Economy

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. Meeting the media, Romney may mention his old friendship with Benjamin Netanyahu, which dates back to the time when the two of them, fresh from business school, worked at the Boston Consulting Group. Journalists will dutifully ask him and Netanyahu about Iran, ignoring the fact that Israel has an economy and that running it is Netanyahu's passion. This is a shame, because Israel can be seen as a laboratory where tests have been conducted in managing a country as if Bain Capital had bought it — and the lab results aren't pretty. To be fair, the Israeli government has followed free-market orthodoxy since the...

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)
N ot 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. That he could graduate high school, and if he didn’t want to go to college or join the military, he could just stay put and make a decent living in one of the smoke-belching steel mills that ringed the city and provided paychecks to...

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)
(AP Photo/Philippos Christou) A woman passes by a branch of Bank of Cyprus in central Nicosia, Cyprus, Thursday, June 28, 2012. Cyprus became the fifth eurozone country this week to ask for a bailout from its partners in the currency union in order to prop up its Greece-exposed banks and flagging economy. Officials from the European Commission, the European Central Bank and the International Monetary Fund will begin assessing next week how much bailout money Cyprus will need. 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...

Tax Reform Silliness

Flickr/401K 2012
Barack Obama did a bunch of big things in his first term—passed health care reform and ended the war in Iraq, most notably. If he wants to do something big domestically in his second term (especially since he seems to have lost any inclination to do anything about climate change), one natural area to try would be tax reform. It might actually be possible to arrive at something both Democrats and Republicans could live with, if we put aside Republicans' desire to make sure he never accomplishes anything, ever (which will continue into his second term). Republicans already have their own tax plan, which lays out some goodies they'll give people (especially wealthy people, you'll be shocked to learn) while conveniently avoiding any specificity on how the goodies will be paid for. Some analyses have been done on the Republicans' plan, and they don't look too good : The tax reform plan that House Republicans have advanced would sharply cut taxes for the wealthiest Americans and could leave...

Welfare for the Wealthy

When conservatives rail against redistribution, it’s important to understand what they mean by the term. It’s not that they are opposed to removing resources from one sector of the economy and moving them to another, but that they’re opposed to taxing funds from rich people, and directing them toward the poor. If you go from the other direction, taxing money from ordinary Americans and giving it to the rich, then there isn’t a problem. To wit, the budget of GOP wunderkind Paul Ryan—which calls for big tax cuts, small deductions, and severe spending cuts—would raise middle-class taxes, and give a huge break to the wealthiest Americans. The Washington Post reports : The tax reform plan that House Republicans have advanced would sharply cut taxes for the wealthiest Americans and could leave middle-class households facing much larger tax bills, according to a new analysis set to be released Wednesday. […] The net result: Married couples in that income range would pay an additional $2,700...

A Paralyzed G-20

(AP Photo/Andres Leighton) France's President François Hollande smiles at the end of a news conference at the G-20 summit in Los Cabos, Mexico, Tuesday, June 19, 2012. All the bland platitudes coming out of the Group of 20 Meeting in Mexico can’t disguise the absence of progress on the European crisis. German Chancellor Angela Merkel is totally dug in on the proposition that Greece, Portugal, and Spain need to stick to the austerity medicine that will only deepen the collapse and embolden more speculative attacks on government bonds. President Obama has just about no leverage in this situation. On Monday, the European Commission President, Jose Barroso, a conservative former Portuguese prime minister, and close Merkel ally, broke his diplomatic cool and declared that he was in no mood to be lectured by Americans on what Europe needed to do to restore growth. This crisis was not originated in Europe," Barroso said. "This crisis was originated in North America. Many in our financial...

School for Success

Capital Idea, an innovative long-term job-training program in Austin, helps lift the working poor out of poverty.

(Patrick Michels) Maria Mora discusses class and work options with a student preparing for summer term. S tudents trail into the Austin Community College classroom in ones and twos, taking seats in pale plastic chairs behind long narrow tables. Some wear scrubs, fresh from shifts at the hospital, while others are in street clothes. A few are middle-aged, but most are in their late twenties or early thirties. The only man in the room wears shoes so battered the soles have almost separated. It’s just days before spring exams begin, and a few of the students discuss an upcoming test. “What kind of math is it?” “It’s easy conversions. How many ounces in a cup and stuff like that.” “They don’t let you use calculators. The first time I didn’t pass for three points, because I didn’t have time to finish.” “If you study your stuff, you’ll get it.” It sounds like any pre-exam college conversation. But not long ago, many of these students could not do high school–level work. Now these working-...

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...

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