, bearing orange stickers to advertise the fact they are “made in Argentina”. Apple refused to play ball, and most stores do not stock iPhones.
The easiest place to buy the iPhone 5s is again on MercadoLibre. Another option is to have friends travelling to the United States or Europe act as iPhone mules, although that can mean sticky moments at customs: passengers are only supposed to bring goods worth $300 into the country, and a 50% tax is payable on anything in excess of that. Using an iPhone can also lead to political embarrassment: Argentina’s vice-president, Amado Boudou, once got into hot water for tweeting from his iPhone about the need to protect local industry.
Argentina is a member of Mercosur, a trade bloc that often seems ambivalent about trade. In the countries of the Pacific Alliance—Chile, Colombia, Mexico and Peru—things are easier for aspiring Apple customers. Consumers in these places have few problems getting hold of the iPhone 5s, provided they have two things: money and time.
“There are plenty of iPhones in Mexico. What’s lacking is purchasing power,” says Ernesto Piedras, head of the Competitive Intelligence Unit, a research firm in that country. BlackBerry and Samsung have 24% of the smartphone market each, says Mr Piedras, compared with Apple’s 14%. An iPhone 5s bought without a plan costs 10,599 pesos ($800). That is beyond the reach of most Mexicans, as are Telcel’s monthly plans (85% of mobile usage in the country is pay-as-you-go). So iPhone vendors tend to focus on selling not the 5s, but previous models that are more affordable. The black market is another option for cash-strapped consumers. Places like San Andresito, a sprawling marketplace in Bogotá, offer Colombians the chance to find iPhones at cheaper prices than usual.
Patience is the other requirement. Your correspondent in Mexico City recently acquired an iPhone 5s from Telcel, by far the biggest mobile carrier, for 4,000 pesos ($300), as part of a two-year plan. The process took two hours and the plan is stingy. Obtaining a smartphone contract in Peru similarly involves lots of queuing, lots of paperwork, and the waste of a few hours. The hassles do not end there. Customer service is poor and flaunting your new toy risks theft. That is true of other countries in the region, too. Diverse as it is, Latin America does have some things in common.
The Economics of Limiting Russia’s Expansion
Peter Boone is chairman of the charity Effective Intervention and a research associate at the Center for Economic Performance at the London School of Economics. He is also a nonresident senior fellow at the Peterson Institute for International Economics. Simon Johnson is a professor at the M.I.T. Sloan School of Management and former chief economist at the International Monetary Fund.
In the United States and Western Europe, discussion is focused on stopping Vladimir Putin from further expanding Russia’s territory. On present course, the West’s strategy looks set for more failure; only a major shift in economic strategy by the Ukrainian government is likely to make a significant difference. Giving or lending lots of money to Ukraine is unlikely to help and may even be counterproductive.
Today’s Economist
Perspectives from expert contributors.
Ukraine’s economic failure over the last two decades is astounding. When the Soviet Union broke up in 1991, Ukraine’s gross domestic product per capita was greater than Romania’s, slightly higher than Poland’s and about 30 percent less than Russia’s. Today, Poland and Romania enjoy more than twice Ukraine’s income per person and Russia nearly triple.
This dismal performance reflects partly a lack of natural resources, but also self-interested leaders who have lined their pockets rather than focus on growth. The Orange Revolution of 2004 brought Viktor Yushchenko to the presidency, after more than a decade of pervasive corruption, but this episode proved to be a great disappointment. The Yanukovych years that followed were even worse.
Ukraine’s economic situation has recently become more
desperate. If Ukraine is to pay all of its bills, the amount needed over the
next two years to make debt payments and cover the budget deficit on its current
trajectory add up to nearly
$40 billion. These bills are growing daily because of the severe disruptions
caused by the loss of Crimea, the continuing instability in eastern Ukraine and
the nonpayment for gas deliveries from Russia. Because of the West’s unbending
support for the current Kiev government, many Ukrainians expect large and
generous support to help the nation out of this mess.
