Economy

The Fed’s Foreclosure-Relief Fail

AP Photo/Paul Sakuma, File
AP Photo/Don Ryan L ike far too many Americans, Debbie Marler of South Point, Ohio has her own foreclosure horror story. It involves one house, seven fraudulent mortgage assignments, three foreclosures, as many states, and five years. It ruined her career prospects, threatened her retirement security, and turned her life into what she calls “a living nightmare.” This week, Debbie walked to her mailbox and found what the federal government considers appropriate compensation for this odyssey of suffering at the hands of JPMorgan Chase, the nation’s largest bank. A check for $800. “I was speechless, just a complete shock,” Debbie said. “That doesn’t even pay for the damn U-Haul from when I moved out of the house in the first place.” The money is a product of the Independent Foreclosure Reviews, part of an enforcement action against 14 banks for crimes committed in the foreclosure process. The IFRs, shepherded by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve...

Reinhart and Rogoff's Theory of Government Debt is Dead

NBER
Carmen Reinhart and Kenneth Rogoff wrote a wildly influential book four years ago called This Time Is Different .* The thesis of the book is that when a government has a debt-to-GDP ratio above 90 percent, it is terrible for economic growth. The authors also followed up with a couple of papers arguing the same thing. Pro-austerity forces here and elsewhere in the world have seized upon the book to push their favored policies. From the beginning, the paper was met with extreme skepticism among the left. The theory could have gotten the causation backwards: perhaps low growth drives high debt, not the other way around. The theory also seemed hard to understand within any macroeconomic frame. It would follow from it that a government that holds assets instead of selling them to reduce debt somehow caused growth to decline, which is just a very confusing idea. The conceptual problems could iterate on and on. Beyond those problems, other researchers also had a hard time replicating their...

Reminder: Mass Unemployment is Terrible

wools/Flickr
This line from David Brooks’ most recent column has stuck with me since I read it: “Right now, America faces two giant problems: social unraveling today and cataclysmic debt tomorrow.” Reasonable people can disagree about the long-term problem of debt, but it’s hard to argue that we haven’t seen some form of “social unraveling” over the last decade. As Brooks notes: We’re living in a country where 53 percent of children born to women under 30 are born out of wedlock, according to government data. Millions of people, especially men, are dropping out of the labor force. Nearly half the students who begin college are unable to graduate within six years. The social fabric for people without college degrees is in shambles What’s frustrating about this diagnosis is that, like most elite discussion, it ignores the huge elephant looming over all areas of American life—mass unemployment. If you lived on a diet of Beltway pundits, you’d have no idea that we’re facing an crisis of joblessness,...

What Does "Balance the Budget" Even Mean?

Flickr/ferntech
This is a story about the deficit scolds who substitute attitude for argument and how they use the public’s ignorance about the federal budget to their advantage. It comes from sparring over the House Republican budget, which Republicans claim will achieve a balanced budget within ten years, and Barack Obama’s budget, which he will be submitting to Congress this week. Neither gets us to a zero deficit. The White House spin has been that balancing the budget isn’t an important goal by itself—deficits, surpluses, or balance are only means to the end of a growing economy or creating jobs. In line with that thinking, last week White House spokesman Dan Pfeiffer said, “You don’t want to balance the budget for the purposes of just balancing the budget.” As Slate’s Matt Yglesias points out , the White House is correct: There's no magic economic reason to run a balanced budget every year. Reducing the debt really is only a good idea if it is done in the service of some other goal. Less debt...

I Want Your Tax

Flickr/soukup
Today is tax day, the yearly opportunity for millions of Americans to shake their fists at the government and declare their contempt for the ideas of mutual concern and collective responsibility. So on this most practical of days, it's good to remind ourselves of some realities. First, the taxes we pay are, by international standards, fairly modest. Second, despite what some would have you believe, the wealthy are not crushed by the burden of taxation. And third, though nobody particularly enjoys giving part of their income to the government, taxes are the price we pay for having an advanced, democratic society. If you like living in a place where you aren't afraid of foreign invasion, if you like knowing that when you retire you'll get Medicare and Social Security, if you like living in a country with parks and roads and police and air traffic controllers and a legal system and food inspectors and water and sewage systems and schools and a thousand things you weren't thinking about...

