Economy

Obama's Biggest Blemish

White House / Flickr
Yesterday, I complained that political media presents debt reduction as a no-brainer—something we must do, for the sake of our solvency—and not as a choice that may or may not be warranted in the current environment (hint: it’s not). There’s no mystery as to why that’s the case; the major mainstream news outlets are heavily influenced by elite opinion, and elite opinion is dominated by the views of successful businesspeople. Businesspeople, among other things, want lower taxes (to keep more of their income), fewer protections for labor (to spend less on workers), less spending (again, taxes), aggressive debt reduction (to avoid higher interest rates), and price stability (to avoid inflation). What’s more, they tend to be less concerned with joblessness—full employment diminishes the flexibility and power of people who own businesses. Because these things are treated as self-evidently good, mainstream media outlets tend to heap praise on politicians who commit to this agenda. The...

All Hail Wall Street

Flickr/Wally Gobetz, Emmanuel Huybrechts
Flickr/Emmanuel Huybrechts I f the debate around the fiscal cliff and, particularly, the still-impending sequester demonstrates anything, it’s that Richard Nixon’s one plunge into economic theory—“We’re all Keynesians now,” the former president once said—still holds. Everyone acknowledges that laying off hundreds of thousands of government employees, including 800,000 civilian Defense Department workers, and stopping payment to government contractors will, by definition, destroy jobs, at least until the payments resume. It’s still Republican orthodoxy, to be sure, to deny that government spending actually creates jobs, but even they acknowledge that the cessation of government spending destroys them. Which illustrates that the problem with contemporary Republicanism isn’t confined to their indifference to empiricism but also their indifference to logic. Reasoning—either deductive or inductive—is either beyond them, beneath them or above them. A second Republican talking point called...

Give Barry a Break

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak President Barack Obama winks as he arrives to make a statement regarding the passage of the fiscal-cliff bill in the Brady Press Briefing Room at the White House. W hen President Lincoln suspended habeas corpus in 1862 (a couple of times, actually), he conceded the possible unconstitutionality of what he had done but concluded that since the move was necessary in a time when half the country was at war with the other half, he would take his chances with Congress, the courts, and history. The country’s current chief executive finds Lincoln comparisons disconcerting, but this is a case where he might pay attention, because his legal grounds for unilaterally raising the ceiling on the national debt in a time of congressionally inflicted crisis are no weaker than Lincoln’s and probably stronger. The latest furor over who should be paying taxes in this country is, as of 36 hours ago, over. This follows a presidential campaign in which the candidate who ran on...

Is the Fiscal Deal a Recipe for National Decline?

White House/Pete Souza
Now that the future revenue path is pretty clear for the next decade, I took another look at President Obama's 2013 budget , which projects spending and revenue through 2022 on the assumption—a correct one, it turns out—that taxes will only rise on the affluent. As I noted in an earlier post today, the White House projects serious cuts to domestic spending. These cuts wouldn't be necessary if the Bush tax cuts were fully repealed. So, in effect, President Obama has largely endorsed the fiscal priorities of his predecessor, with tax cuts forcing spending cuts. This may not amount to "starving the beast," but it is putting government on a conservative diet. I've written a lot about this historic capitulation already, so I won't say more. Instead, let me focus on another implication of letting the Bush tax cuts largely live on. The United States will not only cut spending over the next decade, it will also dramatically increase the national debt—adding $6.6 trillion in new debt by 2022...

Will John Boehner Lose the Speakership?

Flickr/Talk Radio News Service
Flickr/Talk Radio News Service The fiscal-cliff deal —which cleared the Senate by an overwhelming bipartisan majority earlier this week and passed the House late Tuesday—might end up costing House Speaker John Boehner his job. The legislation raises taxes on individuals earning more than $400,000 but cements the Bush tax cuts below that threshold. Only eight senators—five Republicans and three Democrats—dissented. But when the bill reached the House floor, conservatives revolted. The vast majority of House Democrats voted for the compromise measure while 64 percent of House Republicans—including Majority Leader Eric Cantor and Majority Whip Kevin McCarthy—voted against the bill. By introducing the compromise hammered out between Senate Republicans and the White House, Boehner violated the so-called "Hastert Rule," the operational norm by which only bills supported by the majority of the caucus in power are brought up for a vote. The timing couldn't be worse for Boehner. On Thursday,...

