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Fidel’s Cuba is long gone

Fidel’s Cuba is long gone

Economic news
Cuba is no longer the Americas’ lonely outpost of communism. This Caribbean island has become a nation of entrepreneurship, democratic aspiration, even pro-Americanism. About 13% of Cuban workers are in the private sector, operating their own businesses. They are called “cuentapropistas,” meaning “people who work for themselves” – not for the government. Much of this economic activity is due to former president Raul Castro, who expanded the rights of Cuban business owners, albeit in fits and starts. Raul’s brother Fidel Castro, who led Cuba’s 1959 communist revolution and ran the country until 2008, would not recognize his country today. Since Cuba’s emerging private sector depends heavily on tourism – including, until a recent Trump administration crackdown,...
3 tips for Justin Trudeau on how to say ‘I’m sorry’

3 tips for Justin Trudeau on how to say ‘I’m sorry’

Economic news
“I’m sorry.” These two words may seem simple, but the ability to express them when you’re in the wrong is anything but – particularly for those in the public eye. Canadian Prime Minister Justin Trudeau, to name a recent example, had to apologize several times since a photo and a video of him in brownface and blackface makeup surfaced recently. Trudeau’s troubles echo Virginia Gov. Ralph Northam’s difficulty apologizing for a photo on his medical school yearbook page of a man in blackface and another wearing the dress of a Ku Klux Klan member. As a language scholar, I’ve tried to get to the bottom of just what makes an apology effective by analyzing dozens of mea culpas. While some offered authentic apologies, many more seemed defensive, insincere or forced. With t...
Why the United Auto Workers GM strike is headed for failure

Why the United Auto Workers GM strike is headed for failure

Economic news
The United Auto Workers union has a long history of successful strikes against General Motors. The most famous example is the 1936 to 1937 Flint strike that resulted in higher wages and the union being recognized for the first time as the sole collective bargaining representative of workers by GM. For the next 15 years, UAW strikes were relatively common and extremely successful, culminating in the Treaty of Detroit in 1950, which shaped management-labor relations for decades. Even today, worker strikes in most industries are still generally considered an effective tactic. So when UAW on Sept. 15 began its first nationwide strike against GM in more than a decade – for, among other things, higher wages and an end to its two-tiered salary system – you might think workers stood a ...
It’s high time someone studied marijuana taxes – so we did

It’s high time someone studied marijuana taxes – so we did

Economic news
Consumers don’t seem to mind paying sales taxes on things like food and clothing. Marijuana may be a different story. As marijuana taxes are imposed in more states, many recreational marijuana users might cross interstate borders to avoid them or even hoard stocks of weed in anticipation of them. If state governments don’t adjust to such behavior, it will reduce revenue and most likely increase overall marijuana consumption. Not many states have studied the implications of pot taxes on consumer behavior. So we did. I’m a Ph.D. student of public policy, and my colleagues and I studied data from marijuana users in Oregon. We wanted to see what the economic consequences of marijuana taxes are on this billion-dollar industry. Also, we wanted to help local governments to understa...
Fed’s rate cut signals a recession may be ahead – and it may not have enough ammunition to fight it

Fed’s rate cut signals a recession may be ahead – and it may not have enough ammunition to fight it

Economic news
The Federal Reserve seems a lot more concerned about the state of the economy than it’s been letting on. The Fed lowered its target interest rate by a quarter point on Sept. 18, the second such cut since July – and the first reductions since the Great Recession more than 10 years ago. Judging by the words of Fed Chair Jerome Powell, this isn’t that big a deal. In his statement following the decision, he said: “We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks.” True, the economy has been pretty strong for 10 years now, pushing the unemployment rate to a near record-low 3.7%. But in my view, as an economist and expert on monetary policy, Powell’s calm words belie a deeper conc...
Wall Street is ignoring the omens of recession – here’s why

Wall Street is ignoring the omens of recession – here’s why

Economic news
The world is on the brink of a recession, if all the breathless headlines are to be believed. So why are U.S. stocks near all-time highs? That’s a question my MBA students have been asking me lately. Even the Federal Reserve is concerned – at least worried enough to reduce U.S. borrowing costs for the second time this year. Stocks are usually considered a barometer of a company’s future prospects, so rationally you’d think market prices would be a lot lower if a recession were close at hand. After all, recessions are a drop in economic activity, which means consumers and businesses are buying less stuff. The answer to my students’ question has a lot to do with profits and interest rates, but also “animal spirits.” Moving in mysterious ways Both the Dow Jones Indu...
Reparations are essential to eliminating the substantial wealth gap between black and white Americans

Reparations are essential to eliminating the substantial wealth gap between black and white Americans

Economic news
Four hundred years ago, America’s first enslaved Africans arrived in Virginia. Centuries later, black Americans have managed to accumulate some wealth, but it still pales in comparison to that of whites. This racial wealth gap is a result not only of the horrors of slavery but also policies – such as Jim Crow laws, redlining and modern-day mass incarceration – that followed. The average white family with at least one working adult over 25 years old owned more than nine times as much total wealth as a black one in 2016. As a scholar of wealth inequality and its causes, I believe the promise of equal opportunity for all remains unfulfilled as long as this massive gulf persists. A variety of proposals have been suggested by Democratic candidates for president and others to cl...
This tax credit wasn’t meant to help with housing, but that’s exactly what it’s doing

This tax credit wasn’t meant to help with housing, but that’s exactly what it’s doing

Economic news
As rents rise and wages stagnate, many families struggle to find affordable housing in the U.S. This is especially true for low-income households who often spend more than half their income on rent. The U.S. has a number of housing policies to help low-income families find and afford housing, but only about one quarter of eligible households got assistance in 2018. Thus, my colleague Katherine Michelmore and I considered whether a different type of policy – the Earned Income Tax Credit (EITC) – might help improve families’ access to housing by giving parents more disposable income. We wanted to know if further expanding the credit might help address the housing affordability crisis. Getting money back The EITC is a refundable tax credit that provides a subsidy to mostly lo...
Will Trump’s trade war with China ever end?

Will Trump’s trade war with China ever end?

Economic news
President Donald Trump recently escalated his trade war with China, threatening to impose a 10% tariff on the remaining US$300 billion of untaxed Chinese imports. If the new tariff goes into effect in September as promised, virtually all Chinese exports to the U.S. would be subject to levies ranging from 10% to 25%. China retaliated by letting the value of its currency fall to the lowest level in more than a decade and halting all crop imports. Many Americans like me are now wondering: Is there any end in sight? How to win an economic war As a scholar of trade policy, I’ve repeatedly made the point that free exchange is a positive sum game – meaning every participating country can benefit – rather than zero sum — as Trump seems to believe. This is why commercial disputes ...
How corporate bankruptcy works

How corporate bankruptcy works

Economic news
More than 20,000 companies file for bankruptcy every year. Although companies follow many different paths to bankruptcy, each one encounters a process that is carefully designed to balance the rights of debtors and creditors. As I’ve learned from studying and practicing bankruptcy law, the system is not perfect, and sometimes outcomes seem unfair. But bankruptcy is definitely not a “get out of jail free” card for companies deep in debt. Making the best of a grim situation To most people, bankruptcy has a negative image. And for good reason: A filing almost always means there’s not enough money to go around. But the system makes the best of a grim situation by imposing an orderly and open process that preserves value and encourages negotiation. Bankruptcy reorganizati...