Economy

Economic Hearts and Minds

Image from Obama ad; Obama campaigning.
The term "hot button issue" first appeared in the mid-1980s, but came into common usage during the 1988 presidential campaign, when the nation soberly contemplated such questions as whether Michael Dukakis was planning to unleash a horde of dusky criminals to prey upon our precious white women. Alas, this year's campaign is nearly devoid of hot buttons for the candidates to push. God? Mitt Romney is the last person who wants to talk about religion. Guns? The Obama administration has done nothing to restrict their ownership, and the NRA's fevered warnings of government confiscating your weapons grow ridiculous even to gun owners themselves. Gays? Just a month and a half after President Obama surprised almost no one by announcing his support for marriage equality, Republicans haven't bothered to make it an issue, probably because they understand that the public has little taste for their past demagoguery. So aside from the occasional temporary flare-up over things like contraception or...

The State of the Economic Debate

Gallup
Today, President Obama is going to roll out a new speech laying out his case on the economy. From the previews , it looks to be a contrast between what the economy will look like in a second Obama term, and what it will look like in a first Romney term. Essentially, he'll be trying to make this a "choice" election instead of a "referendum" election. Which is exactly what it should be. After all, we wouldn't be replacing something with nothing if we elected Mitt Romney, we'd be replacing something with something very, very different. And as I'm sure Obama will argue today, we have some experience with what Mitt Romney is proposing. Obama will characterize Romney's policies as "exactly what got us into this mess" or some such, but you don't even have to tar him with the 2008 catastrophe to make the case. As I've asked before , if the entire rationale for Mitt Romney's candidacy is that his business experience gives him such unique insight into the workings of the economy, why is it that...

Europe’s Tragic Farce

(AP Photo/Daniel Ochoa de Olza)
(AP Photo/Daniel Ochoa de Olza) Spain's Prime Minister Mariano Rajoy leaves after a control session at the Spanish Parliament, in Madrid, Wednesday, June 13, 2012. The interest rate Spain would have to pay to raise money on the world's bond markets continued to rise Wednesday amid worries that a planned bank bailout might not be enough to save the country from needing an overall financial rescue. Europe’s top politicians, led by German Chancellor Angela Merkel, seem determined to repeat the same mistakes over and over again. Last weekend, the financial crisis seemed to be contained for the moment when the Germans and the European Central Bank agreed to commit 100 billion euros through the European Union’s (E.U.) rescue funds to recapitalize Spain’s faltering banking system. The Spanish government bargained hard, and won an agreement that the bailout would not be tied to new austerity demands of the sort imposed on Greece and Portugal. But as more details emerge, it’s clear that the...

FineGaffeGate!

President Obama says something horrible.
If you don't follow a bunch of conservatives on Twitter, you may have missed the fact that in a press conference this morning, Barack Obama said the most horrific thing any president has ever said, an extemporaneous utterance so mind-boggling, so vile, so earth-shatteringly awful that it will forever transform the way all Americans look at him and make it plain that he should not be re-elected. What was it? "You know, Hitler had some good ideas," perhaps? "I saw Milli Vanilli on tour three times and every show was awesome"? No such luck. Behold: We've created 4.3 million jobs over the past 27 months. The private sector is doing fine. Where we're seeing problems is with state and local government, often with cuts initiated by governors or mayors who are not getting the kind of help they're accustomed to from the federal government. Madre de dios! Sacre bleu! Holy crap! If you said that this would make Mitt Romney very fake-indignant, you'd be right . "Is he really that out of touch?,"...

Germany's Tightrope Act

BERLIN —Germany, uniquely, is prospering while the rest of Europe sinks deeper into recession. And the recession is substantially the result of the very austerity that Chancellor Angela Merkel is imposing on the other member nations of the European Union. Why is Germany spared? One good reason and two bad ones. The good reason is that Germany promotes manufacturing, with sensible training and technology policies. Its industries have partnerships with effective unions. So Germany’s huge export surplus means that it can have tight budget policies at home and still have plenty of good jobs. A bad reason is that the same euro that is overvalued for Greece is undervalued for Germany. So Germany benefits from a tacit subsidy—an artificially cheap currency, which makes its exports cheap. The second bad reason is that as capital flees from weak economies, it comes to Germany, leaving Germans with artificially low interest rates—another subsidy at the expense of its neighbors. But even Germany...

Sabotage Makes Sense!