Mr. Brooks’s Planet

Josh Haner/The New York Times
Since New York Times columnist David Brooks is the very model of the sentient conservative, his acknowledgements of social reality are often more than just personal—they signal that a particular state of affairs has become incontestable to all but the epistemically shuttered. Writing today on President Obama’s new budget, Brooks applauds the president for proposing to reduce Social Security and Medicare payments, and wishes he’d boost spending on discretionary spending programs that might stem the collapse of working- (and much of middle-) class America. Conservatives generally—over to you, Charles Murray—now acknowledge that the American working class, very much including the white working class, is imploding, citing the decline in marriage rates and out-of-wedlock births. They note as well that incomes and labor force participation are tanking, too. But they usually resist the idea that there’s a causal link between the lack of economic opportunity and the decline in the number of “...

Thinking Outside the (X)Box

There was soul-searching to spare at the Game Developers Conference, as attendees had some warranted stress over diversity—but they should be sure to remember to work on improving the world outside the industry too.

Flickr/Official GDC
Brian Taylor O n the narrow sidewalk outside the building where the Game Developers Conference was held, a group of enthusiastic marketers offer free t-shirts that say “0% THE MAN 100% INDIE.” It seems like a call to arms, but a tiny bit of research unearths that it's a new campaign by Samsung to attract game developers to their app store. Sure, Samsung may be an underdog in this realm, when compared to Apple, but you gotta admit the Korean phone giant is at least 30 percent The Man. This style of borrowing progressive language in the game industry is quite common—as noted and skewered in a presented “rant” during the conference by game designer Chris Hecker. The Game Developers Conference is held each year in the Bay Area, taking place during the last week of March this year. It's the major professional conference of the video game industry, where the people who make games gather to network and give presentations about the year's successes and failures. GDC is the most inwardly-...

Bi-Partisanship We Don’t Need

Flickr/BeckyF
John Boehner, Speaker of the House, revealed why it’s politically naive for the president to offer up cuts in Social Security in the hope of getting Republicans to close some tax loopholes for the rich. “If the President believes these modest entitlement savings are needed to help shore up these programs, there’s no reason they should be held hostage for more tax hikes,” Boehner said in a statement released Friday. House Majority Leader Eric Cantor agreed. He said on CNBC he didn’t understand “why we just don’t see the White House come forward and do the things that we agree on” such as cutting Social Security, without additional tax increases. Get it? The Republican leadership is already salivating over the president’s proposed Social Security cut. They’ve been wanting to cut Social Security for years. But they won’t agree to close tax loopholes for the rich. They’re already characterizing the president’s plan as a way to “save” Social Security—even though the cuts would undermine it...

President Obama's Budget

President Barack Obama discusses his proposed federal budget. (AP Photo/J. David Ake)
Budget

Jack Lew: Obama’s Austerity Ambassador

AP Images
There is something seriously off about the mission of the new Treasury secretary, Jack Lew, to Europe. Secretary Lew has been visiting European capitals to persuade leaders there to ease up on the austerity. He has not had a good reception. Speaking at a joint press conference with the chagrined Lew in Berlin, Wolfgang Schauble, the German finance minister and uber-austerity enforcer, dressed down Lew thusly: “Nobody in Europe sees this contradiction between fiscal consolidation and growth.” Nobody among the elite, that is. Ordinary people in Greece, where output has declined by nearly 25 percent since the austerity tonic began, surely see the contradiction. So do young people in Spain, where the youth unemployment rate has reached 56 percent. Even if the cure should eventually work—which it won’t—we will have lost a whole generation. Only in the rarified power precincts of Brussels and Berlin is austerity “working.” But Jack Lew doesn’t exactly come to this mission with clean hands...

Where's the Change?

