Economy

Why "Knowing How the Economy Works" Is Not Enough

George W. Bush has the answers.

This week will see the release of The 4% Solution: Unleashing the Economic Growth America Needs, a collection of essays from the George W. Bush Institute with a forward by the former president himself. It's true that annual GDP growth never actually reached 4 percent during Bush's two terms in office and averaged only 2.4 percent even if we generously exclude the disastrous year of 2008. But look at it this way: Who knows more about what the president ought to do about the economy than Dubya does? After all, there's only one living American (Bill Clinton) with as much experience being president, so Bush must have the answers we need.

A ridiculous argument? Of course. That's because experience only gets you so far. It's obviously a good thing, all else being equal, for the president to know a lot about the economy, just as it's a good thing for him to know a lot about foreign affairs or domestic policy. But the truth is that although the government has to solve many practical problems and it's important to have smart, knowledgeable people in government to work on them, the presidency is not a technocratic position.

Romney's Swing-State Dilemma

(Flickr / Gage Skidmore)

Before Mitt Romney's Bain Capital problems seized everyone's attention, we were hearing about a different political minefield the candidate had to maneuver: While his campaign is based largely on the country's economic woes, several GOP governors in swing states were claiming economic success and recovery. Wisconsin Governor Scott Walker spent his recall campaign pointing to the state's recovery, while Virginia Governor Bob McDonnell launched his own ads showing his state's progress.

Why Is San Bernardino Bankrupt?

The prize for the most abjectly wrong headline in American journalism this week goes, I grieve to say, to the Los Angeles Times. Atop an article analyzing how California cities are coping with horrific budget crunches—which ran one day after the working-class exurb of San Bernardino followed its fellow working-class exurb Stockton into municipal bankruptcy—the headline writer plunked the following line: “Rising costs push California cities to fiscal brink.”

Clueless Kinsley

Back in the days when Michael Kinsley was the designated liberal on CNN’s “Crossfire” show, paired off against Pat Buchanan or Robert Novak, he would answer the complaints of actual liberals that he really wasn’t a liberal himself by agreeing with them. Kinsley was and still is a man of the cautious, corporate center, which means liberal on social and cultural issues and an Aspen/Jackson Hole corporate elitist on economics. Which is to say, while he’s a trenchant social critic, he hasn’t even noticed the bankruptcy of mainstream economics. 

Will Lobby for Food

The farm bill is set to expire, which is bad news for anyone who eats.

Flickr/cordery

Something happened today that, chances are, you know little about yet care about very deeply. It helps pay for the lovely farmers market you frequent every weekend. It’s behind all those corn-syrupy soft drinks you’ve been taught to avoid. It’s the reason you started hiking to that one artisanal shop for grass-fed beef after you read The Omnivore’s Dilemma. It helps feed America’s hungry, because it authorizes the federal food-stamp program, which feeds 46 million people. It’s the farm bill, usually the concern of only the corn, wheat, cotton, peanut, and soy-bean lobby, but it really should be called the food bill, and it has to be reauthorized every five years.

The Myth of Rags to Riches

In the latest version of SimCity, a computer game that let's you pretend to be an urban planner, city residents are born into an economic class and there they remain for life. This may have been done for simplicity's sake, but the scenario makes the popular computer game disturbingly similar to the situation of most Americans.

The Insidious Threat of Telecommuters

Jeremy Bentham's plan for a panopticon.

A couple of weeks ago, upon the release of a study suggesting that people who work at home spend a lot of time not working but nonetheless are more productive than their office-bound colleagues, I argued that people who work at home don't goof off less, we just goof off differently. Not only is there probably no less non-work-related web surfing/Twitter reading/Facebooking going on in the office, but people in offices (at least every office I've ever worked in) spend a lot of time doing things like talking to each other, which we home workers don't waste a moment on. In any case, Wall Street Journal reports that bosses are not satisfied with the fact that their telecommuting employees are perfectly productive. Gripped by the suspicion that they might be slacking off, they're upping the surveillance:

Americans Paying Historically Low Taxes

The top marginal income tax rate, a testament to our oppression. (Flickr)

When the Tea Party movement started in 2009, some of its adherents made signs that read, "Taxed Enough Already!", since the movement defined itself in large part as a reaction against the oppressive tax policies of the federal government, sucking ordinary people dry in its endless search for cash to fund its freedom-destroying schemes. This was always an insane inversion of actual reality—the truth is that as part of the stimulus bill, President Obama actually cut taxes for almost everyone, and the only tax increase he imposed in his first term was a hike in cigarette taxes. It's true that the Affordable Care Act contains a number of different tax increases (on things like "Cadillac" health plans), but those have not taken effect yet. But to many conservatives, it just feels like they're paying more taxes, because...well, because there's a Democrat in the White House.

