Economy

Inaugural versus SOTU

Rex Features via AP Images
President Obama did not say last night that “the state of the Union is strong” a favorite phrase used in past State of the Union speeches. Instead he said, “The state of the Union is stronger.” That phrase points away from “the rubble of crisis” and toward a brighter future. In that respect, the address shared much in common with the president’s Inaugural, which presented a broad, liberal vision for Barack Obama’s second term and set policy goals for years down the road. In his address to the join session of Congress, the president was able last night to lay out more specific proposals than he could in his Inaugural speech. But did the president stay true to the ideals he set out in January while delivering his sometimes technical and wonky address last night? We investigate that question – point by point – below. Education During his Inaugural address President Obama said “a modern economy requires … schools and colleges to train our workers” suggesting we should improve schools by...

Republicans Will Appeal to Latinos by Opposing Policies They Support

Alex Campbell / Medill News Service
In something that shouldn’t come as a surprise, at all Republicans have already announced their opposition to a minimum-wage hike. Here’s House Speaker John Boehner, throwing cold water on the proposal: “I’ve been dealing with the minimum wage issue for the last 28 years that I’ve been in elected office,” Boehner told reporters at a press conference, arguing that raising the minimum wage would hurt people trying to climb the “ladders of opportunity” that Obama mentioned in his speech. “When you raise the price of employment, guess what happens? You get less of it. At a time when Americans are still asking the question, ‘where are the jobs?’ why would we want to make it harder for small employers to hire people?” he said. Senate Minority Leader Mitch McConnell complained that President Obama “spoke of workers’ minimum wages, instead of their maximum potential,” and Florida Senator Marco Rubio did the same when asked about the issue on CBS This Morning: “I don’t think a minimum-wage law...

How Would a Minimum-Wage Increase Affect the Economy?

401K / Flickr
Besides universal preschool , the most overtly progressive policy proposed by President Obama last night was a large minimum-wage hike, from the current rate of $7.25 per hour—instituted in 2009—to a new rate of $9 per hour. Not only is this higher than the minimum wage in every state other than Washington, but when adjusted for inflation, it’s the highest minimum wage since 1981. As is true whenever politicians propose a minimum-wage hike, there is concern over the effect on business and hiring. The traditional line —pushed by Republicans and business groups—is that an increase will cost jobs and harm small businesses. But if two decades of research are any indication, the actual effects of a minimum-wage hike are minimal and in some cases, positive. In 1992, economists Alan Krueger (now co-chair of Obama’s Council of Economic Advisors) and David Card took advantage of a natural experiment —New Jersey increased its minimum wage by 18.8 percent, while neighboring Pennsylvania remained...

The Return of the Balanced Budget Amendment

Flickr/Gage Skidmore
S enate minority leader Mitch McConnell says Senate Republicans will unanimously support a balanced-budget amendment, to be unveiled Wednesday as the core of the GOP’s fiscal agenda. There’s no chance of passage so why are Republicans pushing it now? “Just because something may not pass doesn’t mean that the American people don’t expect us to stand up and be counted for the things that we believe in,” says McConnnell. The more honest explanation is that a fight over a balanced-budget amendment could get the GOP back on the same page—reuniting Republican government-haters with the Party’s fiscal conservatives. And it could change the subject away from social issues—women’s reproductive rights, immigration, gay marriage—that have split the Party and cost it many votes. It also gives the Party something to be for , in contrast to the upcoming fights in which its members will be voting against compromises to avoid the next fiscal cliff, continue funding the government, and raising the...

The President's Dream State

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak President Obama at last night's State of the Union address B y any measure, President Obama’s first term was consequential. In four years, he signed an $800 billion stimulus program into law, laid the foundation for universal health insurance, secured new regulations governing the financial sector, repealed "don't ask, don't tell," and put the United States on the path back to economic recovery. For his second term, he has an agenda that’s just as ambitious and—reflecting the coalition that re-elected him—unambiguously progressive. Other than a de rigeur nod to deficit reduction—he mentioned “the deficit” ten times—the speech ticked off a litany of liberal policies: Universal pre-school, a cap-and-trade system to limit carbon emissions, a higher federal minimum wage (set at 9$ an hour, the highest it’s been since 1981), and billions more in new infrastructure spending to repair roads and bridges. That’s to say nothing of comprehensive immigration reform (with...

