Economy

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...

Could You Live on $11,940 a Year?

A couple of months ago, Fox News host Neil Cavuto went on a rant against fast-food workers striking for higher wages, explaining that when he was but a wee pup of 16, he went to work at an Arthur Treacher's restaurant for a mere $2 an hour, setting him on the road to becoming the vigorous and well-remunerated cheerleader for capitalism he is today. For all his economic acumen, Cavuto seemed to forget that there's a thing called "inflation," and the two bucks he earned in 1974 would today be worth $9.47. That's less than the striking fast-food workers are asking for (they want $15 an hour), but significantly more than the $7.25 today's minimum-wage workers make. Not to mention the fact that so many of them are not teenagers but adults trying to survive and support families. (According to the Economic Policy Institute, 88 percent of those who would benefit from an increase in the minimum wage are over the age of 20; that and much more data on the topic can be found here .) Yesterday,...

Larry Summers and the Economists’ “Greed Exception”

AP Images/J. Scott Applewhite
AP Images/J. Scott Applewhite I t is said that the late economist Milton Friedman was once asked how much money it would take for him to change his position that humans are primarily motivated by greed, which was at the core of his free-market fundamentalism. Friedman wisely dodged the question. He understood that if he said he could not be bought, it would undercut his economic theory. In order to avoid doing so, he would have had to admit that he, like everyone else, had his price. Lawrence Summers is certainly not a Milton Friedman conservative. But of the top candidates to succeed Ben Bernanke as chairman of the Federal Reserve, he is the leading exponent of free-market dogma. He was an architect of financial deregulation, and champions unfettered global trade and limiting government intervention in the economy. He has also become wealthy selling his services to corporate bankers and brokers who benefit from such policies. Summers and his supporters insist that his ties to Wall...

Mobile Phones Continue Inexorable Conquest of Globe

Flickr/Kohei314
Yesterday, Apple released its new iPhones, one a slightly updated version of the iPhone 5 with a fingerprint reader, and one a cheaper version ("unapologetically plastic," in the term the PR wizards came up with) meant to attract new customers in developing countries. In case you didn't catch any of the eight zillion articles written about the release, minds remained rather unblown. Apple may still be an unstoppable engine of profit, but there are only so many times you can tweak a product and convince people it's totally revolutionary (not that that will stop Apple cultists from standing in line to get the latest version). In any case, this is as good a time as any to step back and look at the remarkable spread of mobile phones across the Earth. There are few other technologies that have found their way into so many hands in so short a time. Mobile phones actually date back to the 1940s, when AT&T set up a system that would allow truckers to make calls from certain cities and...

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...

When Giving It the Old College Try Fails

Almost half of Americans drop out of college and are left with debt. Is it time for a bigger investment in vocational training for young people? 

AP Images/Jae C. Hong
AP Images/Jae C. Hong J esse Bonds graduated from high school in 2002 in Clinton, Arkansas, a town of 2,600 people on the southern edge of the Ozarks. He tried college for half a semester, but found the computer-programming courses he enrolled in too advanced. After that, he worked for the state’s power utility for about six months building substations, but his crew was laid off once the work was complete. He was looking for a new career when he was hired as an electrician at a new hospital being built in 2003, and when the work was done he realized he wanted to continue working as an electrician. He decided to enroll in ITT Technical Institute to get a two-year degree in electronics engineering. “I saw all the commercials and stuff,” he says. “And I got into the admissions office and they’re like, ‘Oh you scored the highest of anybody that’s come through here on this test in the last couple of years. You’ll be perfect for this program.’” In retrospect, Bonds realizes they were doing...

