Economy

The End of the Austerity Crusade?

Rex Features via AP Images
I s President Obama planning to reverse course on deficit reduction? You will recall that the president joined the deficit-hawk crowd in calling for more than $4 trillion of deficit reduction over the next decade; that he has offered to cut Social Security and Medicare as part of a grand bargain (that the Republicans mercifully rejected); that it was Obama who appointed the Bowles-Simpson Commission; and that his own budget for FY 2014 includes substantial spending cuts. But, with the 2014 midterm election looming and the recovery stuck in second gear with mediocre job creation, there is zero chance of a grand-budget bargain that includes tax increases, and interest rates are creeping up (which will slow the recovery further). Europe demonstrates that austerity economics are a proven failure. Even the International Monetary Fund says so . So let us read the tea leaves. First, the president has just named Jason Furman to chair the Council of Economic Advisers (CEA). Furman was a...

I Would Desire That You Pay the Ladies

AP Images/Susan Walsh
AP Images/Susan Walsh Fifty years ago today, in 1963, Congress passed the Equal Pay Act. The idea was simple: Men and women doing the same work should earn the same pay. Straightforward enough, right? Change the law, change the world, be home by lunchtime. Well, maybe not by lunchtime . After all, back then the law still accepted the idea that men and women were born for different jobs. Newspapers like The Washington Post still had separate classified ad sections for “men’s” jobs and “women’s” jobs. Female law school graduates had trouble even getting interviews. The pre-1963 world being what it was–sexist, in a word—you’d figure activists might well have estimated that the culture would need at least a decade to catch up and treat women fairly on the job. “When I first came to the Women’s Legal Defense Fund, which is now the National Partnership for Women & Families (NPWF), in 1974, it was very fashionable to walk around with those big buttons that had “59¢” with the...

Children of Color in the Persistent Downturn

At the peak of economic boom times in 2000, the U.S. child-poverty rate reached a historic low of 16.2 percent. Even then, UNICEF ranked the United States as having the second highest child-poverty rate out of 26 rich countries. The United States had a child-poverty rate twice Germany’s, five times Sweden’s, and nearly ten times Denmark’s. The only country scoring worse than the United States was Mexico. The picture is substantially bleaker today. The child-poverty rate reached 21.9 percent in 2011. For many children of color and for immigrant children, poverty rates are typically higher than the overall average, and they have worsened over the prolonged downturn. In the “good” economic times of 2000, the official Latino child-poverty rate was 28.4 percent. By 2011, that rate had jumped to 34.1 percent. For African American children, the child-poverty rate went from 31.2 percent in 2000 to 38.8 percent in 2011. Poverty is also extreme among immigrant children. In 2011, one out of two...

A Shredded Safety Net

“I’m not concerned about the very poor. We have a safety net there.” —Mitt Romney, February 1, 2012 I n 1996, the year that Congress passed and Bill Clinton signed welfare reform, fulfilling his campaign pledge to “end welfare as we know it,” there were 14.5 million poor children in the United States; 8.5 million children were in families that received cash assistance from Aid to Families with Dependent Children (AFDC), or welfare. Even then, nearly half of poor children were not in families that received welfare. Following welfare reform, the number of families receiving assistance declined dramatically. Buoyed by the strong economy and the expansion of other key work supports, including child-care subsidies, public health insurance under Medicaid and the Children’s Health Insurance Program, and the Earned Income Tax Credit, the number of single mothers in the workforce increased and child poverty declined. However, starting in the early 2000s, progress stalled and poverty rates...

Regular Order, Meet Schadenfreude

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak R egular order. For the past few months, it’s been a Republican byword, the potential cure to all that ails Washington. “The right process is the regular order,” Alabama Senator Jeff Sessions, the ranking Republican on the Budget Committee, said in a statement this past January. “A second term presents the opportunity to do things differently, and in the Senate that means a return to regular order,” Senate Minority Leader Mitch McConnell said on the Senate floor earlier this year. “I believe that it’s time to do regular order,” House Speaker John Boehner told ABC News in March. The ceaseless parade of commissions, super committees, and gangs of six and eight could be traced back to the lack of a Democratic budget for these regular-order evangelicals. After all, Senate Democrats hadn't even managed to propose a budget since the first year of Barack Obama's presidency. For the latest issue of the Prospect , Jamelle Bouie and I profiled Patty Murray , the senior...

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...

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