Economy

Underdogs Lose the Money Crutch

Today's Balance Sheet: Is the GOP primary finally petering to a close?

The Economist
Big states that are expensive to have a campaign presence in are up next in the GOP primary, and they aren't going to be too friendly to the candidates' dwindling coffers. Seven primaries were held in February, and the contenders drained their funds in order to perform well in the high-stakes contests: Romney spent over $12 million while raising $11.5 million; Santorum raised $9 million, but spent $7.6 million; and Newt Gingrich spent $1.5 million while raising $2.6 million. Super PACs have become less of a supplement and more of a crutch as the GOP race plods on, keeping moribund campaigns alive. Foster Friess, who has helped keep Santorum afloat with regular cash infusions to the Red White and Blue Fund, said yesterday that the "role I needed to play is maybe accomplished." The super PAC ended the month with only $365,000 in the bank, compared with the $10.5 million still on hand for pro-Romney Restore Our Future, which has started to collect the Republican establishment donors who...

Preventing Wall Street’s Latest Sucker-Punch

(AP Photo/J. Scott Applewhite)
Mercifully, the misnamed JOBS Act did not sail through the Senate yesterday as expected. The Republican-sponsored “bipartisan” act is a Wall Street wish list of exemptions from investor protections that would allow some 80 percent of new stock offerings to avoid the usual disclosures. Except for its Orwellian, contrived acronym (Jumpstart Our Business Startups) JOBS has nothing to do with jobs. More likely, it stands for Just Obfuscate with B.S. The bill would even undo the Sarbanes-Oxley rules, enacted after the Enron scandal, prohibiting “stock analysts” from touting shares in order to help investment bankers get underwriting business. The Obama White House, always eager to curry favor with Wall Street donors and looking for something it could claim as bipartisanship, indicated it would sign the bill. Shame. With that signal, the measure sailed through the House with only 23 Democrats voting against. Shame again. Finally, the chair of the Securities and Exchange Commission, Mary...

Makers and Takers

(Jamelle Bouie/The American Prospect)
If you want to know the priorities behind Paul Ryan’s latest budget, “The Path to Prosperity,” look no further than the line he delivered to the audience at the American Enterprise Institute. “We’ve become a nation of net takers versus makers,” said the House budget chair. The natural instinct of most liberals is to put this in stark class terms. In the language of Occupy, the makers are the “1 percent,” and the takers are the other 99 percent. But this ignores the degree to which the Republican Party is engaged in a form of generational warfare against the rising tide of younger Americans. For the last two years, Republicans have tried to defend the prerogatives of the elderly and near-elderly—opposing health care reform and anything else that would redistribute income to young people—for the sake of preserving their political coalition and providing benefits for the wealthy. The “makers” aren’t just rich people—it also includes the elderly people who feel entitled to the benefits...

An Exercise in Contrasts

(Federal Reserve)
From Representative Paul Ryan’s “ Path to Prosperity ”: The United States is facing a crushing burden of debt – a debt that will soon surpass the size of the entire U.S. economy and ultimately capsize it if left on its present course. From reality: This graph shows the amount the United States pays per year on interest for its debt. If this is what being “crushed by debt” looks like, then we’re doing pretty well. More seriously, this is another reason why it’s silly to focus obsessively over the total amount of debt. Yes, a large debt burden is a long-term liability, but at the moment—when global markets are eager to purchase US debt—there are more pressing issues to deal with, like high unemployment and a sluggish ecovery.

The Budget Plan Cometh

Today's Balance Sheet: Budget Day is Here!

Economist
Representative Paul Ryan, chair of the House Budget Committee, plans to unveil his 2013 budget plan this morning, much to the excitement of Democrats and to the chagrin of Republicans, who remember how last year's budget negotiations turned out for them (not well). Although the details of the plan have yet to be released, changes to the tax code and Medicare will be the proposal's big-ticket items . Ryan's budget would make it so the tax code would have only two brackets—15 and 25 percent—eliminate the Alternative Minimum Tax, and cut almost all taxes on U.S. corporations' overseas earnings. Congressional Democrats are already gearing up to assail the budget plan. As Politico put it , "the release of the House GOP budget is like Christmas in March," and media blitzes and town halls are already in the works to frame the budget in a way that could leave them winners for the second year in a row. The Budget Committee plans to vote on the plan tomorrow, and House Democrats will unveil...

