Economy

Voters Getting Mixed Signals from the Market

(AP Photo/Richard Drew)
Until not long ago, there was a widespread assumption that the economy could well be Barack Obama's undoing. After all, no president since Franklin Roosevelt had been re-elected with unemployment as high as it is now, so if Obama were to prevail, it would take an unusual combination of factors that usually matter only on the margins—the skills of the respective candidates, a foreign crisis or two—to allow him to win. But then something strange happened. The political scientists who think about these things began releasing their forecasts (all of which rely heavily on economic variables), and it turns out that most of them project that Obama will win after all. According to these models, the economy isn't doing so bad after all. It's enough to make Republicans tear their hair out. James Carville may have been right when he put a sign reading "It's the economy, stupid" on the wall in Clinton campaign headquarters in 1992. But what we mean when we say "the economy" is good or bad, up or...

What the Heck Is Quantitative Easing?

A look at the history behind the Fed's latest move

(Flickr/Talk Radio News Service)
Last week, the Federal Reserve announced a third round of quantitative easing, or what is referred to as QE3. This is an open-ended purchase of $40 billion a month, along with a commitment to keep rates low until “a considerable time after the economic recovery strengthens.” Many economic commentators are saying that this is a serious change in economic policy. In order to understand why this is so important to our economy now, it might be helpful to go back to an academic debate about Japan in the 1990s. The era from the early 1980s through the financial crisis was referred to as the “Great Moderation.” It was common for economists to assume that the Federal Reserve and other central bankers could control the economy effortlessly, basically picking the unemployment rate they wanted. Prominent economists who studied macroeconomics, the field created during the Great Depression to study economic crashes, thought everyone in the discipline should pack up and go home. Robert Lucas, a...

Romney’s Bigger Lie

Lots of Republican conservatives, Paul Ryan and Bill O’Reilly among them, have taken the position that even if Mitt Romney’s rhetoric was clumsy, his point was basically right. Some Americans pay taxes; others collect benefits. But his basic claim was total baloney. When you count income taxes, payroll taxes, excise taxes, and highly regressive state and local taxes, the typical lower income working American pays about one-fifth of his or her income in taxes—more than Mitt Romney! According to a study by Citizens for Tax Justice, the bottom fifth of the income distribution paid 17.4 percent of their income in state and local taxes. The second-poorest fifth paid 21.2 percent. There are in fact about 18 percent of Americans who pay neither federal payroll nor income taxes. They are overwhelmingly the unemployed and the low-income elderly, neither of whom pay payroll taxes. As pollster Celinda Lake observes, Romney’s big lie is very important to refute. Even if voters reacted negatively...

#OWS Is Not the Liberal Tea Party

The progressive movement is the real counterpoint to the Tea Party, and it was made much stronger by the 99 percent's successful attempt to change the conversation on inequality.

(AP Photo/Seth Wenig)
At an event this weekend marking the one-year anniversary of Occupy Wall Street, I was reminded why the success of these protests was so improbable in the first place. It wasn’t just that we’d tried this sort of thing before and it had never worked. It wasn’t the predominance of anarchists, whom we were all accustomed to dismissing as the irrelevant fringe at progressive protests. It was also the smell. New York City smells bad enough on its own. But put populists in a public encampment for a few days, and it stinks. After months, it’s repulsive. I was an early skeptic of Occupy Wall Street. “I want to know what democracy looks like, not what it smells like,” I wrote at the time. This was a roundabout way of criticizing the movement for its lack of polish, its incoherent leadership structure, its fuzzy demands—all that chaos that was swarming around Zuccotti Park. On its face, Occupy was a Type-A organizer’s worst nightmare. Yet, despite the odds that stood against it, Occupy Wall...

Two-Faced on Taxes

Chart of economic growth from New York Times.
A lot of the debate we have in America about economics (like many issues) ends up being statements of principle masquerading as analysis of empirical reality. And maybe this is my bias talking, but it seems like most of this comes from the conservative side. For example, it's now become disturbingly common to hear conservatives say that when you cut taxes, total tax revenues actually go up, since the tax cutting creates an explosion of economic growth that brings in lots of new revenue. This idea has zero empirical support. It isn't that cutting taxes can't increase growth somewhat, it's just that it doesn't increase it enough to make up for the lost revenue. Yet no matter how many times economists demonstrate that cutting taxes doesn't actually increase revenue, Republican politicians continue to claim that it does. This is widely known as the " Tax Fairy ," since believing in it makes about as much sense as believing in the Tooth Fairy. But conservatives would certainly like it to...

