Economy

The Millennial Squeeze

It's not Social Security deficits that are destroying the life chances of the young but a prolonged slump confounded by bad policies. 

AP Images/Jacquelyn Martin
AP Images/Jacquelyn Martin Generational fairness has been a big theme of the austerity crusaders, whose most strident advocates tend to be financiers and business titans of substantial net worth. Yet their calls to radically reduce social investment out of a sense of generational equity diminishes the prospects of young people. The true generational injustice has little to do with the projected public debt and everything to do with the real crisis going on right now. Today’s young adults—especially 20- and 30-somethings with young children—face shrinking opportunity and growing insecurity. The fate of today’s infants and toddlers is inextricably connected to that of their millennial--generation parents. Two-thirds of children under the age of 5 are raised by parents younger than 34. The true generational injustice is a threadbare to nonexistent social contract that has made it harder than ever before for the young to either work or educate their way into the middle class—and stay...

Children of the Great Collapse

AP Photo/Bloomsburg Press Enterprise, Bill Hughes
AP Photo/Kin Cheung Here’s a piece of good news of which you might not be aware: The U.S. safety net performed a lot better than you thought during the recent downturn, which was the deepest since the Depression. Thanks to expansions to the Child Tax Credit, the Earned Income Tax Credit, food stamps, and unemployment insurance—all beefed up by the $840 billion Recovery Act—the safety net almost wholly mitigated the rise in child poverty. Even middle-income households saw most of their income losses substantially offset by tax and transfer policies that sharply ramped up to help them. That’s the good news. The bad news is that most of the Recovery Act’s outlays have now been spent, and pressure to reduce deficits leaves other spending on children and families under assault. While the safety net performed well during the worst phase of the downturn, other trends have been troubling. Families lost trillions of dollars in home equity, the largest source of wealth for working- and middle-...

But Austerity Works So Well!

AP Photo/Menahem Kahana, Pool
AP Photo/Michael Sohn, pool A familiar tale: In a small country on the Mediterranean rim, the government chooses to solve an economic crisis by enacting an austerity budget. Regressive taxes will rise. Aid to families will be cut. Less will be left of the welfare state built decades ago. The novice finance minister promises this will heal the economy. As the people of that unhappy land say: Happy are those who believe. The Mediterranean country in question, this time, is not Spain or Greece, but Israel. It is not facing a looming financial meltdown. The crisis amounts to a ballooning deficit—a danger, but not a collapse. Still, Benjamin Netanyahu's recently formed government has chosen a recipe of austerity. The specific ingredients of the Israeli version were chosen by Finance Minister Yair Lapid, the ex-talk show host whose new Yesh Atid (There Is a Future) party campaigned only a few months ago on fervent Facebook promises to protect the middle class. There are several implications...

The Wealthy Kids Are All Right

In a tough economy with dwindling social supports, children of privilege have a bigger head start than ever.

AP Photo/Luigi Costantini
T wo 21-year-old college students sit down in a coffee shop to study for an upcoming test. Behind the counter, a barista whips up their double-shot lattes. In the back kitchen, another young adult washes the dishes and empties the trash. These four young adults have a lot in common. They are the same age and race, each has two parents, and all grew up in the same metropolitan area. They were all strong students in their respective high schools. But as they enter their third decade, their work futures and life trajectories are radically different—and largely determined at this point. The culprit is the growing role of inherited advantage, as affluent families make investments that give their children a leg up. Combined with the 2008 economic meltdown and budget cuts in public investments that foster opportunity, we are witnessing accelerating advantages for the wealthy and compounding disadvantages for everyone else. One of the college students, Miranda, will graduate without any...

How the "Obama Recovery" Makes Scandals Irrelevant

(AP Photo/M. Spencer Green)
(AP Photo/M. Spencer Green) President Barack Obama waves to the crowd at his election night party celebrating his victory over challenger Mitt Romney. Do you remember Mitt Romney’s election-year promise to create 12 million jobs during his first term? It came in for a fair amount of criticism, not because it was too ambitious—and thus unattainable—but because it was banal. Twelve million was the baseline for job creation over the next four years. Absent a major economic shock, the U.S. economy would have created that many jobs regardless of who was president. In essence, Romney had promised to take credit for the turning of the calendar, and the public would have given it to him. After all, they would have seen a simple causal relationship: Romney got elected, and the jobs came. Post hoc ergo propter hoc . It’s with this in mind that you should look at the latest poll from The Washington Post , which shows President Obama with a 51 percent approval rating, despite the two weeks of...

