Economy

Full Employment Is the Best Social Program

The optimistic debate about what could happen in the United States after the unemployment rate goes down

AP Photo
The unemployment rate’s drop to 7.8 percent, reported last week, marked the first time since 2009 that the rate was below 8 percent. It’s fitting that this occurred shortly after someone who predicted the rate couldn’t get below 8 percent changed his mind. Until a year ago, president of the Minneapolis Federal Reserve Narayana Kocherlakota had argued that there may be a new normal unemployment rate of 8.7 percent, and that adjusting the rate at which banks borrow money would do little to help. Now he argues that the Fed should commit to keeping rates low until unemployment is declines—a position in line with those hawkish about our unemployment crisis. Kocherlakota’s arguments were popular among the right, with conservatives like David Brooks name-checking him in his national column. But they also found support from a surprising ally: former President Bill Clinton. Clinton went on David Letterman's show and NPR in 2010, quoting Kocherlakota to argue that we were “coming out of a...

The Politics of the Jobs Report

The White House is breathing easier this morning. The Bureau of Labor Statistics reports the unemployment rate dropped to 7.8 percent—the first time it’s been under 8 percent in 43 months. In political terms, headlines are everything—and most major media are leading with the drop in the unemployment rate. Look more closely, though, and the picture is murkier. According to the separate payroll survey undertaken by the BLS, just 114,000 new jobs were added in September. At least 125,000 are needed per month just to keep up with population growth. Yet August’s job number was revised upward to 142,000, and July’s to 181,000. In other words, we’re still crawling out of the deep crater we fell into in 2008 and 2009. The percent of the working-age population now working or actively looking for work is higher than it was, but still near a thirty-year low. But at least we’re crawling out. Romney says we’re not doing well enough, and he’s right. But the prescriptions he’s offering—more tax cuts...

We're All Values Voters

(AP Photo/Pablo Martinez Monsivais)
As recently as last month’s convention, Democrats were getting their narrative back. They were uniformly praised for their message discipline and for laying out an inspiring vision for the country, reflected in a string of rousing speeches that told a story and signaled (instead of concealed) their values. After last night’s debate, Dems risk falling back into the lost decades when the party could offer only a grab bag of policy goodies to its fragile coalition instead of a coherent governing philosophy. If Barack Obama’s debate performance is any indication, they seem poised to forget a key lesson from the last three elections: We’re all “values voters.” Yes, we in the commentariat always clamor for more specifics. But policies mean little if they’re not communicated as part of a larger narrative that speaks to voters’ values. I don’t mean gay marriage and abortion, per se, but the belated understanding by Dems (decades after the GOP) that voters make choices based on whether a...

Those Unemployment Numbers

President Obama gets a lift from a relatively positive employment report for September. The nation gained 114,000 jobs, and the unemployment rate declined to 7.8 percent, the lowest since Obama took office. Earlier disappointing figures were revised upwards, by 40,000 for July and 45,000 for August. All this gives Obama some bragging rights, and heads off what would have been a withering attack had the news been bad. But Obama makes a mistake by emphasizing what the progress the economy is making. Median household incomes are down, young people face rough going as they enter the job market, and the elderly have dwindling pension coverage and almost no returns on their savings in a zero interest rate environment. It would be much better to emphasize the mess that he inherited from the Republicans, the fact that every effort he has made to produce a stronger recovery has been blocked by the opposition, and the dismal 30-year trend of worsening inequality and rising insecurity. The...

Are Women Better Off than We Were Four Years Ago?

(Flickr/Lekere)
Last week I confessed that I don’t like presidential election season. I don’t like the trivialized reportage, the horse-race-ification of serious subjects, and the narrowed vision that settles in on policy folks during these months. I especially don’t like the question “Are you better off now than you were four years ago?” This suggests two things to which I object: first, that the president is in charge of how well-off I am, when all of us know that American politics and global economics are far more complex. Second, that “better off” or “worse off” can be reduced to my current income and immediate financial prospects, even if those were dependent on the president. So I’m going to hijack that question for my own purposes and ask: Are women better off than we were four years ago—not just financially, and not just in ways affected by President Barack Obama’s administration, but overall? Episode one: Show me the money. Despite the fact that I dislike the reduction of life to finances,...