Today, the Congressional Budget Office released a report on the taxes we have actually been paying, and guess what: the average federal taxes paid by Americans are at their lowest point in the last 30 years:

Investment without Job Creation

A well-known job creator. (Flickr/Vaguely Artistic)

Some time within the last few years, conservatives decided that people who have lots of money shouldn't be called "the rich" or "the wealthy," but "job creators." Give them credit—they know how to use language to turn a problem into an opportunity. After all, defending low tax rates for the rich is hard, but defending low tax rates for job creators is easy. Every now and then you might get an apostate like this venture capitalist coming out and saying that the real job creators are middle class people who buy things and not rich people, but on the whole the "job creator" framing allows conservatives to make their tax arguments without any discomfort.

That gentleman's argument is completely valid: if you have enough middle class people buying Acme Widgets to require 100 people working in the widget factory to meet the demand, it doesn't really matter whether C. Montgomery Acme gets his income taxed at 35 percent (the current, Bush-established, free enterprise-supporting level) or 39.6 percent (the Obama-supported, freedom-crushing, socialist level).

But what about when Mr. Acme takes some of his money and invests in the stock market?

What’s the European Central Bank?

The Prospect takes a look at one of the key players in Europe's financial crisis.

(Flickr / Davide "Dodo" Oliva)

Weird terms like “yield spreads,” “troika,” and “Merkel” have been popping up in the news, often surrounded by acronyms like IMF, ESM, EFSF, and FROB. Our politicians aren't talking about it much, but you can bet your retirement they will once Wall Street underwriters start freaking out about it. Today, the Prospect fills you in on one of the most important acronym in the euro crisis: the ECB, or the European Central Bank.

The European whatsit?

In a nutshell, the ECB is the central bank of the Eurozone—the countries of the European Union that use the euro. Though it only technically became a crucial apparatus of the European Union in 2009, it has a large role in the history of European integration. For now, we'll just leave it at this: The ECB controls the monetary policy of Eurozone countries. It's also one of the newer venues in which France and Germany play chicken over who's the boss of Europe. More on that later.

The American Jobs Act Still Exists

Mitt Romney is back to accusing President Obama of having no plan for economic growth:

The president’s policies have not gotten America working again. And the president is going to have to stand up and take responsibility for it. I know he’s been planning on going across the country and celebrating what he calls ‘forward.’ Well, forward doesn’t look a lot like forward to the millions and millions of families that are struggling today in this great country. It doesn’t have to be this way. The President doesn’t have a plan, hasn’t proposed any new ideas to get the economy going—just the same old ideas of the past that have failed. [Emphasis added]

Terribly Lackluster

(wools/Flickr)

For the third month in a row, job growth has been lackluster. In June, the number of new net jobs came in at 80,000—slightly below the 90,000 to 100,000 expected. Likewise, revisions for previous months were a wash—April’s numbers were revised from 77,000 to 68,000, and May's were revised from 69,000 to 77,000. There simply isn’t much news in this jobs report, which is another way of saying that our sluggish economic growth is grinding to a halt.

Romneyland on the Mediterranean

What does having a Bain-style CEO do to a country? Israel has run the experiment, and the results are ugly.

(Flickr/TheeErin)

If Mitt Romney visits Israel this summer, it's a safe guess that his tour will avoid demonstrations against the government's economic policies. When Mitt and Bibi dine together, the Israeli prime minister probably won't show clips of riot cops dragging away Daphni Leef, the woman who ignited the economic protests, as she tries to re-establish a tent encampment in downtown Tel Aviv.

Where Work Disappears and Dreams Die

In Gary, Indiana—the former “Magic City” of industrial might—jobs have left, and so has almost everything else.

(Flickr/slworking)

Not all teenagers are as lucky as J’Len Glass. He trusts his parents. He knows they will always tell it to him straight. Yet the 15-year-old, who wants to be a doctor, can’t help being skeptical of his elders’ veracity—or at least of their memories—when they tell him that his shrinking, economically depressed hometown of Gary, Indiana—Steel City—was, once upon a time, a wonderful place to raise a family. That it had good public schools and well-maintained city parks and streets. That there were department stores, restaurants, movie theaters, nightclubs, and crowded office buildings up and down Broadway, its main thoroughfare. That a young guy could go outside, play some ball, flirt with girls, and not worry about getting killed in a drive-by shooting.

Can European Leaders Go Big?

With Spain, Italy, and Cyprus reeling, the stakes are high for the Brussels summit—but Germany stands in the way of broad reform.

(AP Photo/Philippos Christou)

The European Summit today and tomorrow in Brussels is the latest in a series of make-or-break moments for the European project. On many occasions since May 2010, when Greece was first cut off from market access, European leaders have been called upon to make a bold leap forward in the policy integration of the Eurozone—the only way to convince investors of the iron irrevocability of the common currency. Under constant pressure from the ongoing crisis, they have often seemed to be making the big decisions to reform the flawed architecture of the monetary union, only for initial perceptions to give way to a much more underwhelming reality. Markets have grown increasingly savvy and cynical in interpreting summit communiqués. They know that behind grand words and large headline numbers, the political will to come together has yet to be demonstrated. Is this summit meeting—in the week when Cyprus became the fourth Eurozone member to ask for an official rescue and Spain confirmed that it would need 100 billion euros to shore up its banks—going to change all that?

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