We Need More Spending

401(K) 2012 / Flickr
401(K) 2012 / Flickr This passage from Politico’s write-up of the fiscal cliff deal, on the supposed inadequacy of the agreement, stuck out to me for it’s sheer wrongness : “The pact also does little to reduce trillion-dollar-plus deficits, shore up entitlement programs, overhaul the tax code or stimulate the U.S. economy — the casualty of a polarized political culture that scorns compromise.” What’s striking is the matter-of-fact tone, as if to say that of course our chief concern should be spending cuts and lower deficits. And it’s echoed by President Obama’s belt-tightening rhetoric, which at this point is par for the course: “The deficit needs to be reduced in a way that is balanced. Everyone pays their fair share. Everyone does their part. That is how our economy works best. That is how we grow.” Except that’s not how we grow at all. As Stephanie Kelto explains in a great and helpful column for the Los Angeles Times , the economy grows when we—governments, businesses, individuals...

The Endless Cliff

Flickr/Talk Radio News Service
Flickr/Talk Radio News Service B eyond yesterday’s narrow escape from the dreaded fiscal cliff are … more cliffs. President Obama and Congress averted one fiscal calamity of tax-hikes-for-all only to face even steeper cliffs—the sequester, the debt ceiling, the Social Security shortfall, ad infinitum . It is a fiscal Wizard of Oz, an extended odyssey with perils on every side. The question progressives are asking themselves this morning is whether President Obama settled for too little in the fiscal mini-deal, having traded away his best single piece of leverage—the automatic tax increase on all Americans scheduled to hit today unless Congress acted. Some, like our colleague Robert Reich, have argued that it would have been better to “go over the cliff”—let tax hikes briefly take effect on everyone, thus increasing pressure on Republicans—rather than to make this agreement. Mercifully, Obama backed off any “grand bargain.” The deal was a defeat not only for the Republicans but for the...

It's Not about the Deficit

Flickr/401(K) 2012
“It’s not all I would have liked,” says Republican Senator Lindsey Graham of South Carolina, speaking of the deal on the fiscal cliff, “so on to the debt ceiling.” The battle over the fiscal cliff was only a prelude to the coming battle over raising the debt ceiling—a battle that will likely continue through early March, when the Treasury runs out of tricks to avoid a default on the nation’s debt. The White House’s and Democrats’ single biggest failure in the cliff negotiations was not getting Republicans’ agreement to raise the debt ceiling. The last time the debt ceiling had to be raised, in 2011, Republicans demanded major cuts in programs for the poor as well as Medicare and Social Security. They got some concessions from the White House but didn’t get what they wanted—which led us to the fiscal cliff. So we’ve come full circle. On it goes, battle after battle in what seems an unending war that began with the election of Tea Party Republicans in November, 2010. Don’t be fooled...

The Republican Party Is the Problem

Gage Skidmore / Flickr
Gage Skidmore / Flickr After weeks of negotiating, we have a deal on the fiscal cliff, which—in true, congressional fashion—passed hours after the government went “over” the cliff. The details of the deal are straightforward: Tax rates will rise permanently to Clinton-era levels for families with income over $450,000 and individuals with income over $400,000. For everyone below that ceiling, taxes will remain at Bush-era levels. Likewise, for families and individuals at that income threshold, the taxes on capital gains will rise to 20 percent, while staying at 15 percent for everyone else. Given the financial situation of most Americans—who don’t earn much, if anything, from investments—this is a good move, considering the circumstances. Estate taxes will rise to 40 percent, but Republicans were able to win a key concession—estates up to $5 million are exempt from the tax, which amounts to a large tax giveaway for a small number of wealthy families. The deal also reinstated the phase-...

Spare the Stimulus, Spoil the Recovery

Flickr/Richard Lemarchand
Flickr/Richard Lemarchand W e are now halfway into our own lost decade. Five years ago this month, the economy started to collapse in the largest downturn since the Great Depression. Though the recession has officially been over since 2009, we’ve had a slow and uneven recovery. Unemployment, which dropped from 8.3 percent in January to 7.7 percent in November, remains far too high. But 2013 could be a turning point for the economy. The housing market, which has held the recovery in check since the crash, started to show signs of life this past year. The Federal Reserve recently stepped up its monetary policy, pledging to continue its efforts to stimulate the economy until unemployment falls to 6.5 percent. No less important, the public rebuked the politics of extreme austerity in November, handing President Obama a second term. Government actors played an important role in keeping the economy going in 2012, and will need to do the same to sustain the recovery into the new year...

