Economy

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...

Chairman Summers? Let’s Hope Not

AP Photo/Shizuo Kambayashi
AP Photo/Shizuo Kambayashi Former U.S. Treasury Secretary Lawrence Summers addresses a press conference after attending the Group of Seven finance ministers in Fukuoka, Japan in July 2000. He’s back. Larry Summers is running hard to succeed Ben Bernanke as chairman of the Federal Reserve when Bernanke’s term expires in early 2014. This is not a great idea, for three main reasons. The first is Summers’ famous temperament. The problem is not just that he’s less than sensitive to women. It’s that he’s a bully in general, cocksure of himself, using others as foils and prevailing by controlling the agenda. Through several turns in a career marked by falling upwards, Summers’ chief patron and sponsor, Robert Rubin, keeps assuring people that “Larry has changed.” And Larry keeps not changing. It was the bullying more than the disrespect towards women that finally got him fired as president of Harvard. Justice Oliver Wendell Holmes, Jr. famously said of Franklin Roosevelt, “a second-rate...

Social Security: Will Obama Cave?

AP Photo/Charles Dharapak
AP Photo/Charles Dharapak President Barack Obama looks toward reporters shouting questions at him regarding the fiscal cliff as he walks to the White House after attending a holiday party for the National Security Council. O nce again, President Obama seems to be on the verge of folding a winning hand. Widely leaked reports indicate that the president and House Speaker John Boehner are making a fiscal deal that includes hiking tax rates back to the pre-Bush levels with a threshold of $400,000 rather than the original $250,000, and cutting present Social Security benefits. Obama, the reports say, will now settle for as little as $1.2 trillion in tax increases on the rich rather than the $1.6 trillion that he had originally sought. The difference, in effect, will come out of the pockets of workers, retirees, the young, and the poor. Especially foolish is the cut in Social Security benefits, disguised as a change in the cost-of-living adjustment formula. Before getting to the arcane...

Drinking the Deficit-Reduction Kool-Aid

It was the centerpiece of the president’s re-election campaign. Every time Republicans complained about trillion-dollar deficits, he and other Democrats would talk jobs. That’s what Americans care about—jobs with good wages. And that’s part of why Obama and the Democrats were victorious on Election Day. It seems forever ago, but it’s worth recalling that President Obama won re-election by more than 4 million votes, a million more than George W. Bush when he was re-elected—and an Electoral College majority of 332 to Romney’s 206, again larger than Bush’s electoral majority over Kerry in 2004 (286 to 251). The Democratic caucus in the Senate now has 55 members (up from 53), and Republicans have eight fewer seats in the House than before. So why, exactly, is Washington back to obsessing about budget deficits? Why is almost all the news coming out of our nation’s capital about whether the Democrats or Republicans have the best plan to reduce the budget deficit? Why are we back to...

For Women Executives, Still Lonely at the Top

(Flickr / Sheraton Hotels and Resorts)
On Monday, the research team at Catalyst released their 2012 Census of women board directors . They found women held just 16.6 percent of board seats in corporate America. As Bryce Covert notes , this is the seventh consecutive year without significant growth in the percentage of women on corporate boards. What can be done? We can look at Norway for one path forward. In 2002 only 7.1 percent of boards consisted of woman. Though up from 3 percent in 1993, progress was slow. This is in a country with significant gender equality, where over 80 percent of women work outside the home. In order to jumpstart gender equality in the boardroom, the Norwegian government decided to use the law to speed things up. In 2002 a trade minister proposed a law requiring 40 percent of company board members to be women by 2005, and in 2003 the Norwegian Government passed it. Compliance with this law was encouraged but voluntary, with no penalties in place. Few companies, only around 20 percent, were...

Full Employment is the Best Deficit Reduction Plan

Google
Despite the fact that Democrats have already agreed to large spending cuts, the Republican position continues to be that further reductions are needed, despite the fact that spending on social programs has already been cut to the bone. The problem, of course, is that there just isn’t much money left in social programs, absent major, unpopular cuts to programs like Social Security and Medicare. Those aside, the most ripe area for savings is the Pentagon, and Republicans have no interest in reducing military spending—indeed, Mitt Romney spent the past year campaigning on more military spending, regardless of actual needs. If deficit reduction is a priority, then more revenue is needed. This chart illustrates the problem: The Bush tax cuts and the Great Recession precipitated a massive drop in the revenue collected by the federal government. Until we return to at least pre-recession levels, deficit reduction will be a difficult enterprise. Which gets to a broader point: The best plan for...

The Federal Reserve Gets Down to Business

(AP Photo/David Goldman)
At a press conference in April 2012, New York Times reporter Binyamin Appelbaum asked Federal Reserve Chairman Ben Bernanke to respond to criticism that he wasn’t doing enough to bring down unemployment. Bernanke responded: “[T]he question is: Does it make sense to actively seek a higher inflation rate in order to achieve a slightly increased pace of reduction in the unemployment rate? The view of the committee is that that would be very reckless. We have … spent 30 years building up credibility for low and stable inflation." Bernanke was putting a limit on how much he would do to get the economy growing faster and unemployment down. Accepting inflation above the target rate of 2 percent, either directly through active policy or implicitly by temporarily tolerating higher inflation without raising rates, wasn’t worth it. By this point a serious critique of Federal Reserve policy had been developed by those who thought the Federal Reserve should be doing more. This held that the...

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