On Monday, the International Energy Agency (IEA) came out with a stunner of a projection. The United States will replace Saudi Arabia as the world’s largest producer of oil by 2020, thanks to the unlocking of massive shale oil reserves. The U.S., with hydro-fracking technology, is riding a boom in natural gas as well.
Oil production will increase from its current level of about 6 million barrels a day per year to 11 million barrels by 2020. Within a few years, the U.S. will be a net exporter.
By this point, it’s clear that former Clinton administration official—and twice failed North Carolina senate candidate—Erksine Bowles is on the short list to replace Tim Geithner as Treasury Secretary. For reasons outlined by Paul Krugman, and our own Bob Kuttner, Bowles would be a terrible choice for Treasury: He’s a deficit scold more concerned with lowering taxes than reducing unemployment and providing a strong base for economic growth.
With two positive jobs reports in a row, it seems clear that the economy is slowly and steadily recovering, which should come as welcome news to students shielded from the effects of the recession behind university walls. But for those who had the misfortune to graduate and enter the workforce at the height of the downturn, the effects of the Great Recession will likely stay with them for the rest of their working lives.
At first glance, it seems clear that those with a college degree have a leg up in a recession. Young people with only a high-school diploma have an unemployment rate of 22 percent, compared with 9 percent with a college degree. But the average college graduate will have the most permanent impact on their earnings, because they’ll have missed the first steps in building their career.
Now that elections season is over, Washington has returned to obsessing over the “fiscal cliff,” a collection of tax increases and spending cuts that—if triggered—would gradually remove hundreds of billions of dollars from the economy and put the United States on the path to another recession.
Despite setbacks in several states, the American labor movement came out a clear winner in Tuesday’s elections. Most important, they played a key role in ensuring the re-election of President Obama, and contributed significantly to Democratic Senate victories in hotly contested races in Massachusetts, Ohio, Wisconsin, and Virginia.
When the applause among Democrats and recriminations among Republicans begin to quiet down—probably within the next few days—the President will have to make some big decisions. The biggest is on the economy.
His victory and the pending “fiscal cliff” give him an opportunity to recast the economic debate. Our central challenge, he should say, is not to reduce the budget deficit. It’s to create more good jobs, grow the economy, and widen the circle of prosperity.
The deficit is a problem only in proportion to the overall size of the economy. If the economy grows faster than its current 2 percent annualized rate, the deficit shrinks in proportion. Tax receipts grow, and the deficit becomes more manageable.
The day after Barack Obama was re-elected, the Dow Jones lost 312.96 points. It wasn’t just that investors were hoping for the lower taxes and further deregulation that would have come with a Romney win. The news from Europe was bad, and pundits were obsessively focused on the “fiscal cliff” of mandatory budget cuts that will drive the economy into a new recession unless Congress jumps off its own budgetary cliff first.
For once, the markets are right. But the news from Europe entirely contradicts conventional assumptions about the fiscal cliff.
Bloomberg finds that—regardless of who wins the election tomorrow—the economy is set for stronger growth in 2013 and beyond:
Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009.
The economy gained 171,000 jobs in October, according to the Bureau of Labor Statistics. The previous two months’ job gains were also revised upward, with the BLS now estimating that an additional 50,000 jobs were created in August and 34,000 in September. With the revisions, we finally have more jobs than in early 2009, when the economy was in full collapse and President Obama took office.
Job growth is important, but what might be even more exciting news is that the unemployment rate went from 7.8 percent to 7.9 percent. Wait—isn’t unemployment the number we want to go down immediately?
For this month’s jobs report, don’t pay attention to the top-line number. Yes, unemployment increased to 7.9 percent, but that’s because the economy is creating more jobs, and more people are looking for work. Not only did the economy create 171,000 new jobs—beating expectations by a significant amount—but labor-force participation is up, and the Bureau of Labor Statistics added 50,000 more jobs to the total for August (bringing it up to 192,000) and 34,000 to the total for September (bringing it up to 148,000).
Electoral historian and Fox News commentator Michael Barone, having long since made the trek from mainstream liberal to standard-issue conservative, is now endeavoring to pull the whole of American history along with him. In today’s Financial Times, he argues that Franklin Roosevelt never really won majority support for his key New Deal programs. Those programs now stand on the chopping block should Mitt Romney be elected president next Tuesday, Barone writes, and they lack popular support even if Barack Obama should prevail.
David Walker announced his endorsement of Mitt Romney this week. The name might not ring a bell, but Walker was head of the Peter G. Peterson Foundation, the number one funder of deficit-hawkery in the United States. Walker, a former Comptroller General, has described himself and his crusade as bipartisan, and it is actually helpful that he has come out of the closet as a Republican.
One part of the dreaded fiscal cliff actually presents an opportunity that could be good politics and good economics. The temporary two-point cut in the payroll tax expires January 1 (along with the Bush tax cuts). The $1.2 billion sequester also kicks in.
Deficit hawks of both parties have been saying that it’s irresponsible to extend the payroll tax cut, while defenders of Social Security such as the AARP are opposed to an extension for fear of diverting revenue from the Social Security trust funds and adding ammo to the crusade for cutting back the system’s benefits.
As we close in on Election Day, the questions about what Mitt Romney would do if elected grow even larger. Rarely before in American history has a candidate for president campaigned on such a blank slate.
Yet, paradoxically, not a day goes by that we don’t hear Romney, or some other exponent of the GOP, claim that businesses aren’t creating more jobs because they’re uncertain about the future. And the source of that uncertainty, they say, is President Obama — especially his Affordable Care Act (Obamacare) and the Dodd-Frank Act, and uncertainties surrounding Obama’s plan to raise taxes on the wealthy.
In fact, Romney has created far more uncertainty. He offers a virtual question mark of an economy
The most bizarre thing about the deficit and the campaign is the fact that the risk of a fiscal cliff—which everyone agrees will crash the economy—is being used to justify a slightly smaller fiscal cliff. There are several players here, so the arguments are worth sorting out. Herewith, some Cliffs Notes:
Everyone agrees that the only way to fix the Gulf of Mexico dead zone—the largest off the United States—is to fix the Mississippi, but not everyone agrees how.
