Economy

Red Wings Give You Bull

Why is a bankrupt city building a new $650 million “hockey arena district” to house the Detroit Red Wings?

*/ AP Photo W hile the state of Michigan appears to have no interest in “bailing out” Detroit, it is giving a substantial boost to the Red Wings, the city’s professional hockey team. Less than a week after Detroit filed for the largest municipal bankruptcy in history, a press conference revealed a deal that will transform 45 blocks of the city with a new hockey arena (or “events center,” as the jargon goes) and a mixed-use entertainment district meant to link two of the city’s healthiest neighborhoods—downtown and midtown. “This is a catalyst project,” Governor Rick Snyder said, according to Crain’s Detroit Business . “This is going to be where the Red Wings are. Who doesn't get fired up in Detroit about the Red Wings? Come on now, the people that are criticizing are people from outside of Michigan. This is something that is important to all of us.” The Red Wings are one of the city’s calling cards most worthy of celebration right now: one of the “original six” teams in the National...

Mortgage Reform: Watch Your Fannie

AP Images/ Manuel Balce Ceneta
AP Images/ Manuel Balce Ceneta Speaking in Phoenix on Tuesday, President Obama associated himself with a bipartisan proposal to slowly get Fannie Mae and Freddie Mac out of the business of backing mortgages. According to the plan, formulated in the Senate, a new federal agency called the Federal Mortgage Insurance Corporation would backstop banks and other private investors against catastrophic mortgage losses, but only after they had run though their own substantial capital first. Obama said, “For too long these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag. It was 'heads we win, tails you lose,' and it was wrong. The good news is right now there's a bipartisan group of senators working to end Fannie and Freddie as we know them. And I support these kinds of reform efforts." It sounds good, but there is reason to worry that this plan would protect the government against losses but at the price...

L.A. Story

The Los Angeles Alliance for a New Economy: a new model for American liberalism?

flickr/AlphaProject
AP Photo/E.J. Flynn T ake a left as you exit the Long Beach Airport, and you’ll pass three acres of greenery named “Rosie the Riveter Park.” The park stands at the southeast corner of what had once been the mammoth Douglas Aircraft factory, where DC-3s, -4s, -5s, all the way up to -10s, were once manufactured, and where, during World War II, 43,000 workers, half of them women, built the B-17 bombers and C-47 transports that flew missions over Europe and the Pacific. World War II and then the Cold War remade Long Beach. Federal dollars funded the Douglas factory, a new naval shipyard, and numerous defense firms. An entire city—the working-class community of Lakewood, which borders Long Beach on the north—was built to house the sudden influx of defense workers. Long Beach became and remains the second-largest city in Los Angeles County. The new jobs paid well; powerful unions represented the workers in the factories and on the docks. Military spending, though, began to decline after the...

Part-Time America

AP Images/Matt Slocum
Of the 963,000 jobs created in the past six months, according to the Bureau of Labor Statistics’ (BLS) Household Surveys, 936,000 of them are part-time. That doesn’t mean that just 27,000 of the people hired on to new jobs got full-time work. The total for part-time jobs includes both newly created jobs and formerly full-time gigs that were cut-back to part-time, and the BLS doesn’t pose the questions that would enable it to quantify these two kinds of new part-time jobs. But factoring in both kinds, we do know that the net number of full-time jobs in America has risen by just 27,000 since the end of January. One reason that the number of full-time jobs is so abysmally low is Obamacare’s employee mandate, which stipulated that employers with 50 or more workers either had to provide all such workers who put in at least 30 hours a week with health insurance, or pay a penalty that would help defray the government’s costs for providing subsidized benefits. The administration announced...

The Long Road to a Decent Economy

AP Images/Carolyn Kaster
To underscore a weeklong initiative by President Obama on behalf of rebuilding the middle class, the latest figures on GDP growth, released Thursday, and on job growth, made public Friday, show just how far from a healthy middle class economy we are. Revised figures show that GDP growth fell to a rate of just 1.4 percent in the first six months of 2013, even less than last year’s dismal rate of 2.2 percent. These numbers are not enough to create an adequate supply of jobs, much less good jobs, much less wage growth. And sure enough, when the employment numbers for July were released on Friday, the grim trend was confirmed. Just 162,000 jobs were added in July, and most of them were relatively low-wage jobs. Average earnings actually fell. At this rate it will take another six years to get unemployment back to pre-2008 levels according to the Economic Policy Institute, and more than a decade according to the Hamilton Project. The official unemployment rate dropped slightly, from 7.6 to...

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...

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