The voters in France and Greece have rejected the parties of austerity. But it is not yet clear that the party of growth can deliver the recovery that the citizenry wants. On both sides of the Atlantic, the obstacles are more political than economic.
In Europe the conventional wisdom, enforced by Germany and the European Central Bank, still holds that the path to growth is budget restraint. Unfortunately, the more that budgets are tightened, the more economies shrink and the more revenues fall. No large economy has ever deflated its way to recovery.
In a 2009 poll conducted by the BBC, only one out of every four Americans thought that capitalism in its current form was working well. Then came Occupy Wall Street (OWS), a physical manifestation of the anger of millions of Americans at an economic system in which big banks are bailed out by taxpayers only to turn around and pay billions in bonuses while filing record home foreclosures. Between the second quarter of 2009 and the fourth quarter of 2010, our nation's total income rose by $528 billion, but of that economic growth, 88 percent went to corporate profits and just 1 percent—that's right, 1 percent—went to workers.
The House plans to vote today on a Republican plan to avoid the $110 billion in Pentagon sequestration cuts that would be triggered at the end of the year because of the failure of last year's supercommittee. "People know at the end of the day that this is not going to be all sunshine and cotton candy," said Representative Tom Cole, a Republican from Oklahoma.
There were 3.74 million job vacancies at the end of March, the highest level since July 2008. The rise was attributed to increased demand in construction and manufacturing, and could show that companies are gaining confidence in the recovery as the year goes on. The small business optimism index rose to 94.5, a high not seen since February 2011
Billionaire George Soros is jumping into the 2012 election funding race, donating $1 million apiece to pro-Democratic super PACs America Votes and American Bridge 21st Century. This cash infusion—much needed given how Democratic super PACs have struggled to match the fundraising pace of the conservativeAmerican Crossroads—may bring other liberal donors to the fray despite longstanding misgivings of the influence of super PACs from both the Obama camp and the pool of untapped liberal donors.
As far as April is concerned, the jobs report is disappointing; 115,000 new jobs, just enough to keep pace with population growth. Unemployment dropped to 8.1 percent, but labor force participation also declined, which means that joblessness is lower because fewer people are searching for jobs.
What’s interesting is that this runs counter to a host of other economic indicators, all of which point to a brighter picture. According to Gallup, for example, economic confidence is a four-year high, consumer spending has edged up, and small-business optimism has risen to its highest levels since the summer of 2008.
Although tax reform has been in the national spotlight lately—between the Obama team's April Buffett Rule push and the Republican primary candidates' proposals (remember 9-9-9?)—don't expect corporate tax reform to be a legislative priority in the near future. “From the beginning, we acknowledged that this would be a heavy lift and take time,” an official from the Treasury Department said.
In a few weeks, tens of thousands of students will graduate from college or university, and attempt to make their way in the economy. During better times, these former students would find jobs, rent apartments, and almost immediately begin to pump money into the economy. But—three years after the nadir of the economic crisis—the job market for young people is still terrible, and many have opted to live with their parents in order to save money. This, you can probably imagine, has only made the economy worse. Here’s TheWashington Post:
The defining feature of Republican economic policy for the short-term is immediate austerity—big spending cuts to social programs, coupled with tax increases on lower-income people, and a reduction in the size of the federal workforce. Conservatives claim that this will lead to immediate job growth and a more robust recovery.
Could this week produce a turning point in Europe’s long, Sisyphean battle against the debt-and-banking crisis that has been ravaging it for the last two-and-a-half years? This coming Sunday, France will likely vote for Francois Hollande, a pro-Keynesian Socialist, as its new president. In Greece, on the same day, parliamentary elections will produce a hammer blow to the existing two-party system and will significantly increase the strength of the anti-Europeans on the far left and the extreme right.
A shivering knot of college students stands outside Motor City Java House as John George unlocks the front door. It’s 15 degrees in Detroit on a February morning, and fresh snow covers the Old Redford business district. Cold weather doesn’t stanch the flow of volunteers coming to the city’s northwest corner: They show up every Saturday, arriving in shifts, ready to swing sledgehammers and twist crowbars. George’s wife, Alicia Marion, has learned to expect this traffic since she opened the coffeehouse in 2010. She puts on an apron and starts brewing.
There are a lot of things companies do to fool consumers, some more meaningful than others. They pack items in large boxes to make them look bigger, they offer questionable claims about their products' effectiveness, they weave absurd tales about how your life will be changed if you buy their thing. Navigating your way through that thicket of baloney is part of being a smart consumer, and to a degree we accept it as part of the price of having free commercial speech. Short of outright fraud or practices that do substantial harm to consumers, we understand that people who are selling things can say almost anything they want, and we accept that being a consumer means that manufacturers and retailers are going to try to fool you. In the immortal words of Morty Seinfeld, "Cheap fabric and dim lighting. That's how you move merchandise."
But there are some kinds of deception that are beyond the pale. It's one thing to sell you something that might not be up to your expectations; perhaps your expectations were just too high. It's something else to fool you into buying one thing, when you actually wanted to buy something else. I give you the modern American gas pump...
Over at the Center on Budget and Policy Priorities, Chye-Ching Huang has written a massive review of the evidence and literature on the relationship between taxes on high-income earners and their effects on economic growth. Her key findings are surprisingly straightforward, and important for how we approach current debates over tax reform and economic policy:
While the global economy is still on shaky terrain, Apple is having a good 2012. In the first quarter, the tech behemoth sold 35 million iPhones—an 88 percent increase from last year, representing 59.7 percent of Apple's overall sales—and 11.8 million iPads. These sales nearly doubled Apple's profits, and sent Apple's stocks up 7 percent, up $40.55 to $600.83 yesterday.