AP Photo/Lauren Victoria Burke
AP Photo/Alex Brandon, File T he Democratic Party’s long-term prospects have dramatically improved since the November election. They will control the White House for another four years. The Republicans, who lost the total vote for the House of Representatives, remain captive of an unpopular reactionary right wing. The “Obama Coalition” of minorities and single women is growing faster than the GOP’s white male base. If demography is destiny, Democrats—and the progressive interests that they are supposed represent in the two-party system—are the wave of the future. But the American dream is about upward mobility. Ultimately, “The economy, Stupid” trumps identity politics. If the Democrats are not the champions of expanding jobs and incomes for the majority of voters who work for a living—whatever their gender, color, or sexual orientation—their claim to being the natural majority party will amount to little. So it made political sense that Barack Obama began his 2013 State of the Union...

The Keystone Fight's Labor Pains

The battle over the tar sands pipeline among unions has been XL on drama.

AP Photo/Nati Harnik, File
AP Photo/Nati Harnik “F or too long we have allowed some corporations to hold a gun to our heads and demand that we choose jobs or choose the earth.” That’s what Terry O’Sullivan, the general president of the Laborers International Union of North America, told green groups and fellow unions at a green-jobs conference in February 2009, just a few months after the union—one of the largest in the country—joined the Blue-Green Alliance, a group organized to advocate for a “clean economy.” But by January 2012, O’Sullivan had made a choice. The climate bill had failed, the money from the recovery act had run out, political tides had turned against government spending, and the union was no longer so keen to partner with the environmental movement. “We’re repulsed by some of our supposed brothers and sisters lining up with job killers like the Sierra Club and the Natural Resources Defense Council to destroy the lives of working men and women,” O’Sullivan said. This heady “job killer” rhetoric...

Destroying the Economy and the Democrats

AP Photo/Susan Walsh
AP Photo/Susan Walsh President Barack Obama speaks at the Police Academy in Denver yesterday. J ob creation slowed to just 88,000 in March, signaling a sluggish economy. And President Obama, with unerring timing, picked this moment to put out an authorized leak that he is willing to put Social Security and Medicare on the block as part of a grand budget bargain that will only slow the economy further. The deterioration in economic performance was all too predictable, given the combined lead weights of the March 1 $85 billion of budget cuts in the sequester and the January deal to raise payroll taxes by about $120 billion. (The tax hike on working people was almost double the much-hyped tax increase on the top one percent, which totaled a little over $60 billion.) Taken together, these twin deflationary deals cut the deficit by around $270 billion dollars this year. That’s close to two percent of GDP. And according to the Congressional Budget Office, this combined contractionary...

Why the AFL-CIO Is Embracing Immigration Reform

Flickr/Old Shoe Woman
Flickr/Old Shoe Woman Their agreement is very preliminary and hasn’t yet even been blessed by the so-called Gang of Eight Senators working on immigration reform, but the mere fact that AFL-CIO President Richard Trumka and Chamber of Commerce President Thomas J. Donohue agreed on anything is remarkable. The question is whether it’s a good deal for American workers. It is, and I’ll explain why in a moment. Under the agreement (arrived at last weekend) a limited number of temporary visas would be issued to foreign workers in low-skilled occupations, who could thereafter petition to become American citizens. The agreement is an important step toward a comprehensive immigration reform package to be introduced in the Senate later this month. Disagreement over allowing in low-skilled workers helped derail immigration reform in 2007. The unions don’t want foreign workers to take jobs away from Americans or depress American wages, while business groups obviously want the lowest-priced workers...

Industry-Funded High-Frequency Trading Study Falls Short

I recently published an article in response to a study of high-frequency trading (“HFT”) by Professor Charles M. Jones of Columbia Business School and an opinion piece he published simultaneously in Politico . My article focused on the funding of the research by Citadel LLP, a major HFT user. It also pointed out broad concerns about the study, which asserts that computer-based algorithmic trading provides substantial net value to the economy. Keeping in mind the Professor Jones’ funding source, it is useful to look into the studies on which the professor relies (his independent work was limited to interpretation). These should be compared with other academic work that draws alternative conclusions. The studies that he cites as supportive are generally based on conventional views of the efficiency of markets. These studies identify lower trading costs that have been experienced during the years that HFT has emerged as a dominant force in the equities and commodities markets. He...

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