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Etsy CEO: The gig economy is a mess. Here are 3 ways Congress can improve it

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When Patricia Beet’s employer filed for bankruptcy shortly after the 2008 financial crisis, her job was relocated from Chicago to Los Angeles. Separated by three time zones, Patricia and her husband, David, started cooking together virtually through Skype as a creative way to connect.
Money was tight, so instead of buying presents, the couple began gifting their culinary creations, from infused sugars and salts to BBQ seasoning. Before long, they set up shop on Etsy. More than 24,000 sales later, their passion project has become a full-time income stream and allowed them to reunite in the Midwest.
Patricia and David’s story, while unique, is illustrative of the new opportunities within the gig economy that emerged in the United States in the 2000s and grew exponentially after the Great Recession. In May of 2017, 21.4 million people worked in “contingent” jobs or “alternative” jobs, according to the US Bureau of Labor Statistics. Other measurements show that more than a quarter of workers participate in the gig economy. And although the government has only recently begun attempting to track statistics for the gig economy, its economic footprint is evident. According to our newly released economic impact study, conducted by ECONorthwest, an economic consulting firm, Etsy sellers generated more than $4.7 billion in 2017 and created 1.24 million jobs in the US economy.
But not all gig economy workers see the same success that Patricia and David did, and not all gig economy jobs are created equal. In fact, gig economy workers are more than three times as likely as full-time employees to be uninsured. Additionally, self-employed workers bear the full weight of payroll taxes, and online sellers face additional costs due to state internet sales taxes.
If our newly elected representatives truly believe in positioning the gig economy for long-term success, they will take action and make America’s countless gig economy workers and microentrepreneurs a top priority. Here are some steps our representatives can take:

Income protection

The gig economy encompasses a broad range of work circumstances, from people who build businesses to sell their wares, to those selling their labor via the sharing services that have exploded in popularity in recent years. But they all can face unpredictable income. An Etsy seller, for example, may experience an influx of sales around the holidays.
To combat the income volatility that both types of workers face, Congress should expand the Earned Income Tax Credit and allow it to be administered quarterly, as well as offer streamlined tax-advantaged savings accounts.
Microentrepreneurs and gig economy workers deserve a simplified tax code that eliminates many administrative burdens that owners currently face, and also gives them the chance to invest more time and money back into their businesses.
The Supreme Court’s recent decision, South Dakota v. Wayfair, Inc., expanded states’ authority to tax online purchases, and, as a result, potentially subjects microentrepreneurs to tax audits from states outside their own. There needs to be a fair, simple federal solution.
Proposed legislation, such as the Online Sales Simplicity and Small Business Relief Act, would protect microbusinesses from this onerous and chaotic tax environment — which spans tens of thousands of tax jurisdictions — by providing a simplified national sales tax solution. This would not only calm the fears of online small business leaders across the country, but also create a more manageable way for individuals to tackle business taxes.
Our representatives could also support microentrepreneurs by giving them access to a social safety net.
Members of the gig economy often lack access to employer-sponsored benefits, like health insurance, retirement savings and unemployment protection. They need portable benefits that they can fund from any job and take with them from gig to gig. That’s why we’ve proposed a series of policy reforms, from automatic tax withholding for 1099s to streamlined savings tools, which would provide a social safety net for everyone who works, regardless of how they work.
There are promising innovations that offer great models for success. For instance, Washington State launched a “Paid Family and Medical Leave” program that will cover both salaried and self-employed workers who need to take time out of the workforce due to illness or after having a child — a significant development and a model for other states and the nation at large.
Likewise, the National Domestic Workers Alliance launched an online platform — Alia — that connects housekeepers to portable benefit plans that allow workers to access and afford insurance options that were unavailable to them before. And innovative financial technology companies like Digit and Stash are now introducing features that help self-employed workers better manage income volatility, save for emergencies, and invest their money to build wealth overtime. Congress could build on these and other innovations to advance a policy agenda that supports the workforce of today and tomorrow.
The gig economy is here to stay, thanks to a number of factors that have and will continue to impact the traditional labor market, including people’s desire to have more control over their work-life balance, the rapid development of automation technology, wage stagnation and the need for supplemental income. Driven by these forces, among others, tens of millions of Americans are likely to join the gig economy in the years to come. That means we have an imperative to strengthen and improve the success of it for the next generation.