Over at Talking Points Memo, Sahil Kapur reports that Senate Majority Leader Harry Reid has pulled the “sabotage” card on his House counterpart, Eric Cantor: “You have heard, as I’ve heard, that there’s a battle going on between Cantor and [House Speaker John] Boehner as to whether or not there should be a [highway] bill,” Reid told reporters. “Cantor, of course — I’m told by others that he wants to not do a bill to make the economy worse, because he feels that’s better for them. I hope that’s not true.” Cantor’s office made a speedy response, calling the charge “ridiculous and patently false,” and John Boehner’s office was even more succinct: “That’s bullshit,” said his spokesman Michael Steel. It’s impossible to know whether Republicans have a strategy to sabotage the economy ahead of the election, but it’s hard to fault Democrats for their suspicions. Not only is the GOP obstinate on the question of stimulus—despite wide agreement among economists that the economy needs an...

What's Next for Economic Policy?

Today's Balance Sheet

It's three days after the dismal May jobs report, and now that politicians are done trying to frame those 69,000 jobs added in their favor, it's time for them to figure our how to get the economic ball rolling again . Although the Federal Reserve has doggedly refused to change course lately, the new jobs numbers may force the institution into action—actions Fed Chair Ben Bernanke may unveil when he testifies in front of Congress on Thursday. One of the most foreboding things weighing on the United States' recovery is the euro crisis, which could be sent roiling if the Greek elections in two weeks bring in a coalition dead-set on opposing German chancellor Angela Merkel's iron-clad austerity policies. Regardless of what happens in the near future, the economy does not seem likely to get out of its funk pre-November, which means high unemployment and a dicey market at least until 2013—and a close presidential election. The Latest Congress Sets its Sights on Conventions POLITICO...

Our Most Widely Ignored Public Intellectuals

Why don't those in power listen to economists Joseph Stiglitz and Paul Krugman?

(Flickr/World Economic Forum/Taekwonweirdo)
A prophet, says the Bible, is not without honor save in his own country. As the most prestigious economic dissenters of this era, Joseph Stiglitz and Paul Krugman form a category of two: astonishingly prescient, widely read, and largely ignored by those in power. Both won Nobel Prizes for their early virtuoso technical economic work. Stiglitz’s research, starting in the late 1960s, showed that markets do not follow the standard economic model of efficient competition, because a buyer or seller often has access to privileged information. Stiglitz enriched the well-established idea that transactions have hidden costs or benefits to the wider society. These “externalities,” he demonstrated, are not exceptional but pervasive. This insight applied particularly to the environment, where transactions are so often free to the polluter and costly to the planet. Krugman, in the late 1970s, did pioneering research challenging the orthodox conception of international trade. Where most economists...

A Gun to the Debt-Ceiling Fight

(Flickr/zieak)
If Barack Obama turns out to be a one-term president, historians may mark the summer of 2011 as the moment his failure became inevitable. At that point, the new right-wing Republican House majority declared the national debt hostage and demanded Obama’s surrender to them on all points of domestic policy. When the debt-ceiling statute required authorization of a new federal borrowing limit, they refused to vote on the measure without massive cuts in federal spending and no increase in federal revenue. The crisis was averted by the appointment of an idiotic congressional “supercommittee” that was supposed to identify future cuts, matched with a set of “automatic” cuts that were to take effect if the “supercommittee” failed to come up with a compromise aimed at reducing federal debt. Not surprisingly, the “supercommittee”—perhaps better known as the “Clark Kent committee”—was unable to produce a compromise. The debt showdown, which paralyzed Washington for much of spring and early summer...

Oh, the Humanity!

(Recuerdos de Pandora/Flickr)
For the past two years, there has been a pattern to the country’s job growth: the economy speeds up in the winter, cruises through the spring, and slows down as summer approaches. For 2012, it seems that we’re on track for the same ride. The strong gains of January and February gave way to the moderate gains of March and April, which have completely dissipated with the latest jobs report . In May, the economy created 69,000 jobs, and unemployment rose slightly to 8.2 percent. This bleak picture becomes much worse when you include revisions. The Bureau of Labor Statistics revised March job growth from 154,000 to 143,000, and April growth from 115,000 to 77,000. Altogether then, the economy grew by a scant 20,000 jobs in May. On Twitter yesterday, New York Times writer David Leonhardt said that it would be “disappointing” to see job growth below 150,000. This jobs report is beyond disappointing—it’s a disaster. Obviously, this has political implications, and none of them are good for...

