Economy

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...

Turning the Cliff into a Launch Pad

One part of the dreaded fiscal cliff actually presents an opportunity that could be good politics and good economics. The temporary two-point cut in the payroll tax expires January 1 (along with the Bush tax cuts). The $1.2 billion sequester also kicks in. Deficit hawks of both parties have been saying that it’s irresponsible to extend the payroll tax cut, while defenders of Social Security like the American Association of Retired Persons (AARP) are opposed to an extension for fear of diverting revenue from the Social Security trust fundsand adding ammo to the crusade for cutting back the system’s benefits. But there is a nice opportunity here to turn a lemon into lemonade. The economy is hardly robust enough to inflict a two-point tax increase on working people. For two-income households, that’s a four-point increase. That means, say, a $2,400 tax hike on a $60,000 family income. Nobody is going to remember that this was temporary; they will simply experience it as a tax increase on...

Mitt Romney's Question Mark Economy

(Jamelle Bouie/The American Prospect)
As we close in on Election Day, the questions about what Mitt Romney would do if elected grow even larger. Rarely before in American history has a candidate for president campaigned on such a blank slate. Yet, paradoxically, not a day goes by that we don’t hear Romney, or some other exponent of the GOP, claim that businesses aren’t creating more jobs because they’re uncertain about the future. And the source of that uncertainty, they say, is President Obama — especially his Affordable Care Act (Obamacare) and the Dodd-Frank Act, and uncertainties surrounding Obama’s plan to raise taxes on the wealthy. In fact, Romney has created far more uncertainty. He offers a virtual question mark of an economy For example, Romney says if elected he’ll repeal Obamacare and replace it with something else. He promises he’ll provide health coverage to people with pre-existing medical problems but he doesn’t give a hint how he’d manage it. Insurance companies won’t pay the higher costs of insuring...

(Fiscal) Cliffs Notes

(Flickr/Matthew Wilkinson)
The most bizarre thing about the deficit and the campaign is the fact that the risk of a fiscal cliff—which everyone agrees will crash the economy—is being used to justify a slightly smaller fiscal cliff. There are several players here, so the arguments are worth sorting out. Herewith, some Cliffs Notes: What is the fiscal cliff? It comes in three parts. On January 1, the Bush tax cuts expire. This means that in the first pay period of the new year, more taxes are taken out of everyone’s withholding. Second, the temporary two-point cuts in payroll taxes expire too, so everyone’s Social Security and Medicare taxes go up as well. Third, the dreaded “sequester” of automatic budget cuts, the toxic fruit of the Republican blockade of a normal budget deal back in 2011, kick in. Oh, and extended unemployment benefits expire, too. What would all this fiscal tightening do to the recovery? It would create a new recession, according to the Congressional Budget Office (CBO), Fed Chairman Ben...

How January's Fiscal Cliff Turns into a Gentle Hill by February

Regardless of what happens on Election Day, at the beginning of next year more than $600 billion in tax increases and spending cuts automatically go into effect. That’s equivalent to about 5 percent of the entire U.S. economy—more than the projected growth of the whole gross domestic product next year. The problem is, if we fall off this fiscal cliff, we plunge into recession. That’s because the cliff withdraws too much demand from the economy too quickly, at a time when unemployment is still likely to be high. The Congressional Budget Office projects real economic growth will drop at an annual rate of 2.9 percent in the first half of 2013, and unemployment will rise to 9.1 percent by the end of next year. As Spain and Great Britain have demonstrated, launching fiscal austerity at a time when a nation’s economic capacity is substantially underutilized causes the economy to contract. This makes the debt even larger in proportion to the size of the economy. Rather than reassure global...

