Economy

Eternal Summers

AP Photo/J. Scott Applewhite N ow that President Obama has made it clear in a meeting with the House Democratic Caucus that he is standing by his man, what comes next in the Larry Summers/Janet Yellen/Federal Reserve psychodrama? Will Obama damn the torpedoes and pick Summers to chair the Fed? Will he conclude that Summers has too much baggage and give the job to Yellen—or go with a third candidate? What’s clear now is that Obama himself would like to appoint Summers. The lobbying for Summers by the group of Robert Rubin protégés around the president has been internalized by Obama himself. But Obama insists that he still hasn’t made up his mind. In the end, the president’s decision will boil down to two questions. Can Summers be confirmed? And even if he can win confirmation after a hard-fought vote, would the process unearth such messy information that the White House would conclude that it’s best not to try? The letter by 19 Senate Democrats supporting Janet Yellen is probably the...

Young Detroiters Double Down

The American Prospect/Aaron Cassara
Courtesy Margarita Barry Margarita Barry This is the last installment of a four-part series on millennials and the new economy, based on the author’s monthlong road trip with stops in the Rust Belt, Omaha, and Texas. Read the first , second , and third . M argarita Barry was nursing her eight-month-old and browsing the news online when a headline caught her eye: “Detroit Declares Bankruptcy.” Pretty soon, her inbox and Facebook feed were clogged with reports from family and friends sharing the news that Detroit had become the largest U.S. city ever to file for Chapter Nine. Barry, a 28-year-old web designer and entrepreneur who was born and raised on the northwest side of the city, knew it would happen eventually. “It was only a matter of when,” she says. Much ink has been spilled over the infiltration of young, educated transplants to Detroit—a youth hostel here, a craft cocktail bar there, a co-working space downtown purchased for pennies on the dollar. But the bankruptcy hints that...

Strikes, Alliances, and Survival

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Fast-food workers in seven cities are set to walk off their jobs today in one-day actions, escalating what is quickly becoming a nationwide effort to win pay hikes in one of America’s premier poverty-wage industries. Backed by the Service Employees International Union (SEIU), the campaign is succeeding in publicizing the plight of low-wage workers in a growing number of states and cities. How it goes about actually winning higher wages, however, remains unclear. For its part, the AFL-CIO is preparing for its biennial convention this September, at which it will begin to hammer out some kind of formal affiliation or partnership with other, nonunion progressive organizations such as the NAACP and the Sierra Club. There are changes afoot within the union’s Working America affiliate—a Federation-run and –funded neighborhood canvass that has expanded from a purely (and brilliantly successful) electoral operation, building support for progressive Democrats among white working-class swing-...

The Commodities Market: A Big Bank Love Story

The Fed loosened rules to allow banks to buy commodities, driving up everyday prices for consumers. Who the next chair is matters if these kinds of practices are ever to be stopped. 

AP Images/Carolyn Kaster
AP Images/Charles Dharapak W ho becomes the next Federal Reserve chair matters, not only because of the implications for economic and monetary policy, but because the Fed remains one of the nation’s chief financial regulators. There are dozens of policies, some we don’t even know about, over which the Fed wields critical influence. While the past year has seen a small but important shift toward tighter controls, particularly on the largest Wall Street institutions, all of that could change if President Barack Obama selects another deregulator in the Greenspan tradition. A perfect example of the Fed’s centrality to the financial regulatory space came last week, when a Senate hearing focused on an unseemly practice that the Fed perpetuated and has the power to stop. As reported in The New York Times and elsewhere, large investment banks like Goldman Sachs have purchased warehousing facilities for aluminum and shuffled the product from one facility to another. When a purchaser buys the...

Must Austerity Keep Winning?

T he EU’s extreme version of budget cutting has pushed the European economy ever deeper into its worst recession since World War II. The United States, pursuing a bipartisan target of $4 trillion in budget cuts over a decade, is mired in an economy of slow growth and inadequate job creation. Our government’s failure to give debt relief to indentured college students and underwater homeowners functions as a multitrillion-dollar twin drag on a feeble recovery. The smart money knows just how weak this economy is. Federal Reserve Chair Ben Bernanke had only to suggest that he might nudge interest rates up a bit, and markets panicked. So austerity is the wrong medicine for the prolonged aftermath of a financial collapse. Case closed. But hold on. Winning the intellectual debate doesn’t matter, because we keep losing the politics. Until we start changing the policies, or at least begin causing more political embarrassment for the budget hawks, austerity will reign, no matter how perverse...

