Economy

Bracing for a Hit from Europe

(Flickr/Juan Carlos García Lorenzo)
It may be the peak of vacation season in Europe, but the continent’s fiscal crisis has not taken a break. Last week, Wolfgang Schäuble, the powerful German finance minister, took time out from his holiday to have a sit-down with his American counterpart, Tim Geithner, in the North Sea island of Sylt. The last-minute meeting was organized at Geithner’s request. Less than a hundred days from the U.S. presidential election, it highlighted—as if more evidence were necessary—the Obama administration’s concern about how developments in the Eurozone could affect the vote come November 6. The crisis calendar between now and then is certainly packed; if a week is a long time in politics, three months is an eternity in economics. Below, the Prospect sketches out a road-map of the pitfalls ahead. Greece We start, unsurprisingly, in Greece. The recently elected coalition government there is putting the final touches on a new austerity program—a condition for its second bailout. The program calls...

Four Things to Know About the July Jobs Report

(Wools/Flickr/Creative Commons)
Today is the first Friday of a new month ( i.e. , Christmas for wonks and political junkies), which means the Bureau of Labor Statistics (BLS) has released its monthly report on employment . The economy created 163,000 net jobs in July, an increase over projections—which hovered around 100,000 —and a substantial increase over June, when the economy added a scant 80,000 jobs. The unemployment rate remains unchanged at 8.25 percent (up from 8.21), but was rounded up to 8.3 percent for the purposes of the report. This isn’t a good number—a more rapid recovery would require up to 300,000 jobs a month—but it is a sign that the United States is not about to fall into another recession. Beyond the topline number, here are a few key things to take away from this month’s report. The revisions were … meh : The BLS revises its job statistics as it gets more accurate information. Today, job growth for May was revised from 77,000 to 87,000, but job growth for June—the most abysmal month of the...

Team Obama Flanks Romney on Taxes

This morning, the Obama campaign came out swinging against Mitt Romney’s tax plan, which will raise taxes on 95 percent of households, according to the Tax Policy Center . Here’s the ad: The Romney campaign has pushed back, accusing the Center of bias—one of its analysts has ties to the Obama White House—but that ignores the extent to which the Center was quite generous in its evaluation of Romney’s plan. They assume a world where Romney cuts tax incentives for the rich—including the charitable giving deduction—and ends all deductions for any income over $200,000. They also assume that the plan will generate economic growth, providing funds to offset the cost of the tax cuts that form the centerpiece of the plan. But these implausibly optimistic assumptions aren’t enough to square the circle of Romney’s tax plan. The only way Romney can keep the Bush tax cuts, cut taxes by 20 percent on top of that, and keep revenue at its current level is to borrow huge sums of money or raise taxes...

Romney's Economic Plan: Dubya 2.0

Mitt Romney's chief economic adviser.
I'll be honest: There are a few things about Mitt Romney that I find annoying. One of the biggest has to be that there is probably no sentence he has repeated more often in this campaign than "I know how the economy works," but he never actually explains what he knows that nobody else does, or how that hard-won knowledge translates into a unique set of policy moves that only he could bring about and that would pull America from its economic doldrums. There are really two sets of questions that absolutely must be asked of Romney in the area of economics, given the rationale he offers for his candidacy. The first is, "What specifically did you learn as a businessman that policymakers haven't known up until now?" As far as I know, he has only been asked this question once, and the result wasn't encouraging. (After repeating over and over that he "understands how the economy works," Romney finally allowed that businesses spend money on energy, so if energy were cheaper, they'd have more...

The Caped Crusader of the Executive Branch

What is the CFPB, and why should you care? 

(Flickr/401(K) 2012)
SEC. FTC. DOD. DOJ. OCC. HHS. FAA. EEOC. OPM. CFTC. CPSC. CFPB. To most sane people, they probably recall a poor combination of letters during a game of Words With Friends. For demented Beltway minds, however, each string of letters carries specific connotations in the vast alphabet soup of the federal bureaucracy. Most operate outside the notice of the rest of the country, quietly protecting our financial markets, inspecting the cars we buy, or upholding labor standards. But that last acronym will climb atop the pile and enter the popular vernacular in the near future. The Consumer Financial Protection Bureau (CFPB, per D.C. shorthand) celebrated its one-year anniversary on Saturday. Depending on the outcome of the presidential election, the agency could grow into one of the most public and popular arms of the federal bureaucracy—or wither away into irrelevance. Did you forget to blow out a candle for its first birthday this past weekend? Fear not, the Prospect has you covered. I’ll...