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India's economy is booming. Now comes the hard part

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India is now the world’s fastest-growing major economy, and Prime Minister Narendra Modi has won praise for shepherding that momentum.

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But the picture for the South Asian giant isn’t all rosy, economists told CNBC: As impressive as the country’s growth has been, it has not seen that prosperity evenly distributed. That’s especially relevant for the prime minister, who is up for reelection in 2019, because inclusive growth had been a major promise during his 2014 campaign.

“The Indian economy has shown sustained strong growth under the Modi government, with GDP growth of around 7 percent every year in fiscal 2017-18 and similar growth momentum forecast for 2018-19,” Rajiv Biswas, Asia Pacific chief economist at data firm IHS Markit, told CNBC.

A 2018 report from international nonprofit Oxfam looked at different assessments from before and after Modi’s administration to conclude that more and more of the country’s income is going “to the top 10% and top 1% of the population.”

Overall inequality also appears to have grown, according to Credit Suisse’s Global Wealth Report, which said the 2018 Gini coefficient for wealth in India rose to 0.854 from 0.83 in 2017 and 0.804 in 2011. The closer a country’s Gini value gets to 1.0, the more unequally distributed is its economy.

“On most indicators, India is now among the countries with the highest level of inequality. But the analysis also shows that unlike most countries which started with high inequality, inequality in India has continued to rise,” Oxfam said. “In the context of the acceleration of growth rate of Indian economy, the rise in inequality raises issues of the distribution of gains from the growth.”

Oxfam separately reported that its online surveys showed 73 percent of respondents in India said “the gap between the rich and the poor needs to be addressed urgently or very urgently.”

Jayati Ghosh, professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University, blamed longstanding inequality in the country on a lack of political will and inefficient domestic policies: “Inequality is a political choice. The hold of the elites and powerful lobbies over government policy is very strong,” she said.

Modi, meanwhile, campaigned in 2014 on the slogan “Sabka Saath, Sabka Vikas,” which translates in English to “together with all, development for all.”

His party manifesto from that election year included some ambitious goals for improving the standard of living for all Indians by creating jobs, increasing profits for farmers, eradicating corruption, curbing inflation and more.

Since coming to power, Modi has taken public steps toward keeping some of those promises — and he’s made some new ones along the way — while others have seen fewer headlines. Here’s how experts think the Indian leader has fared so far.

Modi made a promise to the electorate in 2014: “I will bring back every rupee stored away in foreign banks and ensure it is used for the rehabilitation of the poor.”

The prime minister took a huge step toward that goal in 2016 as he moved to demonetize the 500- and 1,000-rupee notes in order to tackle the problem of so-called black money. Undeclared, untaxed and potentially criminal money in the economy was believed to largely exist in big bills, and so the scheme was designed to draw that cash out of the shadows. The thought process was that many bills would not be exchanged, as criminals refused to declare their funds, and so those enterprises would lose out.

Experts have been split on how successful the policy was in weeding out black money — with some data showing India may failed in that regard — and there have been questions about undesired consequences such as job losses and note shortages.

“A major negative for PM Modi on the policy front was the demonetization debacle, with a poorly thought-out plan (which) was hastily implemented and created economic chaos for several months,” Biswas said.

The Centre for Monitoring Indian Economy estimated that about 1.5 million jobs were lost during January through April 2017, following the implementation of the policy in late 2016.

Demonetization might not have been the right move for an economy that is largely cash based, according to Ghosh.

“India is largely a cash-based economy. Many small businesses and people are cash dependent. Many ordinary Indian citizens lost their jobs due to demonetization. All while the billionaires with huge amounts of unaccounted money stashed away their money electronically,” she told CNBC.

