Economy

Europe: Old Austerity in New Bottles

In late July, European Central Bank (ECB) President Mario Draghi, speaking off the cuff in London, pledged to do “whatever it takes” to save the Euro, including massive intervention in bond markets to keep speculators from extending the Greek disease to Spain and Italy, where interest rates were ominously rising. This impressed money markets for a few days—until investors realized that Draghi’s commitment came with big strings. Strapped countries benefitting from these purchases would first have to double down on austerity. No thanks, said the leaders of Spain and Italy. On September 6, Draghi tried once more. After more than a month of consultations with his own board and national leaders, he declared that the ECB would make unlimited purchases of short term government bonds. He claimed “a massive majority of the [ECB] governing council for this concept.” But the council member who mattered most, Bundesbank President Jens Weidmann, remained adamantly opposed. A Bundesbank press...

Third Night of the DNC: TV & Twitter Review

So the DNC gave us a week that got more and more sober as it went on. By last night, we were down and dirty with tough choices and grim policies. Foreign policy dominated the early part of the evening, with a salute to military veterans that had many in my Twitter feed commenting on how strange it was that the parties have switched places. The Republicans hadn’t even mentioned the wars or the veterans; as conservative Ramesh Ponnuru tweeted , “Really was malpractice, and wrong, for Romney not to mention troops in Iraq, Afghanistan in convention speech.” And so for a night the Democrats became the party of LBJ again, the party of a strong military and uncompromising attack. By the time Joe Biden trotted out his bumper sticker line, “Osama bin Laden is dead and General Motors is alive!” the crowd chanted it with him. How strange was that: a crowd of Democrats cheering for someone’s head on a plate, and for a business bailout? Don’t get me wrong; I understand that both absolutely had to...

Second Night of the DNC: TV and Twitter Review

The early part of last night’s DNC TV show couldn’t match Tuesday night. As I wrote yesterday, that first night rocked out over the body issues: health care for all, equal pay for women, open LGBT military service, repro rights, equal marriage laws—the human values of doing unto others as you would have them do unto you. The speakers preached, and the crowd roared. The night was, as Robert Kuttner writes, a full-on embrace of the social issues that the Republicans have been attacking for decades. You hate homos? We love them! You think women are lying sluts? We believe in women’s integrity! It was awe-inspiring and energizing. Last night’s implicit theme was It’s The Economy, Stupid. Union dudes and CEOs stood up and explained—well, I couldn’t tell you what they explained, exactly, because one after another, they were so boring that my eyes rolled to the back of my head and my wife insisted that we turn it down the volume to “inaudible hum.” As Molly Ball (@mollyesque) tweeted, “The...

Foreclosure Free-For-All

The CFPB is getting resistance from its allies on proposed mortgage policies. 

(AP Photo/David J. Phillip, File)
It's almost four years since the economy cratered, yet 11 million homes—accounting for 23 percent of all outstanding mortgages— remain underwater. The Obama administration's efforts to shore up the housing market by offering incentives for refinancing, rather than the government directly purchasing loans, has been an utter failure ; countless homeowners have been left desperately negotiating with their lenders to modify the terms of their loan and more often than not, being tossed onto the street by mortgage servicers. Servicers are the companies that process mortgage payments; they're also the point of contact should something go amiss, resolving a defaulted mortgage by either restructuring the loan or beginning foreclosure proceedings. During normal times, servicers could better handle the requests of an occasional delinquent borrower. When the avalanche fell in 2009 and a massive pool of customers could no longer make the monthly payments, the incentives shifted, often pushing...

Where’s William Jennings Bryan When You Need Him?

(AP Photo)
The Financial Times is reporting that the Republican platform to be unveiled in Tampa next week calls for establishing a commission to examine whether the United States should go back on the gold standard. The theory behind this antiquarian fantasy, much loved by Ron Paul and his cult, is that by de-linking the dollar from the value of gold—a move begun by President Franklin Roosevelt in 1933 and completed by President Richard Nixon in 1971—America’s leaders have debased our currency and loosed the genies of inflation, since the Federal Reserve can print as many dollars as it likes. It’s a curious time to call for a reversion to gold, but then virtually nothing in the Republican platform speaks to the America of today. For one thing, America hasn’t had a real bout of inflation since the 1970s, and in recent years, inflation has been nowhere to be found. Second, the dollar has never been stronger. The world’s investors have flocked to buy dollars in recent years. The interest payments...

