The Federal Reserve today announced a new approach to monetary policy, announcing that it would keep interest rates low until unemployment hits 6.5 percent (or inflation exceeds 2.5 percent). This is the first time the Fed has explicitly laid out an unemployment target.

During a press conference today, Federal Reserve Chairman Ben Bernanke explained that the Fed took its latest step due to the “enormous waste of human and economic potential” that is resulting from persistently high unemployment:

It’s been about three and a half years since the economic recovery began. The economy continues to expand at a moderate pace. Unfortunately, however, unemployment remains high. About 5 million people, more than 40 percent of the unemployed, have been without a job for six months or more and millions more who said they would like full-time work have been able to find only part time employment or have stopped looking entirely. The conditions now prevailing in the job market represent an enormous waste of human and economic potential.

A return to broad-based prosperity will require sustained improvement in the job market which in turn requires stronger economic growth. Meanwhile, apart from some temporarily fluctuations, largely reflected swings in energy prices, inflation has remained tame and appears likely to run at or below the Federal Market Committee’s 2 percent objective in coming quarters and over the longer term. Against a macro economic backdrop that includes both high unemployment and subdued inflation, the FOMC will maintain its highly accommodative policy.

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As Tim Duy explained at Fed Watch, “The Fed delivered an early Christmas present to the economy by acting above expectations with not only a one-for-one conversion of Operation Twist to outright asset purchases, more than doubling the pace of balance sheet expansion, but also shifting the communications strategy to thresholds. The latter ties policy explicitly to outcomes rather than dates, which I think is the appropriate direction for policy.” Several members of the Federal Reserve board have been pushing for the central bank to adopt an explicit unemployment target.

Bernanke is also right to worry about the plight of the long-term unemployed. Due to an expiration of extended federal unemployment insurance, only one-quarter of the nation’s unemployed will have access to unemployment benefits come January.

The House Republicans latest “counter offer” to President Obama’s plan for averting the so-called “fiscal cliff” reportedly includes a full extension of the Bush tax cuts, including those for the richest 2 percent of Americans. But an aide to Speaker of the House John Boehner (R-OH) said that the rate on the rich does not merit an argument, because it would be rendered “moot” by the tax reform plan the GOP supposedly plans to pursue.

However, the point is far from “moot.” Starting a tax reform effort — which for the GOP means cutting tax rates while eliminating loopholes and deductions — with the revenue baseline lower that that set by President Obama will result in revenue being lower post-tax reform, unless Republicans agree to a huge revenue increase as a component of tax reform.

Here’s why. Lawmakers usually assert that they want tax reform to be revenue neutral, meaning the same amount of revenue raised via the closing of loopholes and elimination of deductions is dedicated towards lowering rates. So starting from a baseline that includes an expiration of the Bush tax cuts for the rich — and thus is $800 billion higher — makes for a different revenue target.

The Simpson-Bowles deficit reduction plan, much lauded by conservatives despite the fact that it raises significantly more revenue than Obama’s plan, baked the expiration of the Bush tax cuts for the wealthy into the cake, and laid out a tax reform plan from there.

But Boehner’s gambit is to start tax reform with a baseline at least $800 billion lower than that envisioned by Obama, thus rigging the game in the GOP’s favor. Boehner and Republicans can then call for “deficit neutral” tax reform that permanently enshrines the revenue level included with the Bush tax cuts. So at the end of the tax reform effort, the GOP would have ensured that no more revenue is raised than was raised by the Bush tax system, and possibly far less will be.

Fast food workers in New York City briefly walked off the job last month to protest the low wages endemic to their industry. Over the last several years, fast food companies — most prominently McDonald’s and Yum! Brands, which owns Kentucky Fried Chicken, Pizza Hut, and Taco Bell — have reaped huge profits while employing some of the largest numbers of low-wage workers in the country.

At the same time that they’re paying their workers bottom-of-the-barrel wages, these companies give huge salaries to their CEOs. Case in point, McDonald’s CEO made $8.75 million last year, while an average McDonald’s employee would need to work more than one million hours to amass such a sum, as Bloomberg News noted today:

The pay gap separating fast-food workers from their chief executive officers is growing at each of those companies. The disparity has doubled at McDonald’s Corp. in the last 10 years, according to data compiled by Bloomberg. At the same time, the company helped pay for lobbying against minimum-wage increases and sought to quash the kind of unionization efforts that erupted recently on the streets of Chicago and New York. [...]