Color-Blinded

(AP/Pablo Martinez Monsivais)
(AP/Pablo Martinez Monsivais) Imagine a college whose orchestra was missing a bassoon player, or whose football team was down a running back. It would go without saying that this school could admit an applicant who plays the bassoon over a candidate who plays the French horn, even if that French horn player had slightly higher grades, or that its admissions officers could give preference to a high school’s star running back over its equally talented defensive lineman. The entire university community benefits from a full orchestra or a football team with a complete offensive lineup, and college admissions officers routinely take similar considerations into account when they think about how to build an incoming freshman class. Nine years ago, in its landmark Grutter v. Bollinger decision, the Supreme Court recognized that race is just like an orchestra. Contrary to the common view that affirmative action is a zero-sum game—in which each seat given to a minority must be taken from a...

Show Me The Money: Correction

Last week, I launched a series simultaneously attacking and hijacking the quadrennial question: Are you better off than you were four years ago? For the first one, I reported on how women are doing economically compared to four years ago. But one of my sentences confused readers—apparently because I myself was confused. For my correction, let me simply quote what Heidi Hartmann of IWPR, one of the labor economists I cited, wrote me: I do have a little trouble with this sentence though because I’m not sure what you were trying to get at. If I said something like this I was not very accurate: Elderly women have fared a little better, because older people who live on Social Security haven’t lost much. They weren’t as affected by the drop in housing prices or the evaporation of pensions, since they hadn’t had jobs to begin with. It might be better to phrase it slightly differently: Elderly women have fared a little better, because older people who live on Social Security haven’t lost...

Romney's Tax Plan Still Makes No Sense

For my part, the most incredible exchange of the first presidential debate came in the first 20 minutes, when President Obama hit Mitt Romney on his tax plan—which would implement across-the-board cuts to marginal rates—and the Republican nominee responded by denying its existence . Romney insisted that his plan would not cut upper-income taxes ( it calls for a 20 percent reduction ) and, in fact, would end breaks for upper-income taxpayers (he has yet to give any detail on this score). The Tax Policy Center, on the other hand, found that there was no way for Romney to accomplish his goals—tax cuts, fewer loopholes, revenue neutrality—without significant tax increases on some group of taxpayers. The Romney campaign has repeatedly dismissed the study. Today, the co-director of the Tax Policy Center, William Gale, offers a response : Suppose Governor Romney said that he wants to drive a car from Boston to Los Angeles in 15 hours. And suppose some analysts employed tools of arithmetic to...

Obama: Giving Away Social Security

(AP/Rex Features)
Here is Mitt Romney’s proposal to cut Social Security benefits, from the Romney campaign website : First, for future generations of seniors, Mitt believes that the retirement age should be slowly increased to account for increases in longevity. Second, for future generations of seniors, Mitt believes that benefits should continue to grow but that the growth rate should be lower for those with higher incomes. In other words, cuts in benefits. In the first debate, I was waiting for President Obama to go to town on this. Instead, Obama had this to say: LEHRER: "Mr. President. Do you see a major difference between the two of you on Social Security?" OBAMA: "You know, I suspect that, on Social Security, we’ve got a somewhat similar position. Social Security is structurally sound. It’s going to have to be tweaked the way it was by Ronald Reagan and Speaker — Democratic Speaker Tip O’Neill." He’s got a similar position to Mitt Romney’s? On Social Security? Does this man just want to hand the...

Smaller Deficits Are Bad News

A new report from the Congressional Budget Office shows that the deficit has declined by $200 billion, bringing it to where it was when Obama took office. Here’s the key passage: The federal government’s fiscal year 2012 has come to a close, and CBO estimates that the federal budget deficit for the year was about $1.1 trillion, approximately $200 billion lower than the shortfall recorded in 2011. The 2012 deficit was equal to 7.0 percent of gross domestic product, CBO estimates, down from 8.7 percent in 2011, 9.0 percent in 2010, and 10.1 percent in 2009, but greater than in any other year since 1947. CBO’s deficit estimate is based on data from the Daily Treasury Statements; the Treasury Department will report the actual deficit for fiscal year 2012 later this month. There’s an excellent chance that President Obama will tout this in upcoming speeches and campaign events. But that doesn't mean it's a good thing—a large portion of this is almost certainly the result of a conservative...

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...

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