Robert Kuttner

Beware a Grand Bargain

AP Photo/ Evan Vucci
W ill President Obama and the Democrats win a major battle only to lose the war? The longterm war that Republicans are fighting is a deadly serious struggle to destroy the most important and valued achievements of the New Deal-Great Society legacy, Social Security and Medicare. Wall Street billionaires like Peter G. Peterson and Stanley Druckenmiller have been softening the ground for decades by claiming that Social Security is bankrupting the country and destroying future prospects of America’s youth. So there is a kind of pincer movement between the scorched-earth Republicans of the Tea Party, willing to shut the government if they don’t get their way, and the more mannered Wall Street Republicans who want to gut social insurance for the alleged good of the country. It adds up to the same thing—cut or privatize the Democrats’ two crown jewels. What’s worse, even though Nancy Pelosi and Harry Reid were able to maintain 100 percent party unity in their House and Senate caucuses in...

A Spine Is a Useful Thing to Have

AP Photo/Charles Dharapak
AP Photo/ Evan Vucci H ow much damage have the Republicans done to themselves going into the elections of 2014 and 2016? And has President Obama resolved to hang tough, not just in this round, but in the one that follows and the one after that? The contrived shutdown crisis proved two things. It proved that Republicans are split down the middle between a lunatic, fundamentalist wing that prefers wreckage to governing and a pragmatic wing often allied with Wall Street. And it proved once and for all that being tough in the face of blackmail beats appeasement that only courts more rounds of blackmail. Business elites applied escalating pressure on the Republicans not to let the United States default on its debt. In the end, 144 House Republicans voted against the measure, and 87 voted for it. That 144, though, exaggerates somewhat the true strength of the Tea Party faction. Some of that vote was a protest against the failure of the Democrats to give anything in return. For now, public...

Take the Fourteenth!

AP Images/Charles Dharapak
Remember the proposals that were current back in 2011 to have President Obama invoke his authority under the 14 th Amendment to keep funding America’s public debt, even without approval from Congress? Well, that proposal has suddenly become highly relevant again, even urgent. Prior to 1917, Congress did not even require periodic legislation to increase the debt ceiling. Statutory approval was added as part of the large increase in World War I borrowing. The 14 th Amendment, approved after the Civil War, included several provisions, but the key one for our purposes was Section 45. It provided that: “The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion….shall not be questioned.” The intent was to make sure that Union war debts would be paid and Confederate ones would not be. A number of constitutional scholars believe that this provides ample authority...

Tom Friedman’s Worst Column Ever

AP Photo/Mark Lennihan
Sometimes, Tom Friedman writes a column that is such complete baloney it makes you want to retch. Rather than risking soiling my shoes, here is a point-by-point rebuttal to Friedman’s opus du jour, titled: “ Sorry, Kids. We Ate It All .” Friedman’s column swallows whole the budgetary malarkey of the corporate Fix-the-Debt lobby and its Wall Street sponsors. Namely, the reduced horizons of the next generation are the result of the gluttony of old folks—and of unions. But what makes this piece especially appalling (and emblematic) is that the hero of Friedman’s piece is one Stanley Druckenmiller, a hedge-fund billionaire who has appointed himself as the Paul Revere of deficit reduction to warn America’s college students that The Seniors Are Coming. In passing, Friedman discloses that Druckenmiller is also “a friend.” So on top of the absurd logic of the piece, Friedman is guilty of a conflict of interest—using the most valuable real estate in American journalism to do a favor for a chum...

Thinking the Unthinkable

Listen up, class. World War I never happened. It didn’t happen because nobody wanted it, and everybody grasped the horrific risks. In the event, the common European civilization was destroyed, three empires fell, 16 million people died, and 20 million were wounded. So World War I couldn’t happen because everyone knew how awful it would be. In August 1914, virtually all leaders anticipated a short set of skirmishes, a readjustment of borders as in other recent wars, and everyone would be home for Christmas. But, you know, stuff happens. Then there was the American Civil War. It didn’t happen either. Many Southern leaders knew that staying in the Union and accepting some limitations on slavery in the territories and new states would allow them to keep their “peculiar institution” and avoid the economic catastrophe of a war on their soil. Oops. Thus the Republican game of chicken with the debt default. It can’t happen because its consequences would be too unthinkable, right? The stock...