Killing Dodd-Frank Softly

To block financial regulations, industries and their congressional allies delay, delay, delay—and if necessary, sue.

(Flickr/Emmanuel Huybrechts)
(Flickr/Emmanuel Huybrechts) On August 16, a group of 32 members of Congress—27 Republicans and 5 Democrats—sent a seemingly innocuous request to Richard Cordray, the director of the Consumer Financial Protection Bureau, regarding a new rule on international money transfers. "We urge you to delay the effective date of these rules and to undertake a comprehensive study of their impact before moving forward to avoid irreparable harm to consumers," they wrote. The regulation, set to go into effect in January, will force companies to disclose the full extent of the fees they charge when people send money overseas. While the letter raised concerns about the rule, the members of Congress didn’t ask the CFPB to scrap it; instead, they entreated Cordray to hold off on the rule until January 2015. Simple enough on the surface. But it is part of a broad, systematic effort by the banks and their allies to delay implementation of the Dodd–Frank Wall Street Reform and Consumer Protection Act, the...

Chicago, Yes; Wisconsin, Huh?

As Chicago teachers union officials and Mayor Rahm Emanuel’s office were assuring Chicagoans that they had reached an agreement Friday afternoon on their contractual dispute, a judge a hundred miles north in Madison, WIsconsin struck down as unconstitutional that state’s hugely controversial law banning collective-bargaining rights for public employees. As I write, the text of the judge’s decision is not yet available, but since a ban on public-employee collective bargaining exists in many states, either the judge found new grounds to declare the law unconstitutional, or he declared it so for reasons not related to the constitutionality of such prohibitions. Nor is it yet clear whether his decision immediately reinstates the old law, or whether the effect of his decision is on hold until a higher court rules on what is sure to be the state’s appeal. ​Things are clearer down in Chi-town. There, the union has apparently agreed to a teacher-evaluation system in which student test...

Ben Bernanke, the Newest Avenger

(AP Photo/Manuel Balce Ceneta)
Ben Bernanke’s announcement Thursday that the Fed would keep easing money sent the stock market soaring, but more important was his declaration that there is only so much the Federal Reserve can do. The Fed’s latest move, approved by the policy-setting Open Market Committee, will buy a total of $85 billion in bonds every month, including $40 billion per month of mortgage-backed securities. This pumps vast sums into the economy. It is the equivalent of printing money. Bernanke’s hope is to drive down interest rates generally, especially on home mortgages. The Fed will also extend its policy further into the future and keep interest rates close to zero through 2015. But as Bernanke himself put it, monetary policy alone can’t fix what’s broken. The more important tool in a severely depressed economy is fiscal policy. And here is where Bernanke is truly playing against type. The usual script calls for a Fed chair to demand fiscal tightening in exchange for liberal interest-rate policy. It...

As Common As Dirt

In the fields of California, wage theft is how agribusiness is done.

(Photography by David Bacon)
Photography by David Bacon "As Common as Dirt" has won the 2013 James Beard Award in the Politics/Policy/Environment category. The award is the highest honor for food journalism. This article was produced in collaboration with the Food & Environment Reporting Network , an independent, nonprofit news organization producing investigative reporting on food, agriculture, and environmental health. O ne morning earlier this year, in the borderland town of Brawley, California, 75-year-old Ignacio Villalobos perched on a chair in his trailer, removed a plastic bag from the well of a rubber boot, and finished dressing for work. Dawn was still an hour away, and in the wan light of the kitchen, Villalobos took off his house sandals and pulled the bag over his right foot. He bunched it at the ankle, then slipped his foot into his boot. “These shoes aren’t made for water,” he said, adding that morning dew and irrigation keep farm fields damp—even in the desert of the Imperial Valley where he...

Koch: It's Only Crony Capitalism When I Don't Benefit

The right-wing press is chock-a-block with articles decrying the Obama administration’s romance with industrial policy. So reflexive is this ideology that some of them are even written by major beneficiaries of industrial policy, whose sense of entitlement must be so ingrained that they fail to notice this anomaly. Exhibit A appeared in Monday’s Wall Street Journal op-ed page, in which Charles Koch of Koch Brothers fame took out after crony capitalism and industrial policy. “We are on dangerous terrain when government picks winners and losers in the economy by subsidizing favored products and industries,” Koch wrote. He further complained that government is currently “subsidizing and mandating politically favored products in the energy sector,” singling out “solar, wind and biofuels” for examples of sectors currently being helped out. But not a word about oil and gas can be found in Koch’s litany of complaints. Could this be because Koch Industries, of which Koch is chairman and CEO,...