Why Supersized CEO Pay Is the Worst—in Three Charts

Flickr/seadigs
Flickr/seadigs A t the Institute for Policy Studies, we’ve tallied the top 25 highest-paid CEOs for each of the past 20 years. That’s a total of 500 richly rewarded executives—each one of whom made more in a week than average workers could make in a year. We’re told CEOs deserve these massive rewards because they add exceptional “value” to their businesses. They’re getting “paid for performance.” Really? Hmm. Let’s consult the numbers. Institute for Policy Studies Let’s start with the firms that led our nation into financial crisis. Of the 500 places on our annual top-paid lists, 112 are filled by Wall Street CEOs who drove their companies to bankruptcy or bailout in 2008. Richard Fuld of Lehman Brothers made the top 25 highest-paid list for eight consecutive years until his firm’s bankruptcy precipitated the financial crisis. And how about CEOs who end up getting fired? No one could possibly consider them “high performers.” Yet fired CEOs make up another 39 names on the highest-paid...

One Way to End the School-to-Prison Pipeline

Since the Great Recession began in 2007, no one’s had more trouble finding work than low-income Asian, black, and Hispanic male teenagers. That’s the main idea in two recent articles in The Wall Street Journal (available here and here ) that rely on research from Andrew Sum, a professor who produces a remarkable number of papers for Northeastern University’s Center for Labor Market Studies (CLMS). As Ben Casselman, author of The Wall Street Journal articles, notes, working during the summer is not only a way for high schoolers to earn money. People who held jobs in their teens are more likely to graduate from high school, and to be employed and have higher earnings in their early 20s than people who didn’t find paid work during the summer, according to a CLMS paper titled “The Continued Crisis in Teen Employment in the U.S. and Massachusetts.” Also worth noting, in that and other CLMS papers, are connections between jobless teenagers and high-school graduation rates that should catch...

The Socialists Who Made the March on Washington

AP Photo/Eddie Adams
AP Photo, File The Team Assembles “I n 1956, when I was a student at Brooklyn College, Mike Harrington told Tom [Kahn, another Brooklyn College student] and me to go up to this office in Manhattan, on 57 th Street, to work with Bayard Rustin,” Rachelle Horowitz remembers. Harrington (who was to author The Other America , which sparked the War on Poverty), Horowitz, and Kahn were all members of the Young People’s Socialist League, a democratic socialist organization of no more than several hundred members nationally. Rustin, their elder, boasted a longer left pedigree: a brief sojourn in the Communist Party in the ’30s, then—repudiating the Communists and affiliating himself with the Socialist Party—working for socialist A.J. Muste’s Fellowship of Reconciliation; founding the Congress of Racial Equality with fellow socialist James Farmer in 1942; doing time in Leavenworth during World War II for protesting the segregation of the armed forces; traveling to India to study nonviolent...

The High Probability of Being Poor

Late last month, the Associated Press ran a report about economic insecurity that managed to gain some traction in certain parts of the political internet, and since then, again and again in certain relevant debates. The statistical bomb dropped in the first sentence of the report really says it all: Four out of 5 U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives, a sign of deteriorating economic security and an elusive American dream. To be clear, this figure pertains to the percentage of people facing these problems at least once in their life , not the percentage of people facing them right now . Also, it should be noted that this figure cannot, by itself, be a sign of deteriorating economic security. To show things are deteriorating, you'd have to know whether this figure used to be lower than 80 percent, and we do not know that. Shortly after the AP report blew up, the Wall Street Journal's James Taranto responded with a...

Stop Worrying about Food Stamp "Fraud"

Over at the Weekly Standard blog, Jeryl Bier raised an alarm on Friday about the rise of food stamp (aka SNAP) fraud. The howler in the piece is that although the headline says food stamp fraud is up 30 percent, you soon realize that the fraud rate only rose from 1.0 percent to 1.3 percent. Bier rightly deserves a ding for a ridiculously misleading use of statistics. In response to Bier, Jonathan Cohn points out the misuse of statistics and makes the straightforward case for food stamps . That case is old but worth repeating here: food stamps stabilize households and the economy in bad economic times, pull millions out of poverty, and have very low overhead. Also, the program runs quite well! Beyond Cohn’s takedown, I think we should point out that the kind of food stamp “fraud” Bier is complaining about is not even a problem. The USDA calls the type of fraud in question “trafficking,” and it basically amounts to individually swapping out food stamp dollars for actual dollars. Despite...