Naming Names in the Dodd Frank Mess

It’s not just faceless Wall Street lobbyists who are doing the damage; a guy named Mark Wetjen has some explaining to do.

AP Images/Mark Lennihan
As we trudge through the swamp of disappointment that defines Dodd-Frank implementation, the liberal commentariat has lately seized upon a new meme; Wall Street lobbyists are responsible for gutting Dodd-Frank behind closed doors. Big-pocketed firms deploy phalanxes of clever lawyers and influence peddlers that easily outpace reformers, ensuring that the regulations ultimately written are sufficiently defanged to allow the financial industry to conduct its business with few, if any, restrictions. The lobbyists, and mostly the lobbyists alone, bear responsibility. Witness the most recent rollback of Dodd-Frank, a compromise on derivatives regulations by the Commodity Futures Trading Commission (CFTC). The New York Times ’ Ben Protess makes the culprit clear in his Page 1 report : “ Under pressure from Wall Street lobbyists , federal regulators have agreed to soften a rule intended to rein in the banking industry’s domination of a risky market.” (Emphasis mine.) But this gets things...

Dimon Forever

flickr/757Live
The main item of business before JP Morgan Chase’s annual shareholder meeting, which will convene today in Tampa, is whether JPM CEO Jamie Dimon will be stripped of his additional post as chairman of JPM’s board of directors. A range of institutional investors concerned about the over-concentration of power atop the nation’s most powerful institutions, and upset by the $6 billion loss JPM took last year at its London trading desk, won roughly 40 percent shareholder support last year to separate the two positions. This year, they hope to do better, even though the bank’s public-relations offensive on Dimon’s behalf has made the prospect of winning a majority more difficult. Dimon —the closest thing America has to a celebrity banker— was the one major financier whose reputation came through unscathed in the 2008 financial meltdown. JPM had steered clear of the worst of the mortgage market, and had managed its risks well enough so that, alone among the nation’s leading banks, it was...

Patty Murray in 19 Takes

Steve Moors
AP Photo/Carolyn Kaster No. 1: The Fixer Patty Murray may be the dullest, most unremarkable member of the United States Senate. Two decades in, she lacks any major legislation to her name, isn’t associated with an issue, rarely appears on television, almost always speaks in gray generalities, and seems to have spent the bulk of her time focused on sending earmarks back to Washington state. As one staffer puts it, the most interesting thing about Murray is how uninteresting she is. She’s also the most important politician you’ve never heard of. As conference secretary, she’s the fourth-ranking Democrat in the Senate, which makes her the highest-ranking woman in the chamber. Last year, she chaired the Democratic Senatorial Campaign Committee (DSCC), spearheading the party’s surprising string of victories in the November elections. Thanks to her efforts, the Senate now has 20 women, the most ever. And as chair of the powerful Budget Committee, she is going up against Paul Ryan, the...

Rediscovering Albert Hirschman

Resistance fighter. Development economist. Philosopher. A new biography of the thinker who redeemed political economy for liberals. 

Flickr/ecce.lomo
T o consider the life story of development economist turned moral philosopher Albert Hirschman is to appreciate that no other generation is likely to accumulate the experience of the European émigrés to America who came of age just before World War II, survived it, and went on to contribute to the political and scholarly foundations of postwar civilization. Of that generation, nobody did so with more range and grace than Hirschman. There was a time in the 1970s and 1980s when Hirschman, who died last December at 97, enjoyed a wide general audience. But outside of academia, his works connecting economics and policies to core human values haven’t made it into the canon of writings that educated people feel they need to read. The results of my informal survey suggest that even among teachers who admire him, Hirschman’s work is invoked but not routinely assigned. This is a loss to our collective wisdom. We can hope that the publication of Jeremy Adelman’s new biography, Worldly...

No More Playing With Money

AP Images/Peter Dejong
If you’re looking for the personification of the Washington economic establishment, you could do a lot worse than Fred Bergsten. National Security Council economics deputy under Henry Kissinger (at age 27), then head of the international desk and the monetary portfolio in Jimmy Carter’s Treasury Department, and from 1981 through last year the founding director of the Peterson Institute for International Economics, Bergsten has been a forceful advocate for what used to be called the Washington Consensus: an unflagging belief in the virtues of free trade and fiscal discipline. This Thursday, he delivers what looks to be at least a semi-valedictory at the Peterson Institute, the annual Stavros Niarchos lecture. Rather than celebrate the virtues of free trade—a topic he says (in an advanced text of his speech) that he considered and then rejected—he devotes his talk instead to an analysis of the devastating effect that currency manipulation has had on the American and other economies, and...