How the Attack on Massachusetts Could Backfire

This morning, the Obama campaign released its first video on Mitt Romney’s tenure as governor of Massachusetts: There are a few obvious problems with this line of attack. Even with its fiscal problems and slow job growth, Massachusetts wasn’t a terrible place to live under the Romney administration. The point is to show that Romney is offering the same “robotic” line to voters, but how does that resonate when few people associate Massachusetts with “bad governance?” The big problem for this attack is health care reform. Not only was Romney’s health care bill the signature accomplishment of his administration, but it formed the basis for the Affordable Care Act, which may become the signature accomplishment of President Obama’s administration. Romneycare remains popular with Massachusetts voters, and it’s a genuine achievement for the Republican nominee, even if he can’t present it as an asset in his campaign. By attacking Romney’s tenure, the Obama campaign could put itself in the odd...

The Austerity Experiment

(Press Association via AP Images)
BRUSSELS—Depending on whose narrative you believe, the deepening economic crisis in Greece proves (a) that the dysfunctional and dissolute Greeks just couldn’t get their act together and keep the reform commitments that they made in exchange for debt relief from the European authorities; or (b) it only proves that austerity breeds more austerity. Cut public spending and wages, and raise taxes in a recession, and you just dig yourself a deeper hole. Since only about 20 percent of the Greek economy is exports and less than 40 percent of export costs are wages, slashing wages just doesn’t produce much of a bounce, especially when the rest of Europe’s economy is contracting too. Greece is a lousy test of the austerity-as-cure hypothesis, because left, right, and center agree that Greece has an encrusted system. When I recently interviewed former Prime Minister George Papandreou, he referred to Greece as a “clientist” state—meaning government by crony constituency. When the right governs,...

It's Hard Out There For a Billionaire

Not an actual billionaire. (Flickr/Rainforest Action Network)
Is there a group of people you can think of who have thinner skin than America's multi-millionaires and billionaires? Wall Street titans have been whining for a couple of years now about the horror of people in politics criticizing ineffective banking regulations and the favorable tax treatment so many wealthy people receive (you may remember the time when hedge fund billionaire Steven Schwarzman said that President Obama suggesting that we eliminate the "carried interest loophole," which allows hedge fund managers to pay taxes at only the 15 percent capital gains rate instead of standard income tax rates, was "like when Hitler invaded Poland in 1939"). America's barons feel assaulted, victimized, wounded in ways that not even a bracing ride to your Hamptons estate in your new Porsche 911 can salve. And now that the presidential campaign is in full swing, their tender feelings are being hurt left and right. David Weigel points us to this remarkable video , in which someone at the...

Housing Stuck in Neutral

Today's Balance Sheet

Housing prices fell again in March—but barely—stirring hopes that perhaps the market may finally be on the rebound. “We’ve turned the corner,” said Scott Brown, chief economist at Raymond James & Associates. “This was always going to be a very gradual process. No one expected a real sharp housing recovery.” Prices fell 0.03 percent in March, according to the S&P/Case-Shiller 20-city home-price index; adjusting for seasonal factors, prices have risen 0.09 percent. The National Association of Realtors reported last week that sales were up 3.4 percent from April. However, consumers are still exercising caution. A consumer-confidence survey released by a business-research firm shows that confidence in the housing market dropped to a four-month low of 64.9 in May. The Case-Shiller's index of the top ten metropolitan areas was down 2.8 percent from the year prior. The Latest GOP Groups Plan $1 Billion Blitz POLITICO Worries About Spain Weigh on Euro Zone The New York Times Job...

Could Romney Be the Real "Job Creator" in this Election?

(Jamelle Bouie/The American Prospect)
After last week’s fight over Bain Capital, the Romney campaign is returning to safer ground with a renewed attack on Obama’s handling of the economy: “President Obama has never managed anything other than his own personal narrative. He has never created a job and never run a business. President Obama not only doesn’t understand the economy - he also opposes the free-market principles that built it. His policies have prevented businesses from growing, thriving, and creating jobs, and he has no plans to change course.” Of course, knowledge of “job creation” has almost nothing to do with experience in business—Bill Clinton spent his entire life in government and George W. Bush had an MBA, but the former presided over a period of immense job creation, while the latter led the country through a decade of stagnant job growth. Likewise, Obama’s inexperience with the private sector hasn’t stopped his administration from presiding over 4.25 million new private sector jobs , a huge improvement...

Pages