The LIBOR Scandal's Lies

While regulators should have done more, it’s the banks that must be punished for their manipulation of interest rates.

(Flickr/Hugeword Picture)
The days between the Fourth of July and Bastille Day on the 14th are known for fireworks on both sides of the Atlantic. This year, more rockets and firecrackers than usual were going off, but they were inside hearing rooms in the British Parliament and the U.S. Congress. Barclays bank announced that it had been fined more than $450 million by regulators from both countries, and its CEO, Robert E. Diamond Jr., and COO, Jerry del Missier, both resigned. The fines were part of a settlement that granted Barclays immunity from potentially worse punishment for its manipulation of interest rates. The press reported that 10 to 12 other large banks (including HSBC, Citigroup, and JPMorgan Chase) were also under investigation. The big financial scandal of July 2012, or at least its first half, involves manipulation of the London Interbank Offered Rate, or LIBOR. The press has used a variety of estimates of the impact of LIBOR, ranging as high as $500 trillion (the Bank of England estimate) to $...

Romney's Counterproductive European Tour

Next week, the Washington Post reports , Mitt Romney is taking a break from the campaign at home to meet with leaders abroad: Mitt Romney plans to depart next week for a visit to Britain, Israel and Poland, and the Republican presidential candidate hopes the trip will help him project the aura of a statesman and signal to voters back home that he would make a plausible commander in chief. He will listen to leaders of important U.S. allies, make symbolic appearances at historical sites and build personal relationships. He plans to meet with British Prime Minister David Cameron at 10 Downing St. and catch up with Israeli Prime Minister Benjamin Netanyahu, an old friend from their days as business consultants, while aides are preparing speeches for him to give in Israel and Poland. I continue to doubt the utility of this trip. Few Americans are dissatisfied with Barack Obama’s foreign policy, and few want—or need—Romney to articulate an alternative. Romney should take advantage of this...

What Romney Needs Is a Bad Economy

Given the numbers, Ross Douthat argues , Mitt Romney isn’t far away from where Ronald Reagan was in 1980, or Bill Clinton in 1992: The last two times an incumbent president was defeated by a challenger – Jimmy Carter in 1980 and George Bush in 1992 – the hinge moment arrived only in the last few months of the campaign. In 1980, it came after the lone debate, when Ronald Reagan’s smooth, reassuring performance turned a tight race into a walkover. In 1992, it arrived with the Democratic Convention, when the one-two punch of Ross Perot’s temporary exit and the Clinton campaign’s skillful “place called Hope” showmanship propelled Bill Clinton to a lead he never relinquished. In other words, if Romney can assuage voter concerns—and show that he is a competent alternative—then he can capture discontented voters and surge ahead. The problem, Douthat argues, is that Romney lacks a positive message, or anything that would show voters that he isn’t the heartless corporate raider described by...

Out of Work, Out of Luck

MIT Press
Back to Full Employment , by Robert Pollin. A Boston Review Book. The M.I.T. Press. 187 pages. $14.95 Achieving full employment has been at the center of the progressive project for more than a century. If work is available at decent wages for everyone who wants it, then the rest of the agenda is a lot easier. Opportunity proliferates. People feel a sense of dignity and worth. Human potential is fully utilized. In a virtuous circle, adequate purchasing power has a rendez-vous with the economy’s productive capacity. Tight labor markets give workers the leverage to bargain for decent wages. Social-transfer programs can be reserved for special needs rather than being strained to make up for the fundamental lack of decent income. As Robert Pollin writes in his important new book, Back to Full Employment , a society with jobs for all “is also the best tool for fighting poverty.” He reminds us that in the era of Lyndon Johnson’s Great Society, unemployment rates fell to below 4 percent,...

Voters Are Buying Obama's Argument on Taxes

The latest Pew survey shows something of a breakthrough for the Obama campaign. Since last fall's unveiling of the American Jobs Act, Obama has hammered home the “fairness” of raising taxes on high income earners. This rhetoric has made its way into almost every speech from the president, and is a key part of his second term agenda. According to Pew, it seems that Obama’s persistence has had an effect—by two to one, 44 percent to 22 percent, Americans say that raising taxes on the rich would help rather than hurt the economy: There’s been some question of timing with regard to the Obama campaign’s attacks on Bain Capital. “If these are so effective,” goes the argument, “then why has Obama deployed them this early in the cycle?” The answer is fairly straightforward—they are the prelude to a broader attack on Mitt Romney’s policies. The Obama campaign almost certainly plans to tie Romney’s taxes, finances, and business practices to his support for upper-income tax cuts, corporate tax...