Still Waiting for That GOP Fever to Break

Photo of Bay Bridge construction courtesy of Caltrans
Word is that in tomorrow's State of the Union address, Barack Obama is going to propose some new infrastructure spending. Not only as a way of boosting the economy in the short term by creating jobs in areas like construction, steel, concrete, those little plastic anchors you put around screws when you're putting them in brick, and so on, but also as an investment that pays long-term dividends in the form of bridges that work and sewer pipes that don't burst. As Neil Irwin points out , given the large number of construction workers sitting idle and the incredible fact that the United States can now borrow money at negative interest—something that won't be true forever—it would be crazy for us not to take advantage of this moment and start doing some long-overdue repairs. "One can easily imagine a deal," Irwin writes. "Democrats get their new infrastructure spending, and Republicans insist on a structure that requires private sector lenders to be co-investors in any projects, deploying...

Austerity's Unintended Consequences

AP Photo/Mauro Scrobogna, LaPresse
AP Photo/Mauro Scrobogna, LaPresse Italian media mogul and former ex-Premier Silvio Berlusconi during a television appearance last week. The latest political polls suggest he is gaining ground on center-left candidate Pier Luigi Bersani ahead of Italy's elections. I s the worst of the Eurozone crisis over? The optimists—out of conviction or calculation—say “yes.” The European Central Bank’s promise to purchase an unlimited amount of government bonds from member-states who find their credibility questioned by the capital markets has brought the borrowing rates of the European periphery down to manageable levels without spending a single euro. Ireland, the second Eurozone country to require an international bailout in November 2010, has already made a partial return to the markets for long-term borrowing, while Portugal, which was bailed out in May 2011, hopes to do so later this year. Even Greece seems to be making headway with reforms and fiscal consolidation, the result of which has...

Mass Joblessness Is Still a Problem—Someone Tell Washington

kanu101 / Flickr
The unemployment rate is a decent measure of where the economy stands, but it doesn’t provide a full picture of joblessness—it only measures the employment status of people looking for a job. For a broader sense of unemployment—and its affect on everyday life—you have to dig deeper. A recent study from Rutgers University, for example, provides a sobering look at the broad impact of persistent joblessness. In “ Diminished Lives and Futures: A Portrait of America in the Great-Recession Era ,” researchers Mark Szeltner, Carl Van Horn, and Cliff Zukin find that “nearly one-quarter (23%) of all survey respondents report being laid off from either a full-time or part-time job.” There’s a stark racial divide, 31 percent of blacks and Hispanics report losing a job, versus 22 percent of whites, and a large gender gap—27 percent of men have lost employment since the recession began, versus 19 percent of women. What’s staggering is the number of people who have been touched by joblessness...

Jobs and Growth, Not Deficit Reduction

Flickr/Andreas Klinke Johannsen
C an we just keep things in perspective? On Tuesday, the President asked Republicans to join him in finding more spending cuts and revenues before the next fiscal cliff whacks the economy at the end of the month. Yet that same day, the Congressional Budget Office projected that the federal budget deficit will drop to 5.3 percent of the nation’s total output by the end of this year. This is roughly half what the deficit was relative to the size of the economy in 2009. It’s about the same share of the economy as it was when Bill Clinton became president in 1992. The deficit wasn’t a problem then, and it’s not an immediate problem now. Yes, the deficit becomes larger later in the decade. But that’s mainly due to the last-ditch fiscal cliff deal in December. By extending the Bush tax cuts for all but the top 2 percent of Americans and repealing the alternative minimum tax, that deal increased budget deficits by about $3 trillion above what the budget office projected last August. The real...

Debt Reduction Is Hurting the Economy

Wall Street Journal
For left-leaning writers, at least, it’s almost cliché to note the extent to which the press defers to deficit hawks, despite clear evidence that deficits are not a pressing problem for the United States. Even still, it’s worth noting when reporters pass along received wisdom, especially when we have fresh data to show the folly of Washington’s obsession with deficit reduction. To wit, here’s The Wall Street Journal with a piece that just cedes the idea there’s a deficit problem and it requires further “belt tightening” from the federal government: A slowly improving economy and recently enacted tax increases will help bring down the federal deficit for the next few years, the Congressional Budget Office said Tuesday, but it will take another $2 trillion in belt-tightening over the next decade to begin to move the federal debt closer to historic levels. […] CBO projects that if Congress leaves current laws unchanged, the debt will be 77% by 2023, and it will be higher if across-the-...