An Ignoble Prize

Eugene Fama, one of the winners of this year’s Nobel in economics, is the fellow who proposed that all markets are efficient all of the time—more precisely that market pricing accurately captures all available information and thus creates “correct” prices. Fama also insisted that there is no such thing as a price bubble. Somehow, the man missed one of history’s great bubbles and the collapse that followed—an epic case of markets getting prices wrong. He also missed the fact that markets have incorrectly priced carbon, leading to global climate disaster, which Lord Nicholas Stern correctly termed “history’s greatest case of market failure.” For this, they give the man a Nobel. What timing! The mind boggles in search of an apt comparison. It’s like giving a posthumous Nobel in physics to Ptolemy rather than Copernicus for demonstrating that the sun revolves around the earth. Or maybe in biology not to Gregor Mendel or Charles Darwin but to Trofim Lysenko, Stalin’s court geneticist, for...

The Task Rabbit Economy

T askRabbit.com markets itself as a Web service that matches clients seeking someone to do odd jobs with “college students, recent retirees, stay-at-home moms, [and] young professionals” looking for extra income. The company website calls it “a marketplace dedicated to empowering people to do what they love.” The name Task Rabbit doesn’t exactly suggest the dignity of work, and the love often takes humble forms. Customers hire Task Rabbits to clean garages, haul clothes to the laundry, paint apartments, assemble Ikea products, buy groceries, or do almost anything else that’s legal. The San Francisco–based company, which has raised $38 million in venture capital since it was founded in 2008, makes its money by tacking on a 20 percent surcharge to the fees paid by clients. The firm performs criminal background checks on aspiring Rabbits, who then get access to chore requests posted by customers. Using the familiar metrics of the Internet, the more than 10,000 approved Rabbits are rated...

Enter Yellen

AP Images/Eugene Hoshiko
With President Obama’s belated decision to name Janet Yellen to chair the Fed, several questions arise. First, is Yellen likely to be confirmed? Almost certainly. The Republicans have lost a lot of public support by shutting down the government and playing chicken with the debt ceiling. They are not likely to trifle with the one functioning branch of government. Despite the Republicans’ intermittent uses of the filibuster, I’d be surprised if they went to the barricades to block Yellen. Second, there is the question of whether Yellen will have the same working majority on the Fed’s board of governors and open market committee that Ben Bernanke has enjoyed. There are now three vacancies on the Fed. One will be filled by Treasury Undersecretary for International Affairs, Lael Brainard, a woman who is close to both Larry Summers but also to Dan Tarullo, the progressive Fed governor responsible for banking regulation at the Fed. However, the shift of Fed Governor Sarah Bloom Raskin to be...

Budget Roulette: The Uncertain End Game

AP Images/Carolyn Kaster
AP Images/Carolyn Kaster This budget crisis, weirdly, has nothing to do with the budget. It is the expression of the Tea Party Republicans’ animus against Obamacare, their general loathing of government, and their willingness to resort to wildly destructive tactics. As Senate Majority Leader Harry Reid, one of the few heroes in this mess, put it so aptly, “They’ve lost their minds.” A fine irony is that one of the few things that the government shutdown doesn’t affect is the Affordable Care Act, which takes effect today. The Act is a mandate to purchase affordable insurance via hybrid “exchanges,” which are not closed by the failure to approve a budget. In a just world, the extremist Republicans would take the fall. Republicans as conservative as Dana Rohrabacher of California, who came to prominence as an ally of the John Birch Society, and arch conservative Karl Rove, have warned that the Republicans are courting political suicide. “What we’re doing here is shooting ourselves in the...

Obama’s Foreign-Policy Realism

AP Images/Meisam Hosseini
AP images/Meisam Hosseini President Obama’s attempted rapprochement with Iran and Syria takes him full circle, back to the Obama of the 2008 campaign and the Obama who was (prematurely) awarded the Nobel Peace Prize. Evidently the United States is now willing to foreswear the use of force if these still-nasty regimes will give up weapons of mass destruction. It’s both a remarkable shift, and a low bar. This new course presents a tricky set of diplomatic challenges. It falls squarely within the school of foreign policy known as realism: give up on ideals that are unattainable and focus on those that serve core national interests and that can be achieved at proportional cost, even if that means making peace with regimes you detest. In modern times, Henry Kissinger, sponsor of détente with China, was the great advocate of realism—with the notable exception of the failed crusade in Vietnam. Realism says that we should try to get along with even brutal status-quo powers, not topple them,...