“Fewer, Poorer, Gloomier”

Another day, another survey charting the decline of the American middle class. Yesterday, the Pew Research Center weighed in with “The Lost Decade of the Middle Class,” to which they appended the kicker, “Fewer, Poorer, Gloomier.” The median net worth of the middle-tier households (Pew defines “middle-tier” as households whose income is between two-thirds and twice the national median) declined from $152,950 in 2007 to $93,150 in 2010, reflecting the sharp loss in home value. Taking the longer view, people in the middle tier made 62 percent of all the household income in the United States in 1970, but just 45 percent in 2010. Middle tiersters didn’t lose to the lower tier, whose share of the national income also declined, from 10 percent to 9 percent. They lost it to the upper tier (who else?), whose share of national income rose from 29 percent to 46 percent. It’s not so much the bottom but the middle that’s fallen out of the economy. But be of good cheer. On Wednesday, the same day...

Five Things Government Does Better Than You Do

We know a lot less about how to manage money than we think.

(Flickr / Sheffield Tiger)
When Wisconsin Congressman Paul Ryan and other hard-line conservatives talk about cutting the government’s budget, their primary rationale is that individuals can make better decisions with their own money than the government can. As Ryan himself said to an audience at Georgetown University, “We put our trust in people, not in government. Our budget incorporates subsidiarity by returning power to individuals, to families and to communities.” It sounds reasonable—of course we want individuals to have power, and of course we want communities to take care of their neediest members. And since conservatives have done a fine job of portraying the government as full of heartless, inept bureaucrats, allowing people to make their own decisions sounds better than the alternative. The conservative approach to government stems from a basic tenet of free-market economics: that people always act rationally to maximize their own benefits, and that from this rises a general state of well-being for...

Corn, Corn Everywhere, But Not a Bite to Eat

(AP Photo/Danny Johnston)
(AP Photo/Carolyn Kaster) President Barack Obama and Agriculture Secretary Tom Vilsack, right, inspect drought damaged corn on the McIntosh farm with members of the McIntosh family including Don McIntosh, third from right, Monday, Aug. 13, 2012, in Missouri Valley, Iowa, during a three day campaign bus tour through Iowa. L ast week, the United States Department of Agriculture released a report on the state of the country’s corn, and the verdict is not good. The report—the first that estimates production based on surveying the fields of U.S. farmers—shows that farmers are on track to produce 10.8 billion bushels of corn this year, a 17 percent drop from last year. This summer’s drought has parched King Corn: some ears have only a few sweet kernels to offer, others droop, brown and defeated. 10.8 billion bushels is still a lot of corn. The USDA report notes that this year’s harvest could be the smallest since 2006. What it doesn’t point out is there are only two years in U.S. history...

Obama's European Socialist Empire

(AP Photo/Haraz N. Ghanbari, File)
It has been a long time since Europe has featured so prominently in an American presidential race. Republicans, in particular, have seen the crisis plaguing the Eurozone as an opportunity to attack president Obama, who—they claim—is leading America away from its core values and towards the sickly collectivism prevalent in the European Union. Mitt Romney, in one of those hilarious-but-horrifying Republican debates last September, spoke of a president “taking his inspiration […] from the socialist democrats in Europe," before pointing out that he, in contrast, believed in America. His vice-presidential pick, Paul Ryan, was complaining to the New Yorker’s Ryan Lizza about the lurch towards a European style of government in March 2009, before the crisis in Greece had begun, and has continued invoking the frightening specter of the Europeanization of American as the Eurozone’s woes have deepened. It is well known that political campaigns leave little room for facts and sober analysis. I...

Too Long, Didn't Read My Rights

A new website helps consumers understand legal agreements

(Flickr/farouq_taj)
I'm not a huge fan of the internet acronym tl;dr. For those who are unaware, it stands for "too long; didn't read." As someone who writes long features for a magazine, I like to think readers will read a longer piece of writing if it is properly engaging. However, there is one form of writing that certainly doesn't meet that standard: terms-of-service agreements. Sure, you'll likely page through the agreements for longer, seemingly weightier agreements like mortgages and credit cards. But what about the daily legal pacts you sign as a matter of course? Want to buy something from the iTunes store? You'll have to wade through over 15,000 words of legalese. Even then, should you want to download an app for your iPhone, you'll need to consent to yet another agreement. Most consumers agree to these without bothering to read the handful of clauses in which they sign away the bulk of their legal rights. Thankfully, a new website is crowdsourcing the task of translating complex lawyer speak...