[A McDonald's employee] would need about a million hours of work — or more than a century on the clock — to earn the $8.75 million that McDonald’s, based in the Chicago suburb of Oak Brook, paid then- CEO Jim Skinner last year.

About one in four Americans will be working in a low-wage job over the next decade. And low wages don’t just hurt workers: they hurt those workers’ children too, as a recent report from the Pew Research Center showed.

Meanwhile, chief executives at the 50 companies employing the largest number of low-wage workers made an average of $9.4 million last year. CEOs now make an average of 380 times as much as the average worker.

CNN’s Dana Bash is reporting that House Republicans have offered an untenable new deal to the White House in the ongoing negotiations to avert the so-called fiscal cliff, demanding, Democratic sources say, that the Bush tax cuts for the top 2 percent of Americans be made permanent.

House Speaker John Boehner (R-OH) unveiled the GOP position during a “tense” phone call Tuesday night with President Obama. The offer comes as Democrats say that any final deal must include an increase in marginal tax rates for the highest income earners and a growing number of Republicans are pressuring Boehner to give-in on the inscrease.

From Bash’s report on Wednesday morning:

BASH: I talked to a Democratic source who said that a counter offer that House Republicans sent back to the White House late yesterday included a call for a permanent extension of the Bush-era tax cuts for the top 2 percent. Now you know that we’ve been talking constantly about the fact that the biggest divide between the two when it comes to taxes is that tax break for the wealthiest. And so this Democratic source, who I talked to familiar with the proposal, said this was a sign to the White House that the Republicans are either unwilling or not capable of offering something that can pass the House and the Senate and, more importantly, that the president can sign, because he has said he does not want to — he wants to raise tax rates for the wealthiest Americans.

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Republicans have publicly proposed $800 billion in new revenues by closing loopholes and deductions.

A Boehner spokesperson told reporter Jennifer Bendery that keeping the tax cuts permanent is “moot” since Republicans are seeking a “framework for comprehensive tax reform,” though this offer would mean that the negotiations would start from a lower baseline than the one in current law. As a result, reform could generate less revenue.

As the back and forth between President Obama and the Republicans continues, cracks have begun to show in the GOP’s steadfast opposition to raising tax rates on the top 2 percent. But Senate Minority Leader Mitch McConnell (R-KY) is not budging, apparently.

Yesterday, he took to the Senate floor to once again berate the President for proposing tax hikes on the wealthy, and for offering inadequately large or specific spending cuts. Despite the country’s crushing need for new revenue, the modest burden President Obama proposes placing on high earners, and the near-historic levels of inequality in the American economy, McConnell dismissed the President’s tax plan as not merely a bad idea, but a “shakedown” of the top two percent:

MCCONNELL: [F]or Democrats, apparently, every dollar in federal spending is sacred. Once secured, it can’t be cut. That’s why we’ve got trillion dollar deficits.

And the truth is, until the President gets specific about cuts, nobody should trust Democrats to put a dime in new revenue toward real deficit reduction — or to stop their shakedown of the taxpayers at the top two percent. As one liberal lawmaker put it last week, that’s just the beginning.

When it comes to deficit deals, the taxpayers need to trust but verify. On cuts, that means specifics.

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In a negotiation, generally speaking, the two sides offer specifics on what they want, and then try to haggle their way to an agreement from those two sets of options. The Democrats quite naturally want revenue increases, but not spending cuts. That’s what Republicans want. Yet McConnell, who along with the rest of the GOP leadership has merely released headline numbers for their cuts, is bizarrely demanding that Obama provide the specifics for both sides.

More to the point, between the Budget Control Act and other legislative decisions, spending has already been cut by $1.5 trillion since 2011.

Income inequality has skyrocketed in America over the last few decades, while income and real wages for the middle class have stagnated. Yet Obama’s proposal raises taxes by a mere 0.2 percent to 4.8 percent of additional income from those making more than $250,000 a year.

