Economy

Greece's Very Real Fiscal Cliff

The tired country's parliament continues to enact austerity measures to ensure Eurozone financial help keeps flowing, to the anger of many affected parties.

(AP Photo/Thanassis Stavrakis)
Last Wednesday night, I sat in the press stalls inside the main hall of Greece’s parliament watching a critical bill being debated. While Americans were still distracted by the results of their own election, Greece’s ruling coalition, made up of three parties that straddle the center, was struggling to pass new cuts and reforms necessary for continued financial help for the debt-ridden country. As the measure was attacked by deputies from SYRIZA, the hard-left official opposition, and the populist-right Independent Greeks, I heard yelling and commotion from inside the parliament building. My first thought was that the tens of thousands of protesters who had gathered outside in the pouring rain had broken through the lines of police and made it into the building. The reality was even worse. The screaming came from the employees of parliament, a notoriously well-connected and privileged enclave of the public sector, who had learned they were going to be included in stricter pay and...

Note to Obama: Shoot First, Compromise Later

(AP Photo/Jae C. Hong, File)
(AP Photo/Pablo Martinez Monsivais) President Barack Obama with Republican House Speaker John Boehner I hope the president starts negotiations over a “grand bargain” for deficit reduction by aiming high. After all, he won the election. If the past four years have proved anything, it’s that the White House should not begin with a compromise. Assuming the goal is $4 trillion of deficit reduction over the next decade—that’s the consensus of the Simpson-Bowles Commission, the Congressional Budget Office, and most independent analysts—here’s what the president should propose: First, raise taxes on the rich—and by more than the highest marginal rate under Bill Clinton or even a 30 percent (so-called Buffett Rule) minimum rate on millionaires. Remember: America’s top earners are now wealthier than they’ve ever been, and they’re taking home a larger share of total income and wealth than top earners have received in more than 80 years. Why not go back 60 years when Americans earning more than...

Romney and the 0 Percent

AP Photo
My favorite exit-poll factoid this year comes near the end of the quadrennial Edison-Mitofsky questionnaire, as reported on the NBC News web site. The pollsters asked people leaving their voting places whether Barack Obama’s policies, and Mitt Romney’s policies, “generally favor[ed]” the rich, the middle class, or the poor—and respondents could give more than one answer. Among Obama supporters, 86 percent said that Obama’s policies favored the middle class, with another 25 percent saying that they favored the poor. Only 12 percent of Romney’s supporters, by contrast, believed that Obama’s policies favored the middle class while a whopping 74 percent said that they favored the poor—not a good thing in Romneyworld. But the interesting numbers come in the answers to the question on Romney’s policies. Not surprisingly, 87 percent of Obama supporters said the Mittster’s policies favored the rich, while 0 percent said they favored the poor. Among Romney’s own supporters, only 10 percent...

Oil: The Bad News in the Good News

(Flickr/Mayhem Chaos)
(Flickr/Mayhem Chaos) An oil field near Bakerfield, California O n Monday, the International Energy Agency (IEA) came out with a stunner of a projection. The United States will replace Saudi Arabia as the world’s largest producer of oil by 2020, thanks to the unlocking of massive shale oil reserves. With hydro-fracking technology, the U.S. is riding a boom in natural gas as well. Oil production will increase from its current level of about 6 million barrels a day per year to 11 million barrels by 2020. Within a few years, the U.S. will be a net exporter. Pardon me if I don’t rejoice. This good news all but guarantees that the United States government, Democrat or Republican, will turn away from efforts to replace carbon fuels with clean, renewable energy. It guarantees another generation of relatively cheap gasoline for motorists—and an increase in the U.S. contribution to global climate change. Hundreds of thousands of people are still suffering the aftereffects of Hurricane Sandy...

Nixon Can't Always Go to China

New America Foundation/Flickr
New America Foundation/Flickr By this point, it’s clear that former Clinton administration official and twice-failed North Carolina Senate candidate Erksine Bowles is on the short list to replace Tim Geithner as Treasury Secretary. For reasons outlined by Paul Krugman, and our own Robert Kuttner, Bowles would be a terrible choice for Treasury: He’s a deficit scold more concerned with lowering taxes than reducing unemployment and providing a strong base for economic growth. But he has his advocates, among them William Cohan, a former investment banker and investigative journalist. Cohan sees the deficit as the chief problem facing the United States, and thinks Bowles is the only candidate for Treasury who can craft a bipartisan deal to get our “fiscal house in order” and bring some accountability to Wall Street. Wait, what? Yes, Cohan sees Bowles as a more progressive alternative to the other name on the short list, White House Chief of Staff Jack Lew. Here’s what he has to say: For...