Teachers Left Behind

Press Association via AP Images
AP Photo/Randy Snyder K athleen Knauth has had a rough school year. The principal of Hillview Elementary, near Buffalo, New York, has spent so much time typing teacher evaluations, entering data, and preparing for standardized testing, she barely had a minute to do what she used to do in her first 12 years of being a principal—drop in on classes, address parents’ concerns, or get to know students. When a school social worker stopped by her office a few months back to get Knauth’s take on which children might need her help, she realized she had hit a new low. “Normally I’d say, ‘This one’s grandma is seriously ill. This child is going through a huge custody battle. This one has clothes that are too small. I could reel off six to eight things,” says Knauth. “But this year, I had nothing.” Two weeks ago, after she was asked to raise the standards her students would be expected to meet for a fifth time this year, Knauth decided to resign and sent a public letter explaining that the...

The Upside Down Economy

AP Images/Scott Sady
AP Photo/Richard Drew O ne aspect that defines our current economy is that things are happening that shouldn’t be happening. I don’t mean that things are happening that are illegal or immoral. (Well, some of them are immoral, but that’s not what I mean.) Rather, things are happening that defy economic logic—a slippery term that really means, the economic patterns of roughly the past half-century. The first such logic-defying thing is that corporate profits are soaring even as corporate revenues limp along. The quarterly reports of S&P 500 corporations for the first three months of 2013 are almost entirely in now, and they show profits rising by more than 5 percent even while revenues have risen by less than 1 percent. Seventy percent of these companies—the largest publicly traded U.S. firms—exceeded the analysts’ profit projections. On the other hand, 60 percent came in under the projections for their sales. Were this disjuncture just a one-time epiphenomenon, we could pass it off...

Deficit Reduction Is Ruining America

Flickr/Talk Radio News Service
Flickr/Talk Radio News Service It’s official: The spending cuts of 2011 and 2012, pushed by Republicans as necessary given our deficits, have damaged the recovery and kept more people out of work. According to Jackie Calmes and Jonathan Weisman of The New York Times , “The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011.” That period, the Times notes, “coincides with the time that Mr. Obama and Congressional Republicans have shared governance since Republicans took control of the House in 2011, promising an immediate $100 billion in spending cuts.” And while we didn’t see that level of austerity at the time, the budget compromises of the last year will lower annual discretionary spending to its lowest levels in fifty years. To put that it slightly different terms, if not for two years of deficit reduction, 1.5 million...

LLM: Lawyers Losing Money

AP Images/Chitose Suzuki
American University’s Washington College of Law (WCL) is in crisis. Situated in the toughest job market for lawyers in the United States, the Washington, D.C. school has fallen 11 spots in the U.S. News rankings since the class of 2013 applied. This is in part due to the release of detailed employment statistics that show the schools’ full-time, long-term legal employment rate of 39 percent ranks 5th out of 7 area law schools. A group of students have started a petition to fire Dean Claudio Grossman and a WCL theatrical troupe staged a play, “Grossman’s Eleven,” alluding to the 2001 heist movie starring George Clooney. The school is undergoing a $130 million expansion and has moderately grown its LLM program—a once rare post-graduate degree whose recent proliferation is becoming to critics a symbol of unscrupulous law school practices. American is not alone in growing its LLM program. From the early 1970s to the late 1990s, the LLM was a marginal degree aimed primarily at foreign...

Underfunded and Under Five

AP Photo/The Hawk Eye, John Lovretta
AP Photo/The Winchester Star, Jeff Taylor A s we contemplate the possibly bright future of pre-K laid out in Obama’s state of the union address this year, in which the feds work together “with states to make high-quality preschool available to every single child in America,” along comes a sobering glimpse of what public preschool looks like now. It’s not quite as rosy. Rather than charting progress toward getting all four-year-olds ready for kindergarten, the National Institute for Early Education Research’s annual survey of programs, just issued last week, shows a system in disrepair—or perhaps even retreat. Even as recognition of the benefits of preschool for four-year-olds has grown, the actual implementation of it has stalled—and, in places, lost ground. Meanwhile state funding for pre-K has gone down by more than half a billion dollars in the last year, according to NIEER. In 2012, state spending per child fell to well below what it was ten years ago. The backsliding, which can...

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