One of the prime drivers of income inequality has been the ever-increasing amount paid to both CEOs and workers in the financial industry. In fact, according to the Economic Policy Institute, “Executives, and workers in finance, accounted for 58 percent of the expansion of income for the top 1 percent and 67 percent of the increase in income for the top 0.1 percent from 1979 to 2005.”

However, Jamie Dimon, CEO of JP Morgan Chase, America’s largest bank, doesn’t believe Wall Street pay has anything to do with growing inequality. Furthermore, he thinks efforts to realign the bad incentives in Wall Street compensation will turn the United States into communist Cuba:

DIMON: I don’t like the fact that we have an increase in inequality in the United States. But you better be very careful if you say we’re having that because I paid that person properly. All of you have the right to say ‘I want to be paid what I’m worth in the market.’ That’s perfectly fair…We all want an equitable society. We need to have a conversation about what makes it equitable. You can go do it the way that Cuba tried. Okay, well, then it will be equitable but everyone won’t have much. So you’ve got to be very thoughtful how you go about it. So I don’t see people say ‘I want inequity.’ I don’t want to make more money if everyone else makes less. We want to lift society up so everyone’s better off. That does not mean that people don’t have to pay people what they’re competitively worth. If you don’t want a free society then start dictating what compensation can be.

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As a recent study in the Quarterly Journal of Economics showed, banker pay skyrocketed after the deregulation of the 1980s and 1990s, and also became “riskier and more backloaded.” And even some Wall Street heavywights have started to push back against outsized compensation. “I think the kind of money that’s made and the way it was flaunted — look it’s wrong. [...] The money was really unbelievably generous, to say the right word,” said former Morgan Stanley CEO John Mack.

The problem with ever-growing pay is not only that it contributes to income inequality (and often bears no relation to the success of the firm, as evidenced by former Citigroup CEO Vikram Pandit receiving $260 million to run his bank into the ground). Wall Street pay can also put the whole economy in trouble, if the incentives are to take huge risks that end up putting a systemically significant bank at the edge of collapse. Hence, the Dodd-Frank financial reform law gives the Federal Reserve the power to veto pay packages that might cause such a situation.

On Wednesday, the hosts MSNBC’s Morning Joe laughed off Gov. Rick Snyder’s (R-MI) claims that the state’s recently-enacted right-to-work law could protect and strengthen unions by encouraging them to show more value to workers, interrupting the governor in bewilderment as he explained his argument.

Snyder appeared on the show less than 12 hours after signing two separate bills allowing public and private union members to opt out of paying union dues, while benefiting from union contracts, and defended the controversial measures. He characterized the law as benefiting workers and unions become more valuable.

The answer shocked the Morning Joe crew and led MSNBC contributor Richard Wolffe to interrupt the governor in mid-answer. Even Joe Scarborough grew incredulous and the Washington Post’s Carl Bernstein sighed heavily as Snyder spoke:

SNYDER: I’ve never said that unions are bad for business. And I don’t believe this is actually anti-union. If you look at it, I believe this is pro-worker, because the way I view it is, is workers now have freedom to choose …

WOLFFE: Hang on. Hang on a second. Are you serious? Are you serious? This is not anti-unions? This actually, at its core undermines the ability for unions to organize. So you can make any argument you like, but saying it’s not …

SNYDER: Unions have to be in a position to present a good value proposition… And if they don’t provide value, people shouldn’t be forced to pay for something they don’t see any value in. So again, this should make unions more effective in terms of having to put a value proposition to workers.

SCARBOROUGH: Governor, while I made a similar argument earlier that workers shouldn’t be compelled to have to pay from their salary to a union with whom they disagree, I would not go so far as to say what you’ve just said, which is that this helps unions. I mean, it undermines unions’ ability to stay vibrant, right?

BERNSTEIN: Absolutely!

SNYDER: It really leaves it up to the union to decide and innovate as to what their value proposition is….

BERNSTEIN: Come on!

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Indeed, economic studies of right-to-work states show that workers tend to receive lower wages and smaller benefits than those in states with stronger unions.