Mark Thoma's summary of the frenzy swirling around the addition of Jason Furman to Barack Obama's economic team is a tour de force. Nobody in the econoblogosphere does a better job than Thoma of organizing together disparate blog posts, news articles, and academic papers, putting them into context and adding his own two cents. If you want to make up your own mind on whether Furman is, as Dean Baker might say, "closer to Wall Street than Main Street," on such issues as Social Security and the pros and cons of Wal-Mart, Thoma's Economist's View should be your first stop.
On Monday, after the announcement that Furman would be Obama's Director of Economic Policy, I wrote that "in the era of the econoblogosphere, every word uttered by an economic advisor to a prospective president is dissected, pored over, magnified and argued about endlessly by a battalion of always-online economists," and then sat back to wait and see what happened. I've had a hard time keeping up!
The most damning entry on the Furman resume -- from organized labor's point of view -- is a paper published in 2005 with the purposefully provocative title: "Wal-Mart: A Progressive Success Story."
The heart of Furman's argument is that Wal-Mart's low prices have such a huge positive effect on the overall economy as to outweigh whatever other negative impacts the company may deliver.
There is little dispute that Wal-Mart's price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Wal-Mart are enormous -- a total of $263 billion in 2004, or $2,329 per household. Even if you grant that Wal-Mart hurts workers in the retail sector -- and the evidence for this is far from clear -- the magnitude of any potential harm is small in comparison. One study, for example, found that the "Wal-Mart effect" lowered retail wages by $4.7 billion in 2000.
My own opinion, as eloquently set forth by Charles Fishman in his book "The Wal-Mart Effect" -- is that, among other things, Wal-Mart's low prices are the product of business practices that have severely deleterious structural impacts on product quality and the environment that aren't taken into account in Furman's number crunching. And after reading the paper, I can see why organized labor is unhappy with him -- he seems overly willing to interpret the data in support of Wal-Mart. But I also understand his larger point, which is that rather than try to restrict a single company from setting up shop in a particular region, or mandating that that company offer a specific level of health benefits to its workers, government should instead be beefing up the safety net so that all workers are operating from a more secure position. His concluding recommendations are worth repeating:
- Raise the minimum wage in stages to $7.25 an hour, a $2.10 increase.
- Expand the Earned Income Tax Credit by ending the marriage penalty and adding a "third tier" for families with three or more children. Or adopt more far reaching and progressive tax reform to benefit working families.
- Help families save and invest by making saving easier and more rewarding for moderate income families.
- Expand health insurance, moving to a system in which every American has affordable, quality health insurance.
Whaddya know -- Obama's new economist supports raising the minimum wage, universal health care, and progressive tax reform.
Works for me.