The Econmist - USA (2021-10-09)

38 United States TheEconomistOctober9th 2021

once  emergency  measures  are  now  rou­

tine. The Treasury must employ “extraordi­

nary  measures”  to  stave  off  an  imminent

default (such as pausing payments on cer­

tain kinds of retirement accounts) so often

now  that  they  are  barely  noticed.  These

had  been  in  effect  since  August.  Another

round  may  begin  when  the  December

deadline  approaches  but  eventually  they

will be exhausted, a new x­date will arrive,

and frantic negotiations will begin again.

The  more  often  Congress  plays  this

game,  the  higher  the  chances  of  a  miscal­

culation. On the other side of it would be a

painful  economic  crisis—all  the  more  be­

cause  it  would  be  entirely  self­inflicted.

Without the ability to issue more debt and

without  any  accounting  gimmicks  to  se­

cure  more  headroom,  the  Treasury  would

need to make difficult decisions. Daily out­

layswouldhavetomatchdailyreceipts,re­

sultinginovernight spendingcutsofas

muchas40%.Ifthegovernmentpriori­

tised paying interest on its debt, that

wouldrequirecessationofvitalpayments

likesocialsecuritychecksandhealth­care

paymentsorsalariesforsoldiersandfed­

eralemployees.Thatwouldcertainlyalso

invitelawsuits.Buttheriskofdefaulting

onthedebtispotentiallycalamitous:a me­

mofromresearchersattheFederalReserve

writtenduringthe 2013 debt­ceilingcrisis

predicted thatyields on American debt

wouldspike,thedollarwouldplungein

value,equitieswouldfallbya thirdanda

mildrecessionwouldensue.

Almosteveryoneagreesthatthisout­

comeischaotic,destructive,andentirely

senseless. So naturallyCongress willbe

hereagainina coupleofmonths.n

Facebook

Whistlewhile

youwork

“Y

ouarea twenty­firstcenturyAmer­

icanhero,”EdMarkey,a Democratic

senatorfromMassachusetts,saidonOcto­

ber5th.Hewasnotaddressingthefounder

ofoneofthecountry’slargestcompanies,

Facebook,butthewomanwhofoundfault

withit.FrancesHaugen,whopreviously

workedatthesocial­mediagiantbefore

becoming a whistleblower, testified in

frontofaSenatesubcommitteeforover

threehours,highlightingFacebook’s“mor­

albankruptcy”andthefirm’sdownplaying

ofitsharmfulimpact,includingfanning

teenagedepressionandethnicviolence.

The public haslong suspected Face­

bookoftwo­facedtoxicitybutlackedfresh

internalcommuniqués to proveit. That

changedwhenMsHaugenreleaseda trove

ofcorporatedocumentstoregulatorsand

theWall Street Journal. Facebook’s own

privateresearch,forexample,foundthat

its photo­sharing site, Instagram, wors­

enedteens’suicidalthoughtsandeating

disorders,yetitstillprioritised sending

youngusersengagingcontentthatstoked

theiranxiety,allwhileproceedingtode­

velopa versionofitssiteforthoseunder

theageof13.(Facebookhassincepaused

thoseplans,duetopublicpressure.)

Senators,whocannotagreeonsuchun­

controversialthingsaspayingforthegov­

ernment’sexpenses,unitedagainsta com­

monenemyandpromisedMsHaugenthat

they would hold Facebook to account.

Couldthathappenatlast?

Facebookhassurvivedscandalsbefore.

Congress has repeatedly called in tech

bosses  for  angry  questioning  and  public

shaming  without  taking  direct  action  af­

terward. Congressional hearings “have be­

come  like  ‘Groundhog  Day’  and  haven’t

really mattered”, is how Paul Gallant of Co­

wen  Washington  Research  Group,  which

tracks tech policy, bluntly puts it. In 2018 a

different  whistleblower  outed  Facebook

for  its  sketchy  collaboration  with  a  re­

search organisation, Cambridge Analytica,

which  allowed  users’  data  to  be  collected

without their consent and used for politi­

cal profiling by Donald Trump’s campaign.

Facebook’s  founder,  Mark  Zuckerberg,

went  to  Washington  to  apologise,  and  in

2019 America’s consumer­protection agen­

cy,  the  Federal  Trade  Commission,  agreed

to a $5bn settlement with Facebook. That is

the  largest  fine  ever  levied  against  a  tech

firm. However, no laws were ever changed

to rein in the company’s misbehaviour. 

DALLAS

Whythelatestseriesofleaksismore

politicallypotentthanpreviousones

T

hepastyearanda halfhasservedup

a reminder, if one were needed, of

how unequal America is. The wealthiest

Americans have seen their assets in­

crease in value thanks to a stockmarket

rally, especially in the tech sector. At the

opposite end of the ladder, millions of

mostly low­wage workers have lost their

jobs, while also facing a higher risk of

death from covid­19. But there is also

some good news to set against this: the

incomes of poor Americans have grown

more quickly than those of rich ones.

The earnings out­performance for

poorer Americans started in 2018. JPMor­

gan Chase Institute, a think­tank within

the bank, parsed data on more than 7m

households. Early in the 2010s, as the

economy recovered from the global

financial crisis, the top quartile of in­

come earners reaped the fastest income

gains and the bottom quartile brought up

the rear. However, a few years ago their

positions flipped. And over the course of

the pandemic the gap has widened, such

that, by May, incomes for the lowest

earners were growing by about 7% annu­

ally, compared with 4.5% for the highest

earners (see chart).

What explains the shift in fortunes?

Some of the credit goes to policymakers’

willingness to run a hot economy before

the pandemic. Traditionally, economists

have worried that low unemployment

pushes up wages and, by extension,

inflation. But even with unemployment

rates below 4%, inflation remained

subdued. At the same time, wage growth

was most pronounced at the lowest

rungsoftheincomeladder(givenan

additional boost in some states by higher

minimum wages), a relationship that

was first observed by Arthur Okun, an

American economist, in a paper in 1973

about how “high­pressure” economies

tend to promote upward labour mobility

as companies pay more for workers.

The spread of covid­19 created a low­

pressure economy, almost overnight.

Unemployment, which would normally

depress wage growth, soared. And with­

out any help from the federal govern­

ment, that is what would have happened.

But thanks to an expansion of unemploy­

ment insurance as well as a series of

stimulus cheques, the reality was very

different. Poorer Americans have been

the main beneficiaries, with far fewer

suffering drops in incomes than would

have otherwise been the case.

Incomes

Piketty lines

WASHINGTON,DC

Ever-widening inequality is not animmutablelawofa moderneconomy

Playing catch-up

United States, median income growth*, %

By quartile of household income

Source:JPMorgan

ChaseInstitute

*Two-year real

growth, annualised

8

6

4

2

0

21201918171615142013

Richest

Third quartile quartile

Second quartile

Poorest quartile