University of Hard Knocks

Contrary to the prevailing view, recent college grads will have the hardest time bouncing back from the recession.

(Flickr/Ali Reza Zamli)
(Flickr/Ali Reza Zamli) W ith two positive jobs reports in a row, it seems clear that the economy is slowly and steadily recovering, which should come as welcome news to students shielded from the effects of the recession behind university walls. But for those who had the misfortune to graduate and enter the workforce at the height of the downturn, the effects of the Great Recession will likely stay with them for the rest of their working lives. At first glance, it seems clear that those with a college degree have a leg up in a recession. Young people with only a high-school diploma have an unemployment rate of 22 percent, compared with 9 percent with a college degree. But the average college graduate will have the most permanent impact on their earnings because they’ll have missed the first steps in building their career. Picture three people: one person who doesn’t go to college, someone who graduates with average grades from a non-elite college, and a third who graduates from the...

How the Fiscal Cliff Has Helped Clear the Air

(contemplicity/Flickr)
Now that elections season is over, Washington has returned to obsessing over the “fiscal cliff,” a collection of tax increases and spending cuts that—if triggered—would gradually remove hundreds of billions of dollars from the economy and put the United States on the path to another recession. What’s interesting about the fiscal-cliff conversation is that this straightforwardly Keynesian argument—we shouldn’t reduce deficits during an economic recovery—is coming from people whose claim to fame is deficit reduction regardless of the circumstances. Erksine Bowles, for example, is a notorious deficit scold whose namesake—along with former Republican lawmaker Alan Simpson—is the Bowles-Simpson deficit-reduction proposal, which would reduce the debt by $4 trillion over the next decade through a combination of tax increases and cuts to entitlement spending. Bowles thinks it’s imperative that we avoid the fiscal cliff: “People are never going to understand how critical this particular time...

Get Out the Union Vote

(Flickr/Wisconsin AFL-CIO/Justin Geiger)
Despite setbacks in several states, the American labor movement came out a clear winner in Tuesday’s elections. Most important, they played a key role in ensuring the re-election of President Obama, and contributed significantly to Democratic Senate victories in hotly contested races in Massachusetts, Ohio, Wisconsin, and Virginia. How effective were the unions’ massive voter-education and mobilization programs in the swing states? This year, for the first time, the network exit polling didn’t ask whether respondents were union members, though it did ask if there was a union member in their household. Historically, while union-household voters are more pro-Democratic than voters with no union members at home, the gap is smaller than that between actual union members and non-members. Also historically, union membership doesn’t make much of a difference among, say, African-American women, who are going to vote Democratic at a 95-percent rate whether or not they belong to a union. Where...

Why Obama Needs to Restart the Conversation on the Economy Now

When the applause among Democrats and recriminations among Republicans begin to quiet down—probably within the next few days—the President will have to make some big decisions. The biggest is on the economy. His victory and the pending “fiscal cliff” give him an opportunity to recast the economic debate. Our central challenge, he should say, is not to reduce the budget deficit. It’s to create more good jobs, grow the economy, and widen the circle of prosperity. The deficit is a problem only in proportion to the overall size of the economy. If the economy grows faster than its current 2 percent annualized rate, the deficit shrinks in proportion. Tax receipts grow, and the deficit becomes more manageable. But if economic growth slows—as it will, if taxes are raised on the middle class and if government spending is reduced when unemployment is still high—the deficit becomes larger in proportion. That’s the austerity trap Europe finds itself in. We don’t want to go there. This is why...

The Dangers of Our Budget-Deficit Minuet

(Flickr/Austen Hufford)
The day after Barack Obama was re-elected, the Dow Jones lost 312.96 points. It wasn’t just that investors were hoping for the lower taxes and further deregulation that would have come with a Romney win. The news from Europe was bad, and pundits were obsessively focused on the “fiscal cliff” of mandatory budget cuts that will drive the economy into a new recession unless Congress jumps off its own budgetary cliff first. For once, the markets are right. But the news from Europe entirely contradicts conventional assumptions about the fiscal cliff. Greece, which has dutifully cut its budget as demanded by the leaders of the European Union and the European Central Bank, is deeper in depression than ever. The latest reports show that its economy has shrunk by more than 20 percent over four years and that the more that it cuts its deficit, the more its national debt grows. How can that be? Budget cutting in a depression just deepens the depression. The deeper the depression, the less...

