Regardless of what happens on Election Day, at the beginning of next year more than $600 billion in tax increases and spending cuts automatically go into effect. That’s equivalent to about 5 percent of the entire U.S. economy—more than the projected growth of the whole gross domestic product next year.
The problem is, if we fall off this fiscal cliff, we plunge into recession. That’s because the cliff withdraws too much demand from the economy too quickly, at a time when unemployment is still likely to be high.
The Congressional Budget Office projects real economic growth will drop at an annual rate of 2.9 percent in the first half of 2013, and unemployment will rise to 9.1 percent by the end of next year.
Imagine a college whose orchestra was missing a bassoon player, or whose football team was down a running back. It would go without saying that this school could admit an applicant who plays the bassoon over a candidate who plays the French horn, even if that French horn player had slightly higher grades, or that its admissions officers could give preference to a high school’s star running back over its equally talented defensive lineman. The entire university community benefits from a full orchestra or a football team with a complete offensive lineup, and college admissions officers routinely take similar considerations into account when they think about how to build an incoming freshman class. Nine years ago, in its landmark Grutter v. Bollinger decision, the Supreme Court recognized that race is just like an orchestra. Contrary to the common view that affirmative action is a zero-sum game—in which each seat given to a minority must be taken from a white student—Grutter recognized that a university’s entire student body, white students included, benefit from a more diverse campus in ways that simply cannot be replicated in a homogenous community. As the Court explained, “‘classroom discussion is livelier, more spirited, and simply more enlightening and interesting’ when the students have ‘the greatest possible variety of backgrounds.’”
Last week, I launched a series simultaneously attacking and hijacking the quadrennial question: Are you better off than you were four years ago? For the first one, I reported on how women are doing economically compared to four years ago. But one of my sentences confused readers—apparently because I myself was confused. For my correction, let me simply quote what Heidi Hartmann of IWPR, one of the labor economists I cited, wrote me:
I do have a little trouble with this sentence though because I’m not sure what you were trying to get at. If I said something like this I was not very accurate:
For my part, the most incredible exchange of the first presidential debate came in the first 20 minutes, when President Obama hit Mitt Romney on his tax plan—which would implement across-the-board cuts to marginal rates—and the Republican nominee responded by denying its existence. Romney insisted that his plan would not cut upper-income taxes (it calls for a 20 percent reduction) and, in fact, would end breaks for upper-income taxpayers (he has yet to give any detail on this score).
The unemployment rate’s drop to 7.8 percent, reported last week, marked the first time since 2009 that the rate was below 8 percent. It’s fitting that this occurred shortly after someone who predicted the rate couldn’t get below 8 percent changed his mind.
Until a year ago, president of the Minneapolis Federal Reserve Narayana Kocherlakota had argued that there may be a new normal unemployment rate of 8.7 percent, and that adjusting the rate at which banks borrow money would do little to help. Now he argues that the Fed should commit to keeping rates low until unemployment is declines—a position in line with those hawkish about our unemployment crisis.
The White House is breathing easier this morning. The Bureau of Labor Statistics reports the unemployment rate dropped to 7.8 percent—the first time it’s been under 8 percent in 43 months.
In political terms, headlines are everything—and most major media are leading with the drop in the unemployment rate.
Look more closely, though, and the picture is murkier. According to the separate payroll survey undertaken by the BLS, just 114,000 new jobs were added in September. At least 125,000 are needed per month just to keep up with population growth. Yet August’s job number was revised upward to 142,000, and July’s to 181,000.
As recently as last month’s convention, Democrats were getting their narrative back. They were uniformly praised for their message discipline and for laying out an inspiring vision for the country, reflected in a string of rousing speeches that told a story and signaled (instead of concealed) their values. After last night’s debate, Dems risk falling back into the lost decades when the party could offer only a grab bag of policy goodies to its fragile coalition instead of a coherent governing philosophy. If Barack Obama’s debate performance is any indication, they seem poised to forget a key lesson from the last three elections: We’re all “values voters.”
President Obama gets a lift from a relatively positive employment report for September. The nation gained 114,000 jobs, and the unemployment rate declined to 7.8 percent, the lowest since Obama took office. Earlier disappointing figures were revised upwards, by 40,000 for July and 45,000 for August.
All this gives Obama some bragging rights, and heads off what would have been a withering attack had the news been bad.
But Obama makes a mistake by emphasizing what the progress the economy is making. Median household incomes are down, young people face rough going as they enter the job market, and the elderly have dwindling pension coverage and almost no returns on their savings in a zero interest rate environment.
Last week I confessed that I don’t like presidential election season. I don’t like the trivialized reportage, the horse-race-ification of serious subjects, and the narrowed vision that settles in on policy folks during these months. I especially don’t like the question “Are you better off now than you were four years ago?” This suggests two things to which I object: first, that the president is in charge of how well-off I am, when all of us know that American politics and global economics are far more complex . Second, that “better off” or “worse off” can be reduced to my current income and immediate financial prospects, even if those were dependent on the president. So I’m going to hijack that question for my own purposes and ask: Are women better off than we were four years ago—not just financially, and not just in ways affected by President Barack Obama’s administration, but overall?
After a slow start, the Consumer Financial Protection Bureau (CFPB) is beginning to live up to consumer advocates' hopes and Wall Street's fears. On Monday, the new federal regulator announced a steep penalty and fine against American Express for ripping off their customers. Three subsidiaries of the credit-card company will have to refund $85 million to around 250,000 customers. As a result of the investigation—conducted by the CFPB, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), and the Utah Department of Financial Institutions—American Express was fined an additional $27.5 million that will be divvied up between the various regulators' coffers.
As work becomes increasingly a matter of machines building or moving other machines, workers either lose their jobs or—if they are fortunate enough to keep their jobs—become vastly more productive. Productivity surged in the U.S. during the early years of the current downturn when companies laid off workers by the millions and replaced them with machines. Revenues per employee at the S&P 500, the Wall Street Journal reported, rose from $378,000 in 2007 to $420,000 in 2010.
And yet, the wages and benefits of employed Americans experienced no corresponding increase as workers’ productivity rose. Indeed, over the past quarter-century, as economists Ian Dew-Becker and Robert Gordon have reported, all productivity gains have gone to the wealthiest ten percent of Americans. In the quarter-century following World War II, by contrast, productivity and median household income both rose by 102 percent—but that quarter-century was the only period in American history when unions were strong.
DENVER, COLORADO—By the time his motorcade pulled up to Magness Arena on the campus of the University of Denver at 6:40 local time Wednesday evening, October 3, the president knew he had 20 minutes to make a decision.
The campaign of his opponent, Governor Mitt Romney, had so deteriorated that, for his part, Barack Obama understood there was a sound argument on behalf of running out the clock and not taking any great risks. The president is typically a prudent man, right up until the moment he does something notably risky, such as ordering the mission that killed Osama bin Laden in spite of virtually all of his inner circle advising against it (except CIA Director Leon Panetta). Now, with only moments until the debate began, the president could anticipate what might well be moderator Jim Lehrer’s opening question, for which the Obama campaign had prepared an innocuous response, counting on the near certainty that Governor Romney would offer a response even more useless.
In 2010, Tea Party mania influenced elections at every level—congressional races and governorships, most famously. But the biggest impact was on state legislatures, where 21 house or senate chambers flipped from Democratic to Republican control. In states like Texas, Republican majorities turned into supermajorities; in the Texas House, Democrats were no longer needed to make up a quorum. All the legislative energy was on the side of Tea Party Republicans. They made sweeping, historic changes—to labor laws, to health care, to reproductive rights, and, most of all, to state budgets and public school funding.