Economy

“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...

The Caped Crusader of the Executive Branch

What is the CFPB, and why should you care? 

(Flickr/401(K) 2012)
SEC. FTC. DOD. DOJ. OCC. HHS. FAA. EEOC. OPM. CFTC. CPSC. CFPB. To most sane people, they probably recall a poor combination of letters during a game of Words With Friends. For demented Beltway minds, however, each string of letters carries specific connotations in the vast alphabet soup of the federal bureaucracy. Most operate outside the notice of the rest of the country, quietly protecting our financial markets, inspecting the cars we buy, or upholding labor standards. But that last acronym will climb atop the pile and enter the popular vernacular in the near future. The Consumer Financial Protection Bureau (CFPB, per D.C. shorthand) celebrated its one-year anniversary on Saturday. Depending on the outcome of the presidential election, the agency could grow into one of the most public and popular arms of the federal bureaucracy—or wither away into irrelevance. Did you forget to blow out a candle for its first birthday this past weekend? Fear not, the Prospect has you covered. I’ll...

The LIBOR Scandal's Lies

While regulators should have done more, it’s the banks that must be punished for their manipulation of interest rates.

(Flickr/Hugeword Picture)
The days between the Fourth of July and Bastille Day on the 14th are known for fireworks on both sides of the Atlantic. This year, more rockets and firecrackers than usual were going off, but they were inside hearing rooms in the British Parliament and the U.S. Congress. Barclays bank announced that it had been fined more than $450 million by regulators from both countries, and its CEO, Robert E. Diamond Jr., and COO, Jerry del Missier, both resigned. The fines were part of a settlement that granted Barclays immunity from potentially worse punishment for its manipulation of interest rates. The press reported that 10 to 12 other large banks (including HSBC, Citigroup, and JPMorgan Chase) were also under investigation. The big financial scandal of July 2012, or at least its first half, involves manipulation of the London Interbank Offered Rate, or LIBOR. The press has used a variety of estimates of the impact of LIBOR, ranging as high as $500 trillion (the Bank of England estimate) to $...

Romney's Counterproductive European Tour

Next week, the Washington Post reports , Mitt Romney is taking a break from the campaign at home to meet with leaders abroad: Mitt Romney plans to depart next week for a visit to Britain, Israel and Poland, and the Republican presidential candidate hopes the trip will help him project the aura of a statesman and signal to voters back home that he would make a plausible commander in chief. He will listen to leaders of important U.S. allies, make symbolic appearances at historical sites and build personal relationships. He plans to meet with British Prime Minister David Cameron at 10 Downing St. and catch up with Israeli Prime Minister Benjamin Netanyahu, an old friend from their days as business consultants, while aides are preparing speeches for him to give in Israel and Poland. I continue to doubt the utility of this trip. Few Americans are dissatisfied with Barack Obama’s foreign policy, and few want—or need—Romney to articulate an alternative. Romney should take advantage of this...

What Romney Needs Is a Bad Economy

Given the numbers, Ross Douthat argues , Mitt Romney isn’t far away from where Ronald Reagan was in 1980, or Bill Clinton in 1992: The last two times an incumbent president was defeated by a challenger – Jimmy Carter in 1980 and George Bush in 1992 – the hinge moment arrived only in the last few months of the campaign. In 1980, it came after the lone debate, when Ronald Reagan’s smooth, reassuring performance turned a tight race into a walkover. In 1992, it arrived with the Democratic Convention, when the one-two punch of Ross Perot’s temporary exit and the Clinton campaign’s skillful “place called Hope” showmanship propelled Bill Clinton to a lead he never relinquished. In other words, if Romney can assuage voter concerns—and show that he is a competent alternative—then he can capture discontented voters and surge ahead. The problem, Douthat argues, is that Romney lacks a positive message, or anything that would show voters that he isn’t the heartless corporate raider described by...

Out of Work, Out of Luck

MIT Press
Back to Full Employment , by Robert Pollin. A Boston Review Book. The M.I.T. Press. 187 pages. $14.95 Achieving full employment has been at the center of the progressive project for more than a century. If work is available at decent wages for everyone who wants it, then the rest of the agenda is a lot easier. Opportunity proliferates. People feel a sense of dignity and worth. Human potential is fully utilized. In a virtuous circle, adequate purchasing power has a rendez-vous with the economy’s productive capacity. Tight labor markets give workers the leverage to bargain for decent wages. Social-transfer programs can be reserved for special needs rather than being strained to make up for the fundamental lack of decent income. As Robert Pollin writes in his important new book, Back to Full Employment , a society with jobs for all “is also the best tool for fighting poverty.” He reminds us that in the era of Lyndon Johnson’s Great Society, unemployment rates fell to below 4 percent,...

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