Angela Merkel's Bad Medicine

The German chancellor’s remedy of austerity is killing Europe, and the failure to contain financial speculation is spreading the epidemic.

(Flickr/World Economic Forum)
O n July 26, as traders were once again deserting Spain’s government bonds, setting up the risk of a default and a deeper crisis of the euro, Mario Draghi, president of the European Central Bank surprised and delighted financial markets. Speaking off the cuff in London, he vowed to do “whatever it takes” to save the European economy. Eric Palma The escalating crisis of speculative attacks on government bonds had spread from Greece to Portugal to Ireland to Spain and Italy, threatening to take down the euro and the European Union. It was a message that political leaders had been waiting for. The markets read Draghi’s statement as an audacious declaration that he would begin massive bond purchases, ending the threat of a slide into European depression. A week later, a chastened Draghi walked it all back. There would be no such purchases, he said, not until governments did their part by getting their budgets under control. Draghi made a rare disclosure of some of the infighting that led...

Europe: Old Austerity in New Bottles

In late July, European Central Bank (ECB) President Mario Draghi, speaking off the cuff in London, pledged to do “whatever it takes” to save the Euro, including massive intervention in bond markets to keep speculators from extending the Greek disease to Spain and Italy, where interest rates were ominously rising. This impressed money markets for a few days—until investors realized that Draghi’s commitment came with big strings. Strapped countries benefitting from these purchases would first have to double down on austerity. No thanks, said the leaders of Spain and Italy. On September 6, Draghi tried once more. After more than a month of consultations with his own board and national leaders, he declared that the ECB would make unlimited purchases of short term government bonds. He claimed “a massive majority of the [ECB] governing council for this concept.” But the council member who mattered most, Bundesbank President Jens Weidmann, remained adamantly opposed. A Bundesbank press...

Third Night of the DNC: TV & Twitter Review

So the DNC gave us a week that got more and more sober as it went on. By last night, we were down and dirty with tough choices and grim policies. Foreign policy dominated the early part of the evening, with a salute to military veterans that had many in my Twitter feed commenting on how strange it was that the parties have switched places. The Republicans hadn’t even mentioned the wars or the veterans; as conservative Ramesh Ponnuru tweeted , “Really was malpractice, and wrong, for Romney not to mention troops in Iraq, Afghanistan in convention speech.” And so for a night the Democrats became the party of LBJ again, the party of a strong military and uncompromising attack. By the time Joe Biden trotted out his bumper sticker line, “Osama bin Laden is dead and General Motors is alive!” the crowd chanted it with him. How strange was that: a crowd of Democrats cheering for someone’s head on a plate, and for a business bailout? Don’t get me wrong; I understand that both absolutely had to...

Second Night of the DNC: TV and Twitter Review

The early part of last night’s DNC TV show couldn’t match Tuesday night. As I wrote yesterday, that first night rocked out over the body issues: health care for all, equal pay for women, open LGBT military service, repro rights, equal marriage laws—the human values of doing unto others as you would have them do unto you. The speakers preached, and the crowd roared. The night was, as Robert Kuttner writes, a full-on embrace of the social issues that the Republicans have been attacking for decades. You hate homos? We love them! You think women are lying sluts? We believe in women’s integrity! It was awe-inspiring and energizing. Last night’s implicit theme was It’s The Economy, Stupid. Union dudes and CEOs stood up and explained—well, I couldn’t tell you what they explained, exactly, because one after another, they were so boring that my eyes rolled to the back of my head and my wife insisted that we turn it down the volume to “inaudible hum.” As Molly Ball (@mollyesque) tweeted, “The...

Foreclosure Free-For-All

The CFPB is getting resistance from its allies on proposed mortgage policies. 

(AP Photo/David J. Phillip, File)
It's almost four years since the economy cratered, yet 11 million homes—accounting for 23 percent of all outstanding mortgages— remain underwater. The Obama administration's efforts to shore up the housing market by offering incentives for refinancing, rather than the government directly purchasing loans, has been an utter failure ; countless homeowners have been left desperately negotiating with their lenders to modify the terms of their loan and more often than not, being tossed onto the street by mortgage servicers. Servicers are the companies that process mortgage payments; they're also the point of contact should something go amiss, resolving a defaulted mortgage by either restructuring the loan or beginning foreclosure proceedings. During normal times, servicers could better handle the requests of an occasional delinquent borrower. When the avalanche fell in 2009 and a massive pool of customers could no longer make the monthly payments, the incentives shifted, often pushing...

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