Paying It Forward on Student Debt

Chris Ison/PA Wire
AP Photo/Jacquelyn Martin, File N ext month, lawmakers will return to state capitals around the country, and as many as a dozen legislatures could consider a new proposal to tackle the growing student-debt crisis. The plan, dubbed " Pay-it-Forward " by its creator, would allow students to enter college without having to pay tuition upfront: In exchange, they would agree to pay a small and set percentage of their income after college into a public fund allowing the next generation to do the same. Senator Jeff Merkley, a Democrat from Oregon, released a plan Friday that would help provide seed money for pilot programs across the country using this model. Almost all of the new initiatives were inspired by Oregon, where the state legislature passed a bill introducing a Pay-it-Forward scheme unanimously on July 1. Barbara Dudley, an adjunct professor at Portland State University who in 2005 helped co-found the Oregon Working Families Party—a third party that has also been influential in...

The Return of One of the GOP's Dumbest Ideas

Flickr/KAZ Vorpal
Lord help us, is the balanced budget amendment—one of the dumbest policy ideas the right ever cooked up (and that's saying something)—actually back? Only time will tell, but today on the New York Times op-ed page, two prominent conservative economists, Glenn Hubbard and Tim Kane, try to revive it with an argument so unconvincing that I worry it's going to be embraced by every Republican in sight. If you think the sequester was a terrific idea and worked out great for everyone, have they got a deal for you. Hubbard and Kane start by insisting that deficit panic must not be allowed to wane. "We are stuck in a bad and worsening place: sure, deficits strike fear in the hearts of economists and intellectuals, but they don't matter at the ballot box." Haven't we actually cut the deficit by more than half from its 2009 peak? And isn't creating jobs and increasing wages more important? And aren't most "economists and intellectuals" not actually driven to terror by the deficit at the moment?...

Red Wings Give You Bull

Why is a bankrupt city building a new $650 million “hockey arena district” to house the Detroit Red Wings?

*/ AP Photo W hile the state of Michigan appears to have no interest in “bailing out” Detroit, it is giving a substantial boost to the Red Wings, the city’s professional hockey team. Less than a week after Detroit filed for the largest municipal bankruptcy in history, a press conference revealed a deal that will transform 45 blocks of the city with a new hockey arena (or “events center,” as the jargon goes) and a mixed-use entertainment district meant to link two of the city’s healthiest neighborhoods—downtown and midtown. “This is a catalyst project,” Governor Rick Snyder said, according to Crain’s Detroit Business . “This is going to be where the Red Wings are. Who doesn't get fired up in Detroit about the Red Wings? Come on now, the people that are criticizing are people from outside of Michigan. This is something that is important to all of us.” The Red Wings are one of the city’s calling cards most worthy of celebration right now: one of the “original six” teams in the National...

Mortgage Reform: Watch Your Fannie

AP Images/ Manuel Balce Ceneta
AP Images/ Manuel Balce Ceneta Speaking in Phoenix on Tuesday, President Obama associated himself with a bipartisan proposal to slowly get Fannie Mae and Freddie Mac out of the business of backing mortgages. According to the plan, formulated in the Senate, a new federal agency called the Federal Mortgage Insurance Corporation would backstop banks and other private investors against catastrophic mortgage losses, but only after they had run though their own substantial capital first. Obama said, “For too long these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag. It was 'heads we win, tails you lose,' and it was wrong. The good news is right now there's a bipartisan group of senators working to end Fannie and Freddie as we know them. And I support these kinds of reform efforts." It sounds good, but there is reason to worry that this plan would protect the government against losses but at the price...

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