Economy

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,...

Time for Government and Public Workers to Be Friends Again

Labor-management cooperation is the key to treading the line between budget shortfalls and unions' demands.

(Flickr/Wxmom)
A lost theme in improving public services—labor-management cooperation—has begun to receive long-overdue attention in recent weeks. Over the weekend The Washington Post gave front-page coverage to a Maryland teachers’ union collaborating with school authorities to accelerate curricular reform and improve teacher performance while disciplining ineffective teachers. Last month, Nicholas Kristof wrote approvingly in the New York Times of a comparable collaboration in New Haven. These examples hardly reflect a new development. In 2001, Toledo won an Innovations in American Government award from Harvard University’s Kennedy School of Government for its collaboration of organized teachers and school administrators. Parts of the Toledo Plan were replicated in other large Ohio cities. When Indianapolis decided to “contract out” some street repair work, the city’s unions persuaded Mayor Stephen Goldsmith to allow them to bid on the contract. The city workers won the contracts and saved the...

A GOP Governor Is Pushing Tax Hikes?

(Flickr/soukup)
Nevada Governor Brian Sandoval came into office with tough talk about taxes. Since then, it seems, he's grown disenchanted with Grover Norquist-style governance. For the second time in as many years, he's pushing to extend a group of temporary tax increases, rather than cut public-education funding. What is the world coming to? Nevada's budget crisis last year was among the worst in the country, with a shortfall that amounted to 45 percent of state expenses according to Stateline.org . When courts ruled the state could not draw on local government funds appropriated by a prior legislature to balance the budget, Sandoval opted to maintain tax rates rather than make more core cuts. This year, he's going with the same philosophy it seems. As the Las Vegas Sun reports: “Let me be clear, as I’ve said before, the economy is improving, but I believe we must begin this budgeting process with all the information available,” Sandoval said in a written statement. “In addition to avoiding further...

Fingers Crossed for Greece

The second Greek bailout gets the green light, but the country isn't out of the woods.

AP Photo/Thanassis Stavrakis
The successful conclusion last Friday of the PSI (Private Sector Involvement), the bond exchange process for Greece’s private creditors, was good news—both for the country and for the eurozone. Voluntary participation in the deal reached 85.8 percent (out of a total of 206 billion euros in Greek government bonds which were up for exchange). The level of participation reached 95.7 percent with the decision to activate the Collective Action Clauses (CAC) recently added to the legal contracts governing 177 billion euros of bonds under Greek law, forcing recalcitrant creditors to participate in the process. This means a 105 billion euro gross reduction in Greek debt—out of a total of 368 billion. This number, which makes Greece’s sovereign debt restructuring the largest in history, should rise further once the process for the holders of Greek government bonds under foreign law is concluded. The government bondholders represent about 10 percent of the 206 billion euro total, and almost 70...

A Stealth Attack on Democratic Governance

Why are Obama trade negotiators pushing the extreme Trans-Pacific Partnership, and why is it being negotiated in such an untransparent manner?

AP Photo
It takes quite a “trade” agreement to undermine financial regulation, increase drug prices, flood us with unsafe imported food and products, ban Buy America policies aimed at recovery and redevelopment, and empower corporations to attack our environmental and health safeguards before tribunals of corporate lawyers. Trade, in fact, is the least of the Trans-Pacific Partnership (TPP). Backdoor deregulation and imposition of new corporate investor and patent rights via trade negotiation began in the 1990s with the World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA). But the TPP now threatens a slow-motion stealth attack against a century of progressive domestic policy. At stake is nothing less than a democratic society’s ability to regulate a market economy in the broad public interest. Under the framework now being negotiated, U.S. states and the federal government would be obliged to bring our existing and future policies into compliance with expansive norms...

The Pacific Pivot

America needs to try something new when it comes to international trade.

(Flickr/James O'Sullivan)
On November 12, 2011, I listened as President Barack Obama told business leaders attending the Summit of the Asia-Pacific Economic Cooperation forum in Honolulu that “we’ve turned our attention back to the Asia Pacific region” and announced two vehicles for that return. These were the Trans-Pacific Partnership (TPP) Free Trade Agreement, now under negotiation and to be concluded by the end of this year, and the Pivot to Asia, meaning a redeployment of American priorities and military forces away from Europe and the Middle East to Asia. The president said that Asia will be central to America’s future prosperity and that it was imperative to correct unsustainable trade and financial imbalances while continuing to expand economic ties. This would require that all countries play by the same rules appropriate to the current global economy. The TPP, he said, would be a template for a “21st-century agreement” that would eventually be open to all the countries of the region. He emphasized...

Not a Great Deal for Asia

The Trans-Pacific Partnership could end up hurting the broader economic interests of both the U.S. and smaller Asian nations.

(Flickr/images_of_money)
The Trans-Pacific Partnership is best understood as President Barack Obama’s extension of the Bush-era doctrine of “competitive liberalization.” Frustrated with pushback at the World Trade Organization by nations like China, Brazil, India, and South Africa, the United States seeks a coalition of the willing to import a commercial framework that rewards private firms at the expense of the common good. That policy regime is ailing in the U.S. and gets worse when exported. The Trans-Pacific Partnership (TPP) certainly isn’t about raising standards of living. The most ambitious estimates of the gains from the TPP suggest that participating nations will gain a mere one-tenth of 1 percent of the gross domestic product. Sixty percent of the projected gains go to Vietnam and the United States, and the other 20 percent goes to Malaysia—largely because the U.S. already has trade pacts with the other proposed big players in the TPP. However, the proposed deal is far from popular in Asia. In...

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