CFPB Catches American Express Breaking the Law

American Express customers will receive $85 million in refunds for deceptive practices

(Flickr/Images_of_Money)
After a slow start, the Consumer Financial Protection Bureau (CFPB) is beginning to live up to consumer advocates' hopes and Wall Street's fears. On Monday, the new federal regulator announced a steep penalty and fine against American Express for ripping off their customers. Three subsidiaries of the credit-card company will have to refund $85 million to around 250,000 customers. As a result of the investigation—conducted by the CFPB, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), and the Utah Department of Financial Institutions—American Express was fined an additional $27.5 million that will be divvied up between the various regulators' coffers. Investigators found that American Express deceived customers at a number of steps, starting from the initial sale of a credit card. Customers were told they would receive extra points, totaling $300, by signing up for a "Blue Sky" credit card, but the...

They Work Hard for the Money

(AP/Mel Evans
(AP/Mel Evans) Cargo containers are stacked on the deck of the Mediterranean Shipping Company's vessel at Port Newark in Newark, New Jersey. As work becomes increasingly a matter of machines building or moving other machines, workers either lose their jobs or—if they are fortunate enough to keep their jobs—become vastly more productive. Productivity surged in the U.S. during the early years of the current downturn when companies laid off workers by the millions and replaced them with machines. Revenues per employee at the S&P 500, the Wall Street Journal reported, rose from $378,000 in 2007 to $420,000 in 2010. And yet, the wages and benefits of employed Americans experienced no corresponding increase as workers’ productivity rose. Indeed, over the past quarter-century, as economists Ian Dew-Becker and Robert Gordon have reported, all productivity gains have gone to the wealthiest ten percent of Americans. In the quarter-century following World War II, by contrast, productivity...

How Obama Beats Romney

(AP Photo/Alan Diaz)
DENVER, COLORADO —By the time his motorcade pulled up to Magness Arena on the campus of the University of Denver at 6:40 local time Wednesday evening, October 3, the president knew he had 20 minutes to make a decision. The campaign of his opponent, Governor Mitt Romney, had so deteriorated that, for his part, Barack Obama understood there was a sound argument on behalf of running out the clock and not taking any great risks. The president is typically a prudent man, right up until the moment he does something notably risky, such as ordering the mission that killed Osama bin Laden in spite of virtually all of his inner circle advising against it (except CIA Director Leon Panetta). Now, with only moments until the debate began, the president could anticipate what might well be moderator Jim Lehrer’s opening question, for which the Obama campaign had prepared an innocuous response, counting on the near certainty that Governor Romney would offer a response even more useless. But another,...

Reaping What Elections Sow

(Flickr/ BKM_BR)
In 2010, Tea Party mania influenced elections at every level—congressional races and governorships, most famously. But the biggest impact was on state legislatures, where 21 house or senate chambers flipped from Democratic to Republican control. In states like Texas, Republican majorities turned into supermajorities; in the Texas House, Democrats were no longer needed to make up a quorum. All the legislative energy was on the side of Tea Party Republicans. They made sweeping, historic changes—to labor laws, to health care, to reproductive rights, and, most of all, to state budgets and public school funding. In a few weeks, voters in most states will be choosing new lawmakers again. They'll make their decisions based in part on how they believe the incumbents governed over the last two years. But because of the massive scale of changes ushered in by Tea Party Republicans, it's going to be extremely difficult—if not downright impossible—for voters to judge the effects of those changes...

Your Credit Score Could Be A Fake

Say you want to buy a house or a car and you need a loan to do it. You do what every personal finance site recommends and obtain a free copy of your credit report from annualcreditreport.com . Then, urged on by the ads from TransUnion, Equifax, or Experian—the “big three” credit reporting firms that compile the reports—you opt for not only the free report but also shell out for what the companies promise is your actual three-digit credit score . A number! Now, you may think, I know what the auto lenders and banks making mortgages really think of me. I have a sense of what rates I qualify for and what type of car or home I can afford. There’s just one problem: the score you paid for is likely not the same one potential lenders will use to assess you . In fact, it could be way off. What many consumers don’t realize is that they have no single “credit score”— FICO alone has more than 49 different scoring models . And new research from the Consumer Financial Protection Bureau (CFPB) finds...