Three Things to Know About Paul Ryan's New Budget

(Gage Skidmore/Flickr)
Later this morning, House Budget Chairman Paul Ryan will unveil his latest budget plan, “ The Path to Prosperity .” Like the “Roadmap” released last year—and passed by House Republicans—the Path to Prosperity fits neatly within Ryan’s self-described Randian ideology: It would slash social and entitlement spending and direct the savings to lower taxes on rich people and corporations. Despite this, as Matthew Yglesias points out, Ryan has a habit of portraying his policies as somehow beneficial to the broad majority of Americans. I plan to be in the audience for Ryan’s unveiling, but in the meantime, here are a few things to remember and look out for as Ryan tries to sell his program to the public. 1. Premium support will not lower costs for the health system or ordinary Americans : Ryan’s plan for Medicare vouchers came under fire last year and contributed to the unpopularity of House Republicans. This time around, Ryan has replaced vouchers with “premium support,” a plan in which...

Pick Me! Pick Me!

(AP Photo/Mark Lennihan)
Why does Larry Summers have more lives than a cat? He was fired as president of Harvard, did not exactly serve President Obama brilliantly as economic policy czar, and now seems to be in line for the presidency of the World Bank, a post traditionally chosen by the president of the United States. The deadline for the selection is this Friday, March 23. The appointment is supposed to be made official at the April meeting of the World Bank. Earlier this month, the White House leaked a short list of three names, Summers plus U.N. Ambassador Susan Rice and Massachusetts Senator John Kerry—neither of whom want the job. Brilliantly subtle signaling, that. Pointedly excluded from the list was Columbia University economist and world citizen Jeff Sachs, an adviser to the U.N. Secretary General Ban Ki-moon and a very serious crusader against world poverty. Sachs took the unprecedented and marvelously transparent step of nominating himself and publicly campaigning for the job, but he is a onetime...

Romney Gets Abstract On the Economy

President Obama in a Chevy Volt (official White House photo by Pete Souza)
For a long time, commentators noted that Barack Obama was going to have a hard time persuading the public with his argument about the economy, since it would come down to, "It could have been worse." Saying that unemployment may still be over 8 percent, and it peaked at 10 percent in October of 2009, but if it hadn't been for the stimulus we passed things would have been much, much worse, isn't going to be a consolation if you're unemployed. The fact that most economists say that the stimulus did in fact have a substantial positive effect on the economy doesn't really matter when it comes to getting people to vote for your re-election. When times are bad, "It could have been worse" is small comfort. That was the story up until recently. But the last few months have shown strong job growth, and most everyone is expecting that the economy will continue its upward trajectory. And guess what that has done to Mitt Romney: made him argue the mirror image of what everyone said Obama couldn't...

What Do You Do with a Pile of Cash?

Today's Balance Sheet: Investors and the stock market are likely to be in a good mood after Apple's big announcement.

The Washington Post
Apple—the world's most valuable company— announced today that it plans to use some of its $97 billion cash stockpile toward paying a regular dividend of $2.65 per share starting in the fourth quarter, and a stock buyback of up to $10 billion . Apple has resisted paying dividends—the last time Apple paid a dividend was in 1995 , before Steve Jobs returned as CEO—but analysts say that the plan is likely good for the company in the long-term. “It will attract a broader class of investor," says A. M. Sacconaghi Jr. with Bernstein Research. “This is something that large shareholders have been asking for," says Shaw Wu at Sterne Agee & Leach Inc. Over the course of three years, these programs should use up about $45 billion of the cash accumulated during past few years. The Latest Playing at No Cost, Right Into the Hands of Mobile Game Makers The New York Times Luxury Chinese Liquors Become Multibillion-Dollar Brands Bloomberg Businessweek News of the World The Economist Greek Deal...

Relative Optimism

Gallup
This week begins with a little positive news about economic expectations: according to Gallup , 19 percent of Americans say that this is a “good time” to find a “quality” job, the highest since September 2008: Of course, the larger lesson is that “good” is relative. Five years ago, before the economy collapsed in a horrible mess, 45 percent of Americans said that it was a good time to find a quality job. But the labor market is far worse than it was then, and at the moment, things are actually looking up if one in five Americans think that they could find a decent job in this environment.

The Age of Double Standards

American Airlines can declare bankruptcy and wipe away debt. But you can’t—and that’s just the beginning.

