Economy

Public Debt and Economic Growth

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In the election of 1952 my father voted for Dwight Eisenhower. When I asked him why he explained that “FDR’s debt” was still burdening the economy—and that I and my children and my grandchildren would be paying it down for as long as we lived. I was only six years old and had no idea what a “debt” was, let alone FDR’s. But I had nightmares about it for weeks. Yet as the years went by my father stopped talking about “FDR’s debt,” and since I was old enough to know something about economics I never worried about it. My children have never once mentioned FDR’s debt. My four-year-old grandchild hasn’t uttered a single word about it. By the end of World War II, the national debt was 120 percent of the entire economy. But by the mid-1950s, it was half that. Why did it shrink? Not because the nation stopped spending. We had a Korean War, a Cold War, we rebuilt Germany and Japan, sent our GI’s to college and helped them buy homes, expanded education at all levels, and began constructing the...

The Shame of Pension-Advance Loans

http://rapidpensionadvances.com/
The financial services industry is second to none in dreaming up ways to rip off Americans. Show me a a financial product—credit cards, mortgages, checking accounts, 401(k)s, annuities—and I'll show you a stack of consumer complaints documenting how banks and other firms have sought to bleed dry the American public. The latest alarming example are "pension-advance loans." Never heard of these nifty loans? Well, I hadn't either until The New York Times ran a shocking expose Saturday about firms that offer workers and retirees a chance to "convert tomorrow’s pension checks into today’s hard cash"—but with annual interest rates that have "ranged from 27 percent to 106 percent—information not disclosed in the ads or in the contracts themselves." The story focused on loans against defined benefit pensions, the kind you get if you serve in the military or civil service. Unlike 401(k)s, which are a failed retirement vehicle in part because so many people borrow against their nest eggs, DB...

The STEM-Shortage Myth

Flickr/jasonandrebecca09
Flickr/jasonandrebecca09 The Economic Policy Institute published a report yesterday on the supposed shortage of professionals in science, technology, engineering, and math (STEM). You've probably heard of the crisis by now. America is not producing enough STEM degrees. This will be the death of innovation and global competitiveness. We must reorient higher education to convert more liberal arts students into STEM students. And so on. The problem with this alleged crisis is that it is not real. As the EPI report lays bare, the common wisdom about our STEM problem is mistaken: We are not facing a shortage of STEM-qualified workers. In fact, we appear to have a considerable STEM surplus. Only half of students graduating with a STEM degree are able to find STEM jobs. Beyond that, if there was an actual shortage of STEM workers, basic supply and demand would predict that the wages of STEM workers would be on the rise. Instead, wages in STEM fields have not budged in over a decade. Stagnant...

Why Kids Still Can't Have It All

AP Photo/The Hutchinson News, Travis Morisse
AP Photo/The Star, Bill Wilson W hen Anne Marie Slaughter launched the latest battle in the Mommy Wars with her Atlantic cover story “ Why Women Still Can’t Have It All ,” which inspired a barrage of features about retro wives—young, high-achieving professionals leaving their careers to take care of children at home—the subtext was that work often isn’t worth it for women. Not only do women face real barriers to advancement, but their paychecks barely cover the cost of child care. Quality child care costs more in most states than tuition at public universities. In 22 states and D.C., the average cost of infant care in a center was more than the median rent in 2012. For low-income families, the costs are extreme, and the quality of providers is effectively unregulated. In a recent cover story for The New Republic , Jonathan Cohn wrote about an extreme case in which the proprietor of a daycare center in Houston left children at home while food was cooking on the stove; four children...

How Unions Are Getting Their Groove Back

flickr/ Chris Dilts
Yesterday—April 24th — was a red-letter day in the annals of worker mobilization in post-collective-bargaining America. In Chicago, hundreds of fast-food and retail employees who work in the Loop and along the Magnificent Mile called a one-day strike and demonstrated for a raise to $15-an-hour and the right to form a union. At more than 150 Wal-Mart stores across the nation, workers and community activists called on the chain to regularize employees’ work schedules. And under pressure from an AFL-CIO-backed campaign of working-class voters who primarily aren’t union members, the county supervisors of New Mexico’s Bernalillo County voted to raise the local minimum wage. The Chicago demonstration, which began in the dawn’s early light of 5:30 a.m., included workers at McDonald’s, Dunkin’ Donuts, and Subway, as well as Macy’s, Sears, and Victoria’s Secret, all of whom make the state minimum wage ($8.25) or just slightly more. Roughly one-third of the jobs in Chicago are low-wage, and...

Banking Regulation: Closed for Business

Flickr/Vittorio Ferrari
T hese are heady times for the bipartisan group of reformers seeking a safer and more manageable U.S. financial system. The leaders of this movement, Senators Sherrod Brown and David Vitter, introduced legislation yesterday to force the biggest banks to foot the bill for their own mistakes by imposing higher capital requirements. The bill would increase equity (either retained earnings or stock) in the financial system by $1.1 trillion and incentivize mega-banks to break themselves up, according to a Goldman Sachs report . Brown and Vitter previewed the legislation earlier this week at the National Press Club, insisting that the new regulations on risky mega-banks would diminish threats to the U.S. economy and prevent taxpayers from having to bail out banks in the future . Vitter also said the legislation would “level the playing field and take away a government policy subsidy, if you will, that exists in the market now favoring size.” With momentum, broadening support, and tangible...

As Wal-Mart Swallows China's Economy, Workers Fight Back

Strikes continue to erupt in Asia.

Imaginechina via AP Images
Imaginechina via AP Images O n any given day, go to the Shenzhen Wal-Mart in the city's Yuanling neighborhood, and you may find a stocky man in his early fifties in front of its doors, draped in a banner that reads, in Chinese characters, “Support the just demands of workers.” Ask him why he's there, and he will tell you that he used to work at the Wal-Mart, that he was unjustly fired for organizing other workers and protesting deteriorating work conditions, and that he's fighting to get his job back. “A lot of people said I should just leave. But my skin is really thick, and I didn’t want to leave the company. I still had faith that things could and would change,” Wang said. “I asked myself, how should I protect my rights? How can this unfair situation be made right?” The answer he found, he said, was organizing along with his fellow workers and now, continuing to stage his weekly protests. While he usually protests alone, Wang Shishu's is one of a growing number of Wal-Mart workers...

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?

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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...

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