BERLIN—Germany, uniquely, is prospering while the rest of Europe sinks deeper into recession. And the recession is substantially the result of the very austerity that Chancellor Angela Merkel is imposing on the other member nations of the European Union.
Why is Germany spared? One good reason and two bad ones.
The good reason is that Germany promotes manufacturing, with sensible training and technology policies. Its industries have partnerships with effective unions. So Germany’s huge export surplus means that it can have tight budget policies at home and still have plenty of good jobs.
Over at Talking Points Memo, Sahil Kapur reports that Senate Majority Leader Harry Reid has pulled the “sabotage” card on his House counterpart, Eric Cantor:
“You have heard, as I’ve heard, that there’s a battle going on between Cantor and [House Speaker John] Boehner as to whether or not there should be a [highway] bill,” Reid told reporters. “Cantor, of course — I’m told by others that he wants to not do a bill to make the economy worse, because he feels that’s better for them. I hope that’s not true.”
It's three days after the dismal May jobs report, and now that politicians are done trying to frame those 69,000 jobs added in their favor, it's time for them to figure our how to get the economic ball rolling again.
A prophet, says the Bible, is not without honor save in his own country. As the most prestigious economic dissenters of this era, Joseph Stiglitz and Paul Krugman form a category of two: astonishingly prescient, widely read, and largely ignored by those in power.
If Barack Obama turns out to be a one-term president, historians may mark the summer of 2011 as the moment his failure became inevitable. At that point, the new right-wing Republican House majority declared the national debt hostage and demanded Obama’s surrender to them on all points of domestic policy. When the debt-ceiling statute required authorization of a new federal borrowing limit, they refused to vote on the measure without massive cuts in federal spending and no increase in federal revenue. The crisis was averted by the appointment of an idiotic congressional “supercommittee” that was supposed to identify future cuts, matched with a set of “automatic” cuts that were to take effect if the “supercommittee” failed to come up with a compromise aimed at reducing federal debt.
For the past two years, there has been a pattern to the country’s job growth: the economy speeds up in the winter, cruises through the spring, and slows down as summer approaches. For 2012, it seems that we’re on track for the same ride. The strong gains of January and February gave way to the moderate gains of March and April, which have completely dissipated with the latest jobs report. In May, the economy created 69,000 jobs, and unemployment rose slightly to 8.2 percent.
This morning, the Obama campaign released its first video on Mitt Romney’s tenure as governor of Massachusetts:
There are a few obvious problems with this line of attack. Even with its fiscal problems and slow job growth, Massachusetts wasn’t a terrible place to live under the Romney administration. The point is to show that Romney is offering the same “robotic” line to voters, but how does that resonate when few people associate Massachusetts with “bad governance?”
BRUSSELS—Depending on whose narrative you believe, the deepening economic crisis in Greece proves (a) that the dysfunctional and dissolute Greeks just couldn’t get their act together and keep the reform commitments that they made in exchange for debt relief from the European authorities; or (b) it only proves that austerity breeds more austerity.
Cut public spending and wages, and raise taxes in a recession, and you just dig yourself a deeper hole. Since only about 20 percent of the Greek economy is exports and less than 40 percent of export costs are wages, slashing wages just doesn’t produce much of a bounce, especially when the rest of Europe’s economy is contracting too.
Not an actual billionaire. (Flickr/Rainforest Action Network)
Is there a group of people you can think of who have thinner skin than America's multi-millionaires and billionaires? Wall Street titans have been whining for a couple of years now about the horror of people in politics criticizing ineffective banking regulations and the favorable tax treatment so many wealthy people receive (you may remember the time when hedge fund billionaire Steven Schwarzman said that President Obama suggesting that we eliminate the "carried interest loophole," which allows hedge fund managers to pay taxes at only the 15 percent capital gains rate instead of standard income tax rates, was "like when Hitler invaded Poland in 1939"). America's barons feel assaulted, victimized, wounded in ways that not even a bracing ride to your Hamptons estate in your new Porsche 911 can salve. And now that the presidential campaign is in full swing, their tender feelings are being hurt left and right.
Housing prices fell again in March—but barely—stirring hopes that perhaps the market may finally be on the rebound. “We’ve turned the corner,” said Scott Brown, chief economist at Raymond James & Associates. “This was always going to be a very gradual process. No one expected a real sharp housing recovery.”
After last week’s fight over Bain Capital, the Romney campaign is returning to safer ground with a renewed attack on Obama’s handling of the economy:
“President Obama has never managed anything other than his own personal narrative. He has never created a job and never run a business. President Obama not only doesn’t understand the economy - he also opposes the free-market principles that built it. His policies have prevented businesses from growing, thriving, and creating jobs, and he has no plans to change course.”
Finance ministers from the 17 eurozone countries agreed this week that it's time to make contingency plans in case Greece drops out. While some leaders—like new French President François Hollande—have floated offering eurobonds to struggling member states like Greece and Spain, German Chancellor Angela Merkel is standing her ground. "We want Greece to remain in the eurozone," Merkel said after yesterday's European Union summit. "But the precondition is that Greece upholds the commitments it has made."
Europe’s leaders emerged far apart at their summit dinner in Brussels Wednesday night. They could not even agree on relatively easy measures to contain the escalating crisis, such as Eurobonds or a greater role for the European Central Bank (ECB).
But at the core of the crisis is an issue that Europe’s leaders are even more reluctant to take on—the ease with which hedge funds and other speculators can drive a small economy into the ground.
In an interview with Time’s Mark Halperin today, Mitt Romney elaborates on his goals for economic growth in his first term. In particular, he hopes to see an unemployment rate of six percent:
I can’t possibly predict precisely what the unemployment rate will be at the end of one year. I can tell you that over a period of four years, by virtue of the policies that we put in place, we’d get the unemployment rate down to 6 percent and perhaps a little lower. It depends in part upon the rate of growth of the globe, as well as what we’re seeing in the United States.
ATHENS—The European austerity caucus led by German Chancellor Angela Merkel is coming apart, but Germany retains the power to block the newly forming coalition for growth as a solution to the eurozone crisis. Tonight’s summit dinner in Brussels is unlikely to produce a breakthrough.
But what a difference an election makes. Since Francois Hollande was elected President of France less than three weeks ago, leaders that had been bullied into siding with the Germans are breaking loose.