Don't Count Boehner Out Just Yet

AP Photo/J. Scott Applewhite
AP Photo/John Duricka Representative John Boehner holds up a copy of the Constitution on Capitol Hill in Washington Thursday, May 7, 1992, as Senator Don Nickles looks on. T he side of John Boehner we understand most is the one that offers a distant sense of comfort—the one who'll pander to the conservative movement during these fiscal-cliff talks but understands a compromise must come through at the end. This is the John Boehner we dub the "dealmaker," the leader who must "stand up” to the Tea Party—and Majority Leader Eric Cantor, the rival who would do him in. His “dealmaker” persona stems from the assumption he isn’t a true believer or an aggressively ideological Republican, which is correct. But it's his other side, the deeply ambitious one, that clouds our ability to predict where the fiscal saga ends. This is the Boehner who clawed his way to the House Speakership for over 20 years, a position that his conference may force him out of if he "surrenders" to President Obama in...

Prostitution for the Price of a Happy Meal

Why food-stamp bans are perpetuating risky behaviors among America’s most vulnerable

AP Photo/Charles Rex Arbogast, file
Carla walked into my office with despair in her eyes. I was surprised. Carla has been doing well in her four months out of prison; she got off drugs, regained custody of her kids, and even enrolled in a local community college. Without much prodding she admitted to me that she had retuned to prostitution: “I am putting myself at risk for HIV to get my kids a f---ing happy meal.” Despite looking high and low for a job, Carla explained, she was still unemployed. Most entry-level jobs felt out of reach with her drug record, but what’s worse, even the state wasn’t willing to throw her a temporary life preserver. You see, Carla is from one of the 32 states in the country that ban anyone convicted of a drug felony from collecting food stamps. With the release of the Global Burden of Disease Study last week, it bears looking at how we are perpetuating burdens among the most vulnerable Americans with our outdated laws. If she’d committed rape or murder, Carla could have gotten assistance to...

It’s a Mad, Mad Michigan

Right-to-work legislation was only the beginning. State Republicans have an entire docket full of legislation set to limit rights.

(AP Photo/The Detroit News, Elizabeth Conley)
Sure, lame-duck legislatures are bound to be a bit mad. But the session that just closed in Michigan was one for the ages. Aflush with the flurry of bills sent to the desk of Governor Rick Snyder—not so much speaking to his opinion on their quality—a politics-loving friend of mine in Detroit exclaimed, “It’s like Christmas in … well, in December.” The swift passage of right-to-work in Michigan picked up national and international headlines last week. But that overhaul of labor law is only one piece of the expansive legislative plan for the state that now awaits Snyder’s go-ahead. The lame-duck session was the final and powerful display of influence by GOP and Tea Party lawmakers that had a total and triumphant win in the 2010 election. Even as Michigan’s reputation as a “swing state” is diminishing—it’s voted Democratic for president since 1992, and both its U.S. senators are Democrats—local politics remain fractious. Not only does the GOP dominate both chambers in the state...

Obama's Unwise, Unnecessary Concessions

AP Photo/ Evan Vucci
AP Photo/ Evan Vucci President Barack Obama talks about the fiscal-cliff negotiations during a news conference yesterday. W hy is the president back to making premature and unnecessary concessions to Republicans? Two central issues in the 2012 presidential election were whether the Bush tax cuts should be ended for people earning over $250,000, and whether Social Security and Medicare should be protected from future budget cuts. The president said yes to both. Republicans said no. Obama won. But apparently Obama is now offering to continue to Bush tax cuts for people earning between $250,000 and $400,000, and to cut Social Security by reducing annual cost-of-living adjustments. These concessions aren’t necessary. If the nation goes over the so-called “fiscal cliff” and tax rates return to what they were under Bill Clinton, Democrats can then introduce a tax cut for everyone earning under $250,000 and make it retroactive to the start of the year. They can combine it with a spending...

The Social Security Conversation We Should Be Having

401K / Flickr
Matthew Yglesias makes an excellent point about an essential tension between Social Security and the demands of “The Market,” in a post called “Why the Powers that Be Hate Social Security”: You’ve got this big scheme to levy taxes on working people who are participating in The Economy and transfer money to people who’ve dropped out of The Economy. They take that money and use it to pay the electricity bill and buy a cookie for their grandkids. If they didn’t get that money, they’d probably have to work longer and spend more years being part of The Economy. And they’d have to spend their working years being thriftier, and amassing more savings that (via the magic of the financial system) finance private sector investments in The Economy. So not only would lower taxes on The Economy spur more growth, but the mere fact of not sending your grandma those checks is good for The Economy. The Economy thrives on incentives (if you work, we’ll give you money) and desperation (if you want money...

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