Subsidizing Poverty

AP Images/Rich Pedromcelli
Want to know the problem with enterprise zones? Then check out Sunday’s Riverside Press Enterprise , one of the best midsized newspapers in California. A story in it covers Governor Jerry Brown’s successful campaign to have the legislature put enterprise zones out of their misery. (Brown recently signed the bill abolishing the zones.) Conceived by the late Jack Kemp and other unusually well-meaning right-wingers to bring jobs to the inner-city, enterprise zones have provided subsidies to businesses for creating jobs they might have created in any case. Disproportionately, the jobs created were low-paying. Also at Brown’s prompting, the legislature replaced enterprise zones with a better-targeted subsidy. Under the new law, businesses in high-unemployment and high-poverty areas will be eligible for tax credits that come to 35 percent of a new hire’s wages—provided those wages are between $12 and $35 an hour. This drew a wondrous complain from Colin Strong, the head of the San...

The Depressing Picture of Economic Mobility in America

Today's New York Times has a big article by David Leonhardt on a new study of income mobility with a bunch of interesting findings, the core of which is that, especially for middle-class and poor people, where you live matters tremendously to your chances of improving your economic station. Here's an excerpt: But the researchers identified four broad factors that appeared to affect income mobility, including the size and dispersion of the local middle class. All else being equal, upward mobility tended to be higher in metropolitan areas where poor families were more dispersed among mixed-income neighborhoods. Income mobility was also higher in areas with more two-parent households, better elementary schools and high schools, and more civic engagement, including membership in religious and community groups. Regions with larger black populations had lower upward-mobility rates. But the researchers' analysis suggested that this was not primarily because of their race. Both white and...

What Tom Friedman Doesn’t Understand About the Economy, Part 72

AP Images/Charles Dharapak
“Average is over,” New York Times columnist Tom Friedman likes to proclaim, and in at least one particular, he’s right. Friedman no longer writes average columns. With each passing week, his efforts become steadily more moronic. His latest , in Sunday’s paper, is entitled “Welcome to the Sharing Economy,” and in it, Friedman mistakes economic marginality and desperation for innovation and opportunity. The subject of this particular essay is Airbnb, a website where travelers go to rent bedrooms in other people’s homes. “There’s an innkeeper residing in all of us!” Friedman effuses, as he recounts how Airbnb may have as many as 200,000 people per night this summer plopping down in some stranger’s kid’s bedroom. Enthralled by the sheer techno-innovation of it all, Friedman doesn’t pause to ponder just what would impel a parent to turn over junior’s room for a few bucks. Could it be that the factory closed? That Wal-Mart pays so little? No matter: “Ordinary people can now be micro-...

Coming Home for the Recession

AP Photo/Bob Leverone
AP Photo/Bob Leverone This is the third installment of a four-part series on Millennials and the new economy, based on the author’s monthlong road trip with stops in the Rust Belt, Omaha, and Texas. Read the first and second . O ne mosquito-heavy evening in May, I met 30-year-old Pat Valdez near San Antonio’s old Lone Star brewery. Valdez makes $15 an hour working in the human-resources department of Wells Fargo. She takes classes part-time at an online university, where she hopes to earn a degree in journalism. With $30,000 in student-loan debt, she’s living paycheck to paycheck. But unlike other Millennials struggling to make ends meet on their own, she’s not in dire straits. After a short, “way too expensive” stint in California living with her older brother, she’s back at home with her parents. She suspects that some people from her South Side neighborhood think she is following the example of many other women in more traditional Hispanic families: staying home until she marries...

The Great Detroit Betrayal

AP Photo/Paul Sancya
AP Photo/Duane Burleson D etroit has filed for bankruptcy. Most of the spot-news coverage has focused on the immediate fiscal crisis of the city, but the immediate fiscal crisis really isn’t what got the city into such deep trouble. Certainly, Detroit’s contracts with its employees and its debts to its retirees don’t explain anything about how and why this once-great city has come to such grief. Those contracts and retirement benefits are par for the course for major American cities—certainly, no more generous than those in cities of comparable size. Any remotely accurate autopsy of the city will find the cancer that killed Detroit was the decline of the American auto industry. The failure of U.S. automakers in the '70s, '80s and '90s to make better cars at a time when foreign-made autos were beginning to enter the U.S. market was surely one factor. Another was the trade deals that made it easy for Detroit automakers to relocate to cheaper climes—most particularly, NAFTA, which...

Netanyahu versus the EU

EU sanctions against Israeli settlements are a warning from friends that their patience has run out.