The government has sought to highlight different reasons for yanking out 86 percent of the currency in circulation as evidence suggested the exercise did little to curb the amount of undeclared income in the country or stifle funding to terror groups. In recent months, government officials have cited a dramatic increase in online transactions in a traditionally cash-dependent economy as a notable achievement of the demonetization drive.

On top of that, some have said the demonetization drive was not a total failure because it did bring some benefits to India’s banking sector.

India’s Parliament had for years been discussing the possibility of a Goods and Services Tax (GST) when Modi in 2017 passed a bill establishing such a levy.

That move represented the prime minister keeping a promise: Modi’s Bharatiya Janata Party (BJP) said in 2014 that it would overcome the bureaucratic deadlock and finally bring “on board all state governments in adopting GST.”

In addition to drawing in more government revenues, the measure — hailed as the country’s biggest tax reform in 70 years — was also aimed at reducing illicit transactions.

Although GST had been discussed for many years, “previous governments could not muster the political courage or will to implement this vitally important but politically challenging reform,” said Prasenjit K. Basu, a Singapore-based economist and author of “Asia Reborn: A Continent Rises from the Ravages of Colonialism and War to a New Dynamism.”

Still, there have been criticisms about Modi’s rollout of the new tax. Those center on how quickly the government implemented the GST in a business marketplace that was not well prepared to accommodate the procedural changes.

For one, slow GST processes reportedly continue to hurt exporters, who are entitled to refunds. Exports in October declined 1.2 percent largely on account of the refund delays, according to an analysis posted on the website of the Reserve Bank of India.

Although the Modi-led government had trumpeted the GST as a tax regime made efficient through digital platforms, it has suffered several hiccups on that front. For example, many exporters said they were unable to file refunds for input tax credit, which reportedly resulted in their funds being blocked in the initial months.

“The GST policy was not implemented with the needed infrastructure in place. What would have taken other governments three years to gradually implement was rushed in India within months — and that, too, to a less educated population,” said Ghosh.

Smaller local businesses were most vulnerable to bearing the taxes and additional costs from consulting accounting services, Ghosh added.

If implemented well, however, the GST policy could ultimately bring benefits to the country.

The tax regime “will help to boost Indian fiscal revenues over the medium to long term, as well as helping to improve industrial competitiveness by significantly lowering logistics costs for domestic manufacturing firms,” Biswas said.

Tax collections are rising as a share of GDP in the wake of demonetization and GST, according to both a government survey and private-sector analysis.

The BJP said in its 2014 manifesto that it wanted to tackle the issue of joblessness and Modi reportedly promised that his administration would create 10 million jobs every year.

Yet the labor market conditions have not charted a steady improvement under Modi: The country’s unemployment rate reportedly hit a two-year high in October. Opposition politicians have seized on such issues to charge the prime minister with not fulfilling his promises on job creation.

Modi, for his part, said earlier this year that the criticism was unfounded and he had succeeded in creating 10 million over a year. Opponents have argued about the validity of the prime minister’s analysis leading to that figure.

Unemployment in India has disproportionately hit young people. Despite 2015’s overall unemployment level of 5 percent, 16 percent of youth and higher educated Indians were designated unemployed, according to a report by Azim Premji University.

Modi’s party’s 2014 campaign manifesto had promised to boost labor-intensive sectors such as manufacturing to tackle the problem of employment. However, experts said the manufacturing sector has not been creating enough jobs and the industry faces foreign competition.

The pressure Modi faces to create more jobs and fulfill his promise may increase as the rapidly growing youth population enters the workforce and as the manufacturing sector faces potential competition from other Asian giants.

“Around 7.5 million young Indians will join the working age population each year over the next three decades, creating a tremendous policy challenge for the Indian government to generate sufficient new jobs to avoid rising unemployment and social unrest,” Biswas said.

The BJP made another 2014 promise to deliver inclusive development by improving infrastructure and boosting the farming sector in the rural regions of India. It said it would take steps to “enhance the profitability in agriculture, by ensuring a minimum of 50 percent profits over the cost of production.”

Modi had reportedly echoed that promise to raise the country’s minimum support price (MSP) offered to farmers to 50 percent above the cost of production.