The Fed Stays the Course

AP Photo/Susan Walsh
F inancial markets rallied when the Federal Reserve defied the rumor-mongers and resolved to continue its program of keeping interest rates very low until the unemployment rate improves. There was only one dissenting vote on the Fed’s policy-setting open market committee. What’s going on here? Ever since the run-up to the collapse of 2008, what’s good for Wall Street hasn’t exactly been good for the rest of the economy. Are these ultra-low interest rates just pumping up more financial bubbles, as critics fear? Or does a still weak economy need this form of stimulus? Think of it this way. There are risks to continuing a policy of very easy money, but premature tightening would be even worse. The markets and the pundits got this one wrong because the hawks in the Fed system had been leaking rumors that they had the votes and that the Fed would soon be “tapering” (pulling back) its program of $85 billion-a-month in bond purchases. Chairman Ben Bernanke, to appease the hawks, lent...

Shutdown Report: How to Play Chicken and Lose

AP Images/J. Scott Applewhite
AP Images/J. Scott Applewhite R epublicans are likely to incur serious political damage in their effort to hold hostage continued funding of the government in exchange for deep spending cuts. This routine has become an annual ritual, and in the past President Barack Obama has been the first one to cave. The 2011 Budget Control Act, which includes the automatic sequester, is one bitter fruit of the president’s past failure to hang tough in the face of Republican extremist demands. But this time is different. The Tea Party Republicans, who dominate the GOP House Caucus, are demanding that President Obama de-fund the Affordable Care Act in exchange for their willingness to fund ordinary government spending in the new fiscal year, which begins October 1. But they picked the wrong demand. In the past, Obama was willing to make deep cuts in federal spending in order to get a budget deal with Republicans. The Affordable Care Act, however, is a nonnegotiable for the president. It’s his...

Did Summers Spoil It for Yellen?

AP Images/Mark Lennihan
AP Images/Mark Lennihan Now that Larry Summers is out of contention for chairman of the Federal Reserve, the nomination of Janet Yellen should be assured. Unfortunately, Yellen still is far from a safe bet. Her qualifications, certainly, are not in doubt. Yellen is currently vice chair of the Fed and before that she was president of the Federal Reserve Bank of San Francisco. She has had a distinguished academic career, which she interrupted to serve as chair of President Clinton’s Council of Economic Advisers, and after that, as a governor of the Federal Reserve. Yellen is better positioned than any other woman to break the glass ceiling that has kept the Fed from having any female chair throughout its century-long history. Yellen, who began her scholarly career as a labor economist, has also been outspoken about the need for the Fed to continue its policy of economic stimulus to help strengthen the faltering economic recovery. Nobel Laureate Joseph Stiglitz, who preceded her as chair...

A True Liberal Mayor At Last?

AP Images/Bebeto Matthews
New York City is on the verge of electing its first progressive mayor in a generation. In most polls, Public Advocate Bill de Blasio is well over the 40 percent threshold required to avoid a runoff in the Democratic Primary. And in the Big Apple, the Democratic nomination is tantamount to a win. Even if he is pushed into a runoff, DeBlasio is strongly favored to come out on top. The early front runner, Christine Quinn, stumbled badly, partly because of her close association with Mayor Michael Bloomberg. As city council chair, Quinn was the key enabler of Bloomberg’s overriding of the city’s term limits law. All of Bloomberg’s latent unpopularity among the non-affluent began culminating during his final months in office, and it cascaded onto the unfortunate Quinn . Even among women, she has only 19 percent support in the polls. Quinn had been poised to become not only New York’s first female mayor but its first lesbian mayor. But that historic breakthrough is on the verge of being...

The Summers Dossier

AP Images/J. Scott Applewhite
To: President Obama From: Your Political Team Re: Larry Summers Vetting Report Dear Mr. President, Welcome home. You have several immense challenges in the coming days and weeks: marshaling support for the Syria attack, dealing with the next artificial budget crisis contrived by the Republicans, and continuing to move forward with implementation of the Affordable Care Act against fierce partisan opposition. This memo on Larry Summers’s confirmation as Federal Reserve Chairman is written with all that in mind. The staff investigation of Summers in anticipation of a potentially bruising confirmation hearing is now complete, and you face a tricky decision. On the one hand, there is no single smoking gun that disqualifies him outright. With a lot of political heavy lifting, we might get Summers confirmed. On the other hand, it would eat up a lot of political capital and credibility at a time when we are seeking to rebuild both, not to incur political debts needlessly. Here are Summers’s...

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