Western diplomatic actions in recent months have
created nothing short of a fiasco for Ukraine and some of its neighbors.
Diplomats overtly welcomed the change to an anti-Russian government in Kiev, and
they celebrated the flight of the pro-Russian President Viktor Yanukovych. We
were all pleased to see some highly corrupt politicians toppled, yet, in the
midst of all these intrigues, some news organizations and diplomats lost sight
of the end game with Russia.
With no credible military threat and an unwillingness of politicians to inflict pain by applying sanctions against Russia similar to those imposed on Iran, Western politicians proved toothless. The Germans do not want to disrupt the supply of gas from Russia, the British do not want to undermine their status as a financial haven, and the Americans are concerned about reprisals against their companies with large exposures in Russia (e.g., PepsiCo, Exxon or Citigroup).
In a series of moves that appear to have been planned carefully, Mr. Putin has taken Crimea, won huge popular support in Russia and in much of Crimea and left the West holding financial responsibility for the rest of Ukraine.
There is no doubt that Russia may seek to annex more parts of Ukraine. Russian military intervention is possible, but the Crimean strategy has proven much easier. Time and momentum are on Russia’s side, so Mr. Putin can be patient. If Ukraine’s eastern and southern regions continue to flounder while Russia grows richer, it is only a matter of time before large separatist movements will develop in these areas.
Russia will make a success of Crimea as an example for others: pensions, government wages and other incomes can roughly double to meet Russian averages. The experience of debate and referendums in Quebec, Scotland, Catalonia and other regions all point to plausible democratic routes to exit that Russia can encourage.
A stable Ukraine, with an economy that catches up to its neighbors, is the best defense against disintegration. There is a chance to keep Ukraine united with its current borders (less Crimea), but it would require a striking change in Ukrainian economic strategy – something very hard to pull off with so many levers of power in the hands of the established political elite, who remain well entrenched.
Russia controls many of the levers for Ukraine’s success. It is Ukraine’s largest trading partner. Ukraine is heavily in debt to Russia and relies on Russia for most of its energy imports. Russia has been selling Ukraine natural gas at well below world prices. Russia also has substantial ability to promote riots, political intrigues and general instability. In short, unless Ukraine can normalize relations with Russia, it has little hope for growth.
In contrast with Russia’s influence, the West’s ability to affect Ukraine’s success is highly limited. The idea of providing Ukraine with a big loan from the International Monetary Fund and other forms of external financial assistance will not help much and may even make things worse. Given the financial state of Ukraine, such money could easily be wasted before Ukraine turns again, as it eventually must, toward better relations with Russia.
Greater integration of Ukraine into Europe, through the European Union, could set the institutional framework better placed for growth. Yet the potential for such an association agreement is one reason Russia has chosen to bring more pressure. However, a trade pact does not resolve Ukraine’s entrenched corruption, and any success still relies on Russia’s cooperation. The European Union needs to engage with Russia as much as possible, but events in Crimea make this hard.
One thing that Ukraine could do soon, to encourage growth and harness the goals of the Maidan revolution, would be to move quickly, and in a high-profile manner, against all forms of corruption. In 2004 Georgia fired all its traffic police, then hired new officers, with higher salaries, better equipment and less inclination to accept bribes (see this Princeton case study for more detail). Simplification of the tax system, changes in regulatory policy and changes to the judiciary can also reduce corruption.
But to take all these actions requires political legitimacy, and this can only be acquired through new presidential and parliamentary elections. The European Union pact, any kind of I.M.F. program and large-scale moves against corruption require a government that can make long-term commitments and demonstrate political strength.
The current government was selected after violent street demonstrations and early on revealed an anti-Russian stance that is at odds with keeping the nation unified and with harmonizing relations with Russia. Until there is political capacity to achieve significant reduction in corruption, Ukraine’s growth prospects and its ability to remain unified, remain limited.
박주하
Thanks Sophia!
See you there this Sunday!
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