Why "Knowing How the Economy Works" Is Not Enough

George W. Bush has the answers.
This week will see the release of The 4% Solution: Unleashing the Economic Growth America Needs , a collection of essays from the George W. Bush Institute with a forward by the former president himself. It's true that annual GDP growth never actually reached 4 percent during Bush's two terms in office and averaged only 2.4 percent even if we generously exclude the disastrous year of 2008. But look at it this way: Who knows more about what the president ought to do about the economy than Dubya does? After all, there's only one living American (Bill Clinton) with as much experience being president, so Bush must have the answers we need. A ridiculous argument? Of course. That's because experience only gets you so far. It's obviously a good thing, all else being equal, for the president to know a lot about the economy, just as it's a good thing for him to know a lot about foreign affairs or domestic policy. But the truth is that although the government has to solve many practical problems...

Romney's Swing-State Dilemma

(Flickr / Gage Skidmore)
Before Mitt Romney's Bain Capital problems seized everyone's attention, we were hearing about a different political minefield the candidate had to maneuver: While his campaign is based largely on the country's economic woes, several GOP governors in swing states were claiming economic success and recovery. Wisconsin Governor Scott Walker spent his recall campaign pointing to the state's recovery, while Virginia Governor Bob McDonnell launched his own ads showing his state's progress. Iowa Governor Terry Branstad was boasting on his website of "“200,000+ new jobs" and "a 25% increase in family incomes." By late June, things were coming to a head. Bloomberg News reported that Romney's team asked Florida Governor Rick Scott to quiet down his bragging about job creation in the Sunshine State. There was a disastrous Ohio rally in which Governor John Kasich hailed his state's economic gains, and then Romney took the stage to slam the national economy. All in all, at least seven battleground...

Why Is San Bernardino Bankrupt?

The prize for the most abjectly wrong headline in American journalism this week goes, I grieve to say, to the Los Angeles Times . Atop an article analyzing how California cities are coping with horrific budget crunches—which ran one day after the working-class exurb of San Bernardino followed its fellow working-class exurb Stockton into municipal bankruptcy—the headline writer plunked the following line: “Rising costs push California cities to fiscal brink.” The headline doesn’t really capture what the ensuing article is about, which is what city governments have done as they have approached or gone over that brink. Rather, the headline advances its very own theory of causality for why Stockton and San Bernardino got into trouble: rising costs, which feeds nicely into the rightwing narrative about municipal unions undermining fiscal viability. But that’s really not what caused the crises of Stockton and San Bernardino. Thousands of other American cities had contractual arrangements...

Clueless Kinsley

Back in the days when Michael Kinsley was the designated liberal on CNN’s “Crossfire” show, paired off against Pat Buchanan or Robert Novak, he would answer the complaints of actual liberals that he really wasn’t a liberal himself by agreeing with them. Kinsley was and still is a man of the cautious, corporate center, which means liberal on social and cultural issues and an Aspen/Jackson Hole corporate elitist on economics. Which is to say, while he’s a trenchant social critic, he hasn’t even noticed the bankruptcy of mainstream economics. For evidence of this assertion, readers need look no farther than Kinsley’s column today, which ran in both the Los Angeles Times and Bloomberg News . In it, he attacks the Obama campaign for going after Mitt Romney for offshoring jobs—because, he argues, offshoring is really a good thing. Well, he doesn’t actually argue it. Instead, he simply asserts that “most economists believe in the theory of free trade, which holds that a nation cannot prosper...

Will Lobby for Food

The farm bill is set to expire, which is bad news for anyone who eats.

Flickr/cordery
Something happened today that, chances are, you know little about yet care about very deeply. It helps pay for the lovely farmers market you frequent every weekend. It’s behind all those corn-syrupy soft drinks you’ve been taught to avoid. It’s the reason you started hiking to that one artisanal shop for grass-fed beef after you read The Omnivore’s Dilemma . It helps feed America’s hungry, because it authorizes the federal food-stamp program, which feeds 46 million people. It’s the farm bill, usually the concern of only the corn, wheat, cotton, peanut, and soy-bean lobby, but it really should be called the food bill, and it has to be reauthorized every five years. The House Agriculture Committee debated and passed the reauthorization of the law this morning—and it includes $16 billion in cuts to food stamps and an amendment that will kill a program designed to help small chicken farmers. Now, the bill will likely die. Most observers don’t expect House Majority Leader John Boehner to...

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