However, months after being elected, the government reportedly argued it would not be able to enhance the MSP for agricultural produce to that level because prescribing such a high price was not possible and such a step would “distort markets” and “be counterproductive in some cases.”

Across the country, farmer protests have taken place demanding minimum income, minimum prices for crops and unconditional loan waivers.

Due to pressures from farmers — and with the 2019 elections fast approaching — the government substantially hiked the MSP for 14 summer-sown crops for the 2018-2019 marketing season. In October, the winter-sown crops saw their own minimum price hikes, with reports claiming that the move will ensure a minimum 50 percent return to farmers over the cost of production of those products.

Recently, the prime minister reiterated his government’s resolve to ensure MSP is 50 percent over the cost of production and forecast a doubling of farm incomes by 2022.

Such pronouncements have been met with suspicion due to delays and the timing of such hikes a year before reelection. According to Ghosh, that’s because farmers have been one of the group’s most disappointed in the Modi administration.

“The reason you are getting so many farmers protest is because farmers are possibly the worst cheated. It is the farmers and the youth that have been the most betrayed,” she said.

Other than promises in the agricultural sector, Modi also made pledged to push for greater financial inclusion: In August 2014, he promised greater access to financial services for Indians who did not have a bank account.

That promise has seen real progress, observers said.

Compared to mid-2014, when 60 percent of households did not have access to a basic bank account, the government has since extended basic banking services to a large portion of households that had never previously held a bank account.

Experts praised that reform, noting that it allows government benefits to move directly into the millions of new accounts.

“There could hardly be a more inclusive reform than this,” Basu said.

During a keynote address this week at the Singapore FinTech festival, Modi described India’s progress in bringing financial inclusion to the most remote villages making it a reality for 1.3 billion Indians. Such a feat he described “was not easy in a country of India’s size.”

The BJP promised in its 2014 manifesto that it would work to create “universal healthcare that is not only accessible and affordable, but also effective … for the common man.”

In September of this year, Modi’s government launched its own massive health insurance program, expected to cover half a billion of India’s poorest citizens.

The Ayushman Bharat scheme, dubbed “Modicare” by some, has been trumpeted as the largest government-funded health care scheme. It plans to provide a yearly hospital cover of up to $6,950 per family.

Basu said the scheme will be covering “the last 50 percent of households in rural India who did not have health insurance,” which he described as “a dramatic widening of a basic social service.”

The plan is ambitious, but there have been questions about whether there’s been sufficient funds allocated for an effective implementation.

— CNBC’s Justina Crabtree and Yen Nee Lee contributed to this article.

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Cramer: For the first time, Powell seems concerned about the economy, and that's good

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Federal Reserve Chairman Jerome Powell’s comments about the U.S. economy on Wednesday may have been the central bank chief’s first real acknowledgment of an economic slowdown, CNBC’s Jim Cramer says.

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“It’s the first time that I’ve actually heard Jay Powell say, ‘You know what? We’ve got to be careful, because there are signs of the economy slowing,’ whether it be because of tariffs, whether it be just because genuine economic activity seems to be cooling off,” Cramer told investors on “Mad Money.”

During a question-and-answer session in Dallas, Powell conceded that the global economy is not growing at the same pace it was last year, but said that overall, the domestic picture looks good. He described the global layout as gradually “chipping away” at the pace of growth but said it is “not a terrible slowdown.”

To Cramer, Powell’s remarks “basically amounted to a realization” that the Fed’s interest rate hikes are affecting the U.S. economy.

“If you’re thinking that way, you’re not going to be thinking, ‘You know what? I’m going to slap on a rate increase in December, and then I’m going to just add three more blindly in 2019,'” Cramer said.

“He gets that the tightenings have had an impact and that maybe he shouldn’t keep tightening, because the impact is going to get worse and worse and worse for the economy,” the “Mad Money” host continued. “And he said he did not want to be responsible for setting us back.”

Powell has been a target of criticism from Cramer and from President Donald Trump for the Fed’s aggressive plan to hike interest rates to a level where they are neither accommodative nor restrictive to the economy. The central bank is expected to hike interest rates once more in December and three times in 2019.