Who Said Women Can Have It All?

Remember that Anne-Marie Slaughter article in The Atlantic about a month and a half ago, whose title—"Why Women Still Can't Have It All"—drove feminists bonkers, while the substance nevertheless rang true for roughly 70 gazillion working parents in this country who are doing the impossible every single day? Rebecca Traister proposed forever retiring the phrase " having it all " here, and I chastised the magazine for the framing. But the article's core idea was right, as I wrote at the time: She’s right about this core truth: Being both a good parent and an all-out professional cannot be done the way we currently run our educational and work systems . When I talk to friends who’ve just had children, here’s what I tell them: Being a working parent in our society is structurally impossible. It can’t be done right, so don’t blame yourself when you’re failing. You’ll always be failing at something—as a spouse, as a parent, as a worker. Just get used to that feeling. Slaughter’s entire...

Bracing for a Hit from Europe

(Flickr/Juan Carlos García Lorenzo)
It may be the peak of vacation season in Europe, but the continent’s fiscal crisis has not taken a break. Last week, Wolfgang Schäuble, the powerful German finance minister, took time out from his holiday to have a sit-down with his American counterpart, Tim Geithner, in the North Sea island of Sylt. The last-minute meeting was organized at Geithner’s request. Less than a hundred days from the U.S. presidential election, it highlighted—as if more evidence were necessary—the Obama administration’s concern about how developments in the Eurozone could affect the vote come November 6. The crisis calendar between now and then is certainly packed; if a week is a long time in politics, three months is an eternity in economics. Below, the Prospect sketches out a road-map of the pitfalls ahead. Greece We start, unsurprisingly, in Greece. The recently elected coalition government there is putting the final touches on a new austerity program—a condition for its second bailout. The program calls...

Four Things to Know About the July Jobs Report

(Wools/Flickr/Creative Commons)
Today is the first Friday of a new month ( i.e. , Christmas for wonks and political junkies), which means the Bureau of Labor Statistics (BLS) has released its monthly report on employment . The economy created 163,000 net jobs in July, an increase over projections—which hovered around 100,000 —and a substantial increase over June, when the economy added a scant 80,000 jobs. The unemployment rate remains unchanged at 8.25 percent (up from 8.21), but was rounded up to 8.3 percent for the purposes of the report. This isn’t a good number—a more rapid recovery would require up to 300,000 jobs a month—but it is a sign that the United States is not about to fall into another recession. Beyond the topline number, here are a few key things to take away from this month’s report. The revisions were … meh : The BLS revises its job statistics as it gets more accurate information. Today, job growth for May was revised from 77,000 to 87,000, but job growth for June—the most abysmal month of the...

Team Obama Flanks Romney on Taxes

This morning, the Obama campaign came out swinging against Mitt Romney’s tax plan, which will raise taxes on 95 percent of households, according to the Tax Policy Center . Here’s the ad: The Romney campaign has pushed back, accusing the Center of bias—one of its analysts has ties to the Obama White House—but that ignores the extent to which the Center was quite generous in its evaluation of Romney’s plan. They assume a world where Romney cuts tax incentives for the rich—including the charitable giving deduction—and ends all deductions for any income over $200,000. They also assume that the plan will generate economic growth, providing funds to offset the cost of the tax cuts that form the centerpiece of the plan. But these implausibly optimistic assumptions aren’t enough to square the circle of Romney’s tax plan. The only way Romney can keep the Bush tax cuts, cut taxes by 20 percent on top of that, and keep revenue at its current level is to borrow huge sums of money or raise taxes...

Romney's Economic Plan: Dubya 2.0

Mitt Romney's chief economic adviser.
I'll be honest: There are a few things about Mitt Romney that I find annoying. One of the biggest has to be that there is probably no sentence he has repeated more often in this campaign than "I know how the economy works," but he never actually explains what he knows that nobody else does, or how that hard-won knowledge translates into a unique set of policy moves that only he could bring about and that would pull America from its economic doldrums. There are really two sets of questions that absolutely must be asked of Romney in the area of economics, given the rationale he offers for his candidacy. The first is, "What specifically did you learn as a businessman that policymakers haven't known up until now?" As far as I know, he has only been asked this question once, and the result wasn't encouraging. (After repeating over and over that he "understands how the economy works," Romney finally allowed that businesses spend money on energy, so if energy were cheaper, they'd have more...

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