Sipa via AP Images
AP Photo/Ariel Schalit, File "T his is the chronicle of a crisis foretold years in advance," said the Israeli ex-ambassador to Germany, in that petulant tone of a diplomat working very hard not to sound infuriated. Shimon Stein was trying to explain new European Union sanctions against Israeli settlements. Neither journalists nor politicians should sound so shocked by the EU move, he lectured the anchor of state radio's morning news program. He was right, but he was trying to outshout a hurricane of public anger and disbelief. The anchor herself had begun the show with a riff of indignant surprise that the EU considered her Israeli neighborhood in East Jerusalem to be a settlement. Of course, the EU position has consistently been that the country called Israel is defined by its pre-1967 borders, or Green Line—and that anything built beyond those borders is not part of Israel. The sanctions are designed to give more teeth to that position. Under new budget guidelines, EU bodies must...

Rhode Island’s Small Victory

AP Photo/Susan E. Bouchard, File
AP Photo/Mel Evans W hen Governor Lincoln Chaffee signed the Temporary Care Giver’s Insurance law last week, Rhode Island became the third state—along with California and New Jersey—to grant paid time off to care for a sick loved one or a new baby. Rhode Island’s law, which goes into effect in 2014, will not only provide most workers with up to four weeks off with about two-thirds of their salaries (up to $752 a week), it will protect employees from being fired and losing their health insurance while they’re out. Workers will be able to use the time to care for a broad range of people, including children, spouses, domestic partners, parents, parent-in-laws, grandparents, and foster children. And, though the maximum single leave is four weeks, each parent can take four weeks off to bond with a new baby. A mother recovering from birth could combine that with an additional six weeks paid through an existing state program, bringing her total paid time off to ten weeks. An entire family...

Transatlantic Trouble

How much has America's spying on European allies damaged the transatlantic trade deal once thought to be one of Obama's best opportunities for shaping his foreign policy legacy?

AP Images/Charles Dharapak
Recent revelations that the U.S. government had been spying on European allies continue to rile public sentiment on the continent, just as officials from both sides of the Atlantic sit down for talks in Washington on the Transatlantic Trade and Investment Partnership (TTIP), a wide-ranging deal that the Obama administration has been pushing as a key foreign policy initiative. If successful, TTIP would deepen the economic ties between North America and the European Union and represent the biggest trade deal in over two decades. But with public trust in the United States ebbing throughout the core countries of the European Union, President Obama will probably have to do more than simply downplay the scandal as a hyped-up, misunderstood policy detail. Old school Atlanticists have long touted the wisdom of deeper economic integration between the United States and the European Union, which is already vast and significant. U.S.-EU trade in goods and services totals about one trillion...

Online LL.M.'s: A New Way to Rob Peter to Pay Paul?

flickr/David Ortez
Two weeks ago, faculty at Seton Hall’s School of Law were informed their pay would be cut by 10 percent during the upcoming term. All junior (untenured) faculty were told they could be fired after the 2013-2014 school year. Seton Hall joined Florida Coastal, (where 10 percent of staff were fired ) and Vermont Law School (one-fifth of tenure-track faculty positions were removed ), in delivering a message professors not at elite schools have long feared was coming. As the legal job market remains in shambles and law school applications continue their historic free-fall, schools will be forced to take a variety of drastic measures to remain solvent until the millions in disappearing tuition dollars return. Firing faculty and downsizing staff—perhaps even closing whole schools—will likely soon be common; so will the appearance of the LL.M., a degree whose strange history may be emblematic of the most serious problems in legal education. The LL.M., awarded after the first degree in law,...

How to Keep Bad Cops on the Beat

A few states forego a key tool protecting the public from rogue police officers.

AP Photo/Harold Valentine
AP Photo/Elise Amendola David Silva died during an arrest in Bakersfield, California on the night of May 8. The Kern County sheriff’s department contends that the 33-year-old was drunk and uncooperative and fought back during the arrest. The sheriff’s deputies on the scene also fought back during the arrest—using unreasonable and excessive force, as the civil-rights lawsuit Silva's family filed charges—allegedly beating Silva with batons while he lay on the ground. One of the accused deputies has the same name as one charged in the 2010 beating of a man that resulted in a $4.5-million court judgment against Kern County. County sheriff Donny Youngblood declined to tell The Los Angeles Times whether he is the same officer. If the deputy is one and the same and the lawsuit succeeds, the circumstances will fit an emerging pattern in the state—police departments retaining cops with questionable records. In October 2011, two San Joaquin Valley TV stations revealed that several officers with...

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