Economy

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...

Euro in the Balance ... Still

Today's Balance Sheet

Finance ministers from the 17 eurozone countries agreed this week that it's time to make contingency plans in case Greece drops out. While some leaders—like new French President François Hollande—have floated offering eurobonds to struggling member states like Greece and Spain, German Chancellor Angela Merkel is standing her ground. "We want Greece to remain in the eurozone," Merkel said after yesterday's European Union summit. "But the precondition is that Greece upholds the commitments it has made." All eyes are on June 17 now, when Greece's next round of elections will occur. If the left-wing parties solidify the gains they made in the last election and a firm legislative rejection of the eurozone bailout plan is the result, it is hard to imagine an outcome not ending with a Greek exit from the currency. Currently, the top left-wing and conservative party are neck-and-neck in the polls. For now, the European leaders haven't made any firm decisions on eurobonds or other potential...

The Issue Europe Won’t Face

(Flickr/Davide Olivia)
Europe’s leaders emerged far apart at their summit dinner in Brussels Wednesday night. They could not even agree on relatively easy measures to contain the escalating crisis, such as Eurobonds or a greater role for the European Central Bank (ECB). But at the core of the crisis is an issue that Europe’s leaders are even more reluctant to take on—the ease with which hedge funds and other speculators can drive a small economy into the ground. When the socialist government of George Papandreou took office in 2009, his people soon found that basic statistics had been fudged by its predecessor conservative government, and that Greek debt was higher than previously reported. But the Greek economy was still in relatively decent shape. A downgrade by credit rating agencies ensued, followed by massive speculation against Greek bonds by outfits like Goldman Sachs and Deutsche Bank as well as hedge funds. “Spreads”—the difference between Greek government borrowing costs and those of Germany—...

Romney's Promises to Lower Unemployment to 6 Percent. It's Not Impressive

(Jamelle Bouie/The American Prospect)
In an interview with Time ’s Mark Halperin today, Mitt Romney elaborates on his goals for economic growth in his first term. In particular, he hopes to see an unemployment rate of six percent: I can’t possibly predict precisely what the unemployment rate will be at the end of one year. I can tell you that over a period of four years, by virtue of the policies that we put in place, we’d get the unemployment rate down to 6 percent and perhaps a little lower. It depends in part upon the rate of growth of the globe, as well as what we’re seeing in the United States. This is far more realistic than the 4-percent projection of last month, but it’s still a little disingenuous. Romney tells Halperin that he hopes to get to 6 percent unemployment with his policies, a nod to his claim that tax and budget cuts will stimulate the economy and generate economic growth. But the fact of the matter is that under the current baseline, according to the Congressional Budget Office , unemployment will...

Merkel in the Minority

(Flickr / Environment Blog)
ATHENS —The European austerity caucus led by German Chancellor Angela Merkel is coming apart, but Germany retains the power to block the newly forming coalition for growth as a solution to the eurozone crisis. Tonight’s summit dinner in Brussels is unlikely to produce a breakthrough. But what a difference an election makes. Since Francois Hollande was elected President of France less than three weeks ago, leaders that had been bullied into siding with the Germans are breaking loose. Here in Greece, reckless talk by leaders of the European Central Bank that they might not back Greek banks if Greece tried to walk away from the terms of the austerity deal led to runs on Greek banks. Greek citizens lined up at ATM machines to convert their savings to cash before Greece was pushed out of the euro. Last week, that loose talk ended. ATM machines are quiet. The ECB promised that it would get some $25 billion euros to the banks, more than the amount that had been withdrawn in panic. Greek...

Fear the Reaper

Today's Balance Sheet

Unless Congress and the White House work together to manage the budget sequestration and tax hikes scheduled for the end of the year, the economy could plummet into a mild recession—growth contracting by an estimated annual rate of 1.3 percent— according to the Congressional Budget Office. If all the spending cuts and tax hikes are canceled, the economy will likely grow by 4.4 percent, and two million jobs will be added. "The idea of piling another recession on top of such a slow and incomplete recovery is quite horrifying from the standpoint of the well being of average families in this country," said William Galston at the Brookings Institution. "It would be unconscionable to permit that to happen if there were obvious policy alternatives." Complicating the impending negotiations is the debt ceiling, which Republicans say they are unwilling to raise without spending cuts, and which will need to be dealt with at the end of the year as well. The CBO also said that although next year...

Who Will Save the Middle Class?

Liberals must face the stark truth: Both parties have agreed to sacrifice the middle.

(Tim Bower)
I n the eyes of most of the world and in our own, to be an American is to be an optimist—entrepreneurial, positive-thinking, and future-oriented. It is not surprising, then, that our politics has not come to grips with the question of national decline. Yes, our governing elites have long debated America’s power in the world and whether it’s eroding. But about the future of Americans , as opposed to the future of the geopolitical hegemon, America, our most important politicians and pundits have much less to say. Despite the bitter public arguments over tax and budget policies, they share the implicit assumption that even harder times are ahead for the majority of Americans—if not 99 percent then at least 75 percent to 80 percent. But doom and gloom does not play well in American politics. So, whenever our policymakers cannot avoid the word “sacrifice,” it is gingerly presented as a temporary inconvenience, to someone other than the listener, necessary to rebalance the government’s...

Time for a Financial Transaction Tax

Despite the Camp David G8 summit’s support for a shift from austerity to growth, there is no agreement among major western leaders on what growth requires. Here is an idea whose time has come: a Financial Transactions Tax. The tax would do two things urgently required by the crisis. It would take some of the profit out of the pure speculation that has created such hardship for countries like Greece, Portugal, Spain, and Ireland whose economies have already been pummeled by recession and by perverse demands for belt tightening. And a tax on financial trades could raise some serious revenue, which could be put back into green investment and other forms of economic stimulus to help the economies of Europe revive. This week is crucial for the fate of the FTT. Europe’s leaders are gathering for an emergency growth summit in Brussels. And the European Parliament will be debating a report from its Economic and Monetary Affairs committee, which has recommended enactment of such a tax. The...

Will Round Two Knock Out Greece?

The ailing country prepares for another round of elections as talk of leaving the Eurozone escalates.

(AP Photo/Kostas Tsironis)
Consistent in its suicidal tendencies, the Greek political system failed this week to come to an agreement on forming a coalition government. The leaders of Greece’s political parties—as we know from the published minutes of the meetings with the President of the Republic—showed themselves, with one or two dignified exceptions, tragically unable to rise to the occasion. New elections have now been called. The outcome on June 17, or even the mounting uncertainty of the pre-election period itself, could spell the end of Greece’s membership of the euro. Two factors determined the inability to form a government after the May 6 election. The first was the sharp rebuke to the two (formerly) major parties, New Democracy and PASOK, who lost nearly 60 percent of their combined voting share and were thus, even in tandem, two seats short of an absolute majority in parliament. The second was the unwillingness of the parties of the non-communist Left—SYRIZA and the Democratic Left—to enter into a...

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