Good News, Bad News on the Economy

The Obama administration got good news and bad news on the economy Thursday. The bad news: The Commerce Department revised the economic growth rate downward, to just 1.3 percent in the second quarter of 2012, down from an earlier estimate of 1.7 percent. That’s close to stall speed, not nearly enough to generate enough jobs or income growth. To add to the administration’s bad day, durable-goods orders dropped 13.2 percent in August. The good news: The Labor Department revised the job-creation numbers upward, including an impressive 386,000 in March. (But March was a long time ago.) Housing prices finally hit bottom, according to several reports, and have started to rebound. Still, these are not good numbers. If the government doesn’t radically change its economic policy, we will face a protracted slump for years to come. The only thing that could alter the trajectory is fiscal policy—not the grand bargain to cut the deficit that Messrs. Bowles, Simpson, and a platoon of corporate CEOs...

Pain in Spain

(AP Photo/Andres Kudacki)
The European authorities seem determined to drive the continent into a repeat of the Great Depression. The European Central Bank keeps playing a cute game designed more to impress the Germans than the financial markets or to provide real relief. Mario Draghi, ECB president, offers to buy unlimited amounts of the bonds of states that are being pummeled by speculators, but then undercuts his own offer by conditioning it on punishing austerity. In Spain, in the days after Draghi’s latest pronouncement, the rate on government bonds briefly fell, but is now rising again as markets realize that Draghi’s conditions make it impossible for any elected government to accept the offer. Meanwhile, unemployment is rising to record levels and Spain’s depression keeps feeding on itself. Draghi’s game reminds me of a battery-operated novelty toy I had when I was a kid. It was a mysterious box with a switch. When you turned on the switch, the lid opened, a mechanical hand came out of the box, and...

Richie Rich Aces the SAT

(Flickr/sacmclubs)
(Flickr/sacmclubs) A California high schooler takes the Scholastic Aptitude Test (SAT). The College Board released its data on 2012 SAT scores on Monday, and beneath the headlines (which tallied how much SAT scores have slipped as more and more students take the test) was a revealing picture of the influence of students’ household income on their performance. The influence couldn’t be more decisive. The board measured household income in increments of $20,000—starting with students from households making $0 to $20,000 annually, then $20,000 to $40,000, all the way up to $160,000—then an increment of $40,000 ($160,000 to $200,000) and then a final category of more than $200,000. And SAT scores rose considerably at every step in the income scale. The poorest students, from households making less than $20,000 had a mean combined score of 1322 out of 2400; the next highest, 1397; then 1458, then 1497—all the way to a score of 1722 for students from households making more than $200,000...

What Will Obama Do about Income Inequality? Not Much.

New data from the Census Bureau shows that the tepid recovery is exacerbating income inequality and pushing ordinary Americans into tougher economic circumstances. Here is the Los Angeles Times with more detail : The median household income, after adjusting for inflation, dropped 1.5% in 2011 from the previous year to $50,054. That is now 8.1% lower than in 2007, when the recession began late that year. […] The share of people falling below the poverty line—$11,702 for a single person under age 65 and $23,201 for a family of four—had increased steadily since 2006, when the rate was 12.3%. The census report said there were about 46 million poor people in the U.S. last year, essentially the same as in 2010. […] The latest census report showed that households with incomes in the 20th to 60th percentile saw their share of overall incomes fall last year to 23.8% of total income. Meanwhile, households in the top 20% saw their share of the total pie climb to an all-time high of 50%. With the...

Voters Getting Mixed Signals from the Market

(AP Photo/Richard Drew)
Until not long ago, there was a widespread assumption that the economy could well be Barack Obama's undoing. After all, no president since Franklin Roosevelt had been re-elected with unemployment as high as it is now, so if Obama were to prevail, it would take an unusual combination of factors that usually matter only on the margins—the skills of the respective candidates, a foreign crisis or two—to allow him to win. But then something strange happened. The political scientists who think about these things began releasing their forecasts (all of which rely heavily on economic variables), and it turns out that most of them project that Obama will win after all. According to these models, the economy isn't doing so bad after all. It's enough to make Republicans tear their hair out. James Carville may have been right when he put a sign reading "It's the economy, stupid" on the wall in Clinton campaign headquarters in 1992. But what we mean when we say "the economy" is good or bad, up or...

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