But even Powell’s newfound sense of caution doesn’t guarantee that the central bank won’t continue to raise rates to economically crippling levels, Cramer warned.

“I need everybody to think that things are going to be awful,” he said. “The bear market that everyone is talking about? Well, it’s got to be universally accepted and people have to keep leaving. And if they don’t, then what’s going to happen is someone’s going to say, ‘You know what? I heard Powell. I’m going to stay in.’ Every weak hand has to go.”

The major averages endured another day of declines Wednesday as weakness from shares of Apple and the banking sector weighed on the broader market.

— CNBC’s
Jeff Cox
contributed to this report.

Disclosure: Cramer’s charitable trust owns shares of Apple.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer’s world? Hit him up!
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Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com

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Powell credits Fed policy for the US economy being 'in a good place'

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Federal Reserve Chairman Jerome Powell expressed confidence in U.S. economic strength Wednesday and said markets will have to get used to the idea that the central bank could raise rates at any time starting in 2019.

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During a question-and-answer session in Dallas, Powell conceded that the global economy is not growing at the same pace it was last year. But he said overall the domestic picture looks good. He described the global picture as a “gradual chipping away” at the pace of growth but said it is “not a terrible slowdown.”

“I’m very happy about the state of the economy now,” he said in an interview with Dallas Fed President Robert Kaplan. “Our policy is part of the reason why our economy is in such a good place right now.”

That confidence has translated into a commitment by the policymaking Federal Open Market Committee to continue to increase short-term interest rates in a gradual but steady manner. The committee has approved three quarter-point increases this year and is expected to go through with a fourth in December.

Powell has faced some criticism for the Fed’s policy. President Donald Trump has been vocal in his belief that the central bank’s interest rate policy is the biggest threat to the growth seen during his administration.

For his part, Powell has refused to be drawn into a public debate with the president, maintaining that the Fed is independent and will continue to do what it thinks is best to maintain economic growth while keeping inflation under control and ensuring financial stability.

“We have a very important job that Congress has assigned us: Serve the public,” he said. “That’s our sole focus. We don’t try to control things we don’t control. We try to control the controllable. We’re just trying to do our jobs, and we’re doing fine.”

Powell did nothing to dispel anticipation that the rate hikes would continue. In fact, he said that in 2019, investors should know that the practice of the Fed only hiking rates quarterly, at meetings where the chair holds a news conference afterwards, will no longer be the case.

That’s because Powell announced earlier this year that he will be meeting with the press after all eight FOMC meetings. The committee has not wanted to make rate decisions without the public having the benefit of hearing the chair explain why.

“Certainly all meetings are live now, there’s no question about it now,” he said.

“Over time, folks will get used to the idea that we can and will move at any meeting,” he added.

However, he did say the Fed will continue to monitor financial conditions.

“We have to be thinking about how much further to raise rates and the pace at which we will raise rates,” he said. “I think the way we will be approaching that is to be looking really carefully at how the markets and the economy and business contacts will be reacting to our policy.”

“Our goals will be to extend the recovery … and to keep unemployment low and inflation low. So that’s how we’re going to think about it,” he added.

Asked about the recent market volatility, which brought the major averages close to correction levels of a 10 percent decline, Powell said stock prices are “one of many, many factors” used to assess the economy.

The Fed has been hiking interest rates as the U.S. economy has escaped the tepid pace of GDP growth that had plagued the recovery. The economy has maintained a 3 percent-plus growth rate through the year and is expected to close the fourth quarter around the same level.

Globally, the case has been different. The synchronized growth that had been the big story of 2017 has faded, putting the U.S. ahead of many of its global peers.

“Our mandate is for U.S. economic conditions — stable prices, maximum employment and financial stability, but it’s really important what happens around the world,” Powell said.

“A strong U.S economy is good for the global economy,” he added later.

Powell repeated concerns brought up in the past about the unsustainability of the current fiscal path in the U.S. Debt and deficits continue to pile up, with the national IOU over $21 trillion and the budget shortfall approaching $1 trillion a year.

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