Wonder Warren

AP Photo/Win McNamee
AP Photo/Win McNamee Senator Elizabeth Warren, Democrat from Massachusetts, at the presidential inauguration S ince the start of the new Congress, liberal Democrats have anxiously awaited senior Senator from Massachusetts Elizabeth Warren’s initial moves. Celebrity entrants into the Senate—from Hillary Clinton to Al Franken—have tended to take a modest approach, immersing themselves in committee work and issues of local importance, building relationships with their colleagues, and operating as a “workhorse, not a show horse.” By contrast, Warren said during the campaign that she wanted to use her new position as a platform for her ideas . And one of her first actions suggests she will spend her time as Senator much the way she did as chair of the TARP oversight panel and at the Consumer Financial Protection Bureau: shedding light on the harm caused by unscrupulous financial interests. (Editor's note: Warren's daughter, Amelia Warren Tyagi, is a member of the Prospect 's governing...

Going Back Too Soon

Without pay, many new parents can’t take the time off granted them by the FMLA.

AP Photo/Greg Gibson
Rex Features via AP Images P erla Saenz went back sore and exhausted just four weeks after giving birth—and two weeks after the incision from her C-section reopened. (She had heard her older child cough in the night and instinctively tried to pick him up, forgetting for a moment her doctor’s warning against lifting anything heavier than ten pounds.) Weak and sometimes feverish, she often found herself clutching the counter for support. Bernadette Cano was back on the job five weeks after giving birth. Though she was in better physical shape, she wasn’t ready to be apart from her son. “I was thinking about the baby all the time,” she told me tearfully from the break room of Walmart, where she worked in the dressing room. Under normal circumstances, she enjoyed the job tidying up the dressing rooms and returning clothes to the racks. But with her newborn son at home, she couldn’t think of anything else and even broke the company policy against texting so she could check in with her...

Labor Wins—in China

Flickr/notebookaktuell
Is China moving ahead of the United States on worker rights? According to a report on Monday’s Financial Times , it may be doing just that. The FT reports that Foxconn, which employs 1.2 million Chinese workers who make the bulk of Apple’s products, along with those of Nokia, Dell, and other tech companies, has decided to allow its workers to hold elections to select their union leaders. This is a radical departure from past practice in China, where unions are run by the government—that is, the Communist Party—which customarily selects the union leaders. Often, the leaders selected under this system are actually the plant managers. Under Foxconn’s new plan, workers will cast secret ballots for their union leaders, and no managers will be eligible to run. The company’s proposal, writes the FT , is viewed as a “response to frequent worker protests, riots and strikes and soaring labor costs.” In other words, just as employers in Western Europe and the U.S. once came to prefer dealing...

What Would Jack Lew Do?

AP Photo/Win McNamee
AP Photo/Win McNamee Current White House Chief of Staff Jack Lew, whom President Barack Obama has nominated to be the new Treasury secretary, at the president's swearing-in ceremony during the 57th Presidential Inauguration. S ometime this month, the Senate is expected to grill President Obama’s pick for Treasury secretary, Jack Lew, who if confirmed will replace outgoing secretary Timothy Geithner. As the president’s chief of staff, Lew has been influential in the budget battles President Obama fought with House Republicans in the past year and has a deep knowledge of how government spending works. Conventional wisdom is that the president chose Lew to have a strong ally as the White House battles with congressional Republicans over spending and taxes. But with only a short stint at Citigroup amid a life of public service, there isn’t a deep record on what he thinks about financial reform. Nevertheless, the Treasury secretary will be responsible for the overhaul of the legal and...

The First Progressive Revolution

Flickr/Mike Chaput
Exactly a century ago, on February 3, 1913, the Sixteenth Amendment to the Constitution was ratified, authorizing a federal income tax. Congress turned it into a graduated tax, based on “capacity to pay.” It was among the signal victories of the progressive movement—the first constitutional amendment in 40 years (the first 10 had been included in the Bill of Rights, the 11th and 12th in 1789 and 1804, and three others in consequence of the Civil War), reflecting a great political transformation in America. The 1880s and 1890s had been the Gilded Age, the time of robber barons, when a small number controlled almost all the nation’s wealth as well as our democracy, when poverty had risen to record levels, and when it looked as though the country was destined to become a moneyed aristocracy. But almost without warning, progressives reversed the tide. Teddy Roosevelt became president in 1901, pledging to break up the giant trusts and end the reign of the “malefactors of great wealth.”...

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