The Economy Is Set for Big Growth Next Year

(401K/Flickr)
Bloomberg finds that—regardless of who wins the election tomorrow—the economy is set for stronger growth in 2013 and beyond: Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009. “The die is cast for a much stronger recovery,” said Mark Zandi, chief economist in West Chester, Pennsylvania, for Moody’s Analytics Inc. He sees growth this year and next at about 2 percent before doubling to around 4 percent in both 2014 and 2015 as consumption, construction and hiring all pick up. Yes, there’s the fiscal cliff. But odds are best that Congress and the White House will avoid a situation where the economy is hit with a burst of contractionary policy. In all likelihood, the winner of tomorrow will be able to claim credit for a growing economy, even if his policies...

Unemployment Ticks Up—And That's a Good Thing

The economy gained 171,000 jobs in October, according to the Bureau of Labor Statistics. The previous two months’ job gains were also revised upward, with the BLS now estimating that an additional 50,000 jobs were created in August and 34,000 in September. With the revisions, we finally have more jobs than in early 2009, when the economy was in full collapse and President Obama took office. Job growth is important, but what might be even more exciting news is that the unemployment rate went from 7.8 percent to 7.9 percent. Wait—isn’t unemployment the number we want to go down immediately? Unemployment is a measure of people looking for work. As people are unemployed for longer periods of time, they become discouraged and give up on trying to find a job. When they do this, they are no longer counted as unemployed, which leads to an artificial decline in the unemployment rate—it’s not that the economy has added jobs; it’s that there are fewer people looking for them. The BLS tracks the...

I Can Haz Recovery?

Jamelle Bouie
Jamelle Bouie For this month’s jobs report , don’t pay attention to the top-line number. Yes, unemployment increased to 7.9 percent, but that’s because the economy is creating more jobs, and more people are looking for work. Not only did the economy create 171,000 new jobs—beating expectations by a significant amount—but labor-force participation is up, and the Bureau of Labor Statistics added 50,000 more jobs to the total for August (bringing it up to 192,000) and 34,000 to the total for September (bringing it up to 148,000). If this were unusually good—250,000 new jobs, for instance—or unusually bad, then it could have a significant effect on the presidential race. As it stands, it’s just solid, and it won’t bend the needle in one direction or the other. President Obama can cite it as evidence that the economy is moving forward and we need to continue on the current path; Mitt Romney will hammer it as an example of the president’s “failed leadership.” In fact, right on time, that’s...

Michael Barone's Tenditious History

Electoral historian and Fox News commentator Michael Barone, having long since made the trek from mainstream liberal to standard-issue conservative, is now endeavoring to pull the whole of American history along with him. In today’s Financial Times , he argues that Franklin Roosevelt never really won majority support for his key New Deal programs. Those programs now stand on the chopping block should Mitt Romney be elected president next Tuesday, Barone writes, and they lack popular support even if Barack Obama should prevail. As Barone sees it, “even in straitened economic circumstances, most Americans do not want and will not reward politically a vast expansion of the size and scope of government.” Since he is advancing a general thesis here, not merely an analysis of the Obama administration’s alleged overreach, he extends this argument backward to the 1930s. Roosevelt’s landslide re-election of 1936, in which he won 61 percent of the popular vote and carried every state save Maine...

Fix the Debt, Destroy the Recovery

(AP Photo/Jim Cole)
David Walker announced his endorsement of Mitt Romney this week. The name might not ring a bell, but Walker was head of the Peter G. Peterson Foundation, the number one funder of deficit-hawkery in the United States. Walker, a former Comptroller General, has described himself and his crusade as bipartisan, and it is actually helpful that he has come out of the closet as a Republican. Lately, Walker has been deeply involved with the efforts to levitate the late Bowles-Simpson Commission as a template for deficit-reduction, and has been working closely with the corporate-funded “Fix the Debt” campaign of more than 100 CEOs lobbying for an austerity grand bargain. It’s worth unpacking the economics and the politics of the austerity lobby. The Fix the Debt campaign, much like the Bowles-Simpson Commission and the propaganda of the Peterson Foundation generally, contends that the projected national debt is depressing business willingness to invest now. Presumably, businesses are worried...

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