(AP Photo/J. Scott Applewhite)
“But, Yossarian, suppose everyone felt that way.” “Then,” said Yossarian, “I’d certainly be a damned fool to feel any other way, wouldn’t I?” —Joseph Heller, Catch-22 Last November 29, American Airlines declared bankruptcy under Chapter 11, the provision of the bankruptcy code that allows a corporation to stiff its creditors, break contracts, and keep operating under the supervision of a judge. This maneuver, politely termed a “reorganization,” ends with the corporation exiting bankruptcy cleansed of old debts. In opting for Chapter 11, American joined every other major airline, including Delta, Northwest, United, and US Airways, which has been in and out of Chapter 11 twice since 2002. No fewer than 189 airlines have declared bankruptcy since 1990. As the sole large carrier that had not gone bankrupt, American missed out on savings available to its rivals and thus was increasingly uncompetitive. Bankruptcy is intended to give a fresh start to persons and enterprises overwhelmed by...

The World Gives Greece Another Loan

Today's Balance Sheet: The IMF moves forward with its contribution to the bailout. 

Moneybox
The International Monetary Fund (IMF) approved a $36 billion contribution toward the latest Greek bailout. Along with more than $170 billion from other European governments and institutions, the IMF loans will be doled out over the course of four years, hopefully allowing the country and the eurozone to regain their financial standing. “The main function of this agreement is to contain the crisis for the next few months in order to provide a more stable environment for Italy and Spain to carry out their adjustments and therefore stabilize the euro area as a whole,” said Domenico Lombardi, a former IMF board official and senior fellow at the Brookings Institution. IMF Managing Director Christine Lagarde said the risks with this type of bailout are "exceptionally high," and that Greek politicians will likely need to make many difficult and unpopular decisions on the road to recovery. IMF rescue plans are also in the works for Ireland and Portugal. The Latest Can It Be … the Recovery?...

With Santorum’s Goofy Views, Why’s Obama Down in the Polls?

(Flickr/sangroncito)
What should we make of those scary poll numbers? The most recent New York Times /CBS poll, conducted March 7 to March 11, reported a big drop in President Obama’s favorability ratings, which declined to 41 percent from 50 percent just a month ago. This occurred during a period when the economic news was relatively good—the economy created more than 200,000 jobs for the third straight month; gas prices rose but not steeply; and Obama acquitted himself well on the treacherous terrain of resisting Iran’s nuclear ambitions without embracing war. It was also a period when the Republicans seemed to be imploding with women, thanks to their clumsy blurring of the issues of abortion and contraception. The White House has revved up its outreach to women voters, who presumably don’t want the government messing with their right to contraception. Yet in this poll, the president’s approval rating declined among all groups, even women. What gives? First, it’s only one poll. In the most recent Gallup...

The Truth about Goldman Sachs

The investment firm headed south as soon as it started prioritizing short-term gain over its long-term interests.

(Flickr/macten)
Former Goldman Sachs employee Greg Smith wrote an op-ed in yesterday’s New York Times that simmers with pathos. Smith describes the devolution of the culture at Goldman: Whereas in the past, the company worked in the interests of its clients, they are now seen merely as the source of transactional profit, to be manipulated for the benefit of the firm. His story emerges in the midst of a huge effort by Wall Street to eviscerate and delay the implementation of the Volcker Rule, which limits bank traders to running a client-service businesses by prohibiting trading for the bank’s own account. Having spent 12 years at Goldman prior to 1997, I sympathize with Smith’s feelings of loss and betrayal. I left just at the beginning of the institution’s evolution into its current form and have observed the process with despair—not only for the organization but for the loss suffered by the nation. Some context might provide greater meaning to Mr. Smith’s story. At its best, Wall Street serves an...

Hating Wall Street Springs Eternal

Today's Balance Sheet: The Goldman Sachs employee strikes back.

NPR
After Goldman Sachs employee Greg Smith quit his job with a loud and blistering New York Times op-ed , Wall Street is once again at the forefront of the national conversation. Questioning Wall Street definitely isn't new—we've been calling the stock market greedy ever since it was founded in 1792, and even more in the past year with the birth of the Occupy Wall Street movement. “When you’ve been around 40 years, you always say things were better back then,” said David Dreman, a veteran money manager. “But it is different now. There have been enormous changes on Wall Street. ... Unless the client is very sophisticated, the client gets clipped.” The public shaming of Goldman Sachs wasn't limited to the op-ed claiming that the financial giant favors profits over clients— Bloomberg Businessweek wrote a long piece on the company yesterday, and many major newspapers had lead stories on the firm this morning. Goldman's stock slipped 3.4 percent in the wake of Smith's departure. Right now,...

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