Economy

McMansions on the Cheap

Today's Balance Sheet: Housing prices dropped to 2002 levels in December. 

Although the past few months have brough economic data that hints at recovery, one important statistic hasn't improved: housing prices. The Standard & Poors/Case-Shiller index of property values report of 20 U.S. cities released yesterday shows that national housing prices have dropped to their lowest levels since 2002. “It is hard to get entirely enthusiastic about the recovery when housing prices are still falling,” said Mark Zandi, the chief economist at Moody’s Analytics. In December, the index decreased by 4 percent from a year earlier, and Detroit was the only city to see an increase from 2010. The biggest reasons housing prices continue to drop despite the tax credits and bank incentives offered by the Obama administration are oversupply and expected foreclosures. However, home resales are climbing —up 2 percent in January—and this may be a sign that housing values could rebound soon. As Karl E. Case, a co-creator of the index, points out , “There are some bright spots."...

A German History Lesson

Yesterday, the German Parliament relented and agreed to let the Greek debt restructuring go forward, but only the price of crushing austerity for the Greek economy. This is a widespread attitude in Germany, where aid to the Greeks is unpopular. The other day, Jörg Krämer, chief economist for Commerzbank in Frankfurt, said of the Greeks, “If you live beyond your means, then you can repair your balance sheet only if your consumption goes down.” But the Germans might take a moment and reflect on their own history. In the aftermath of World War II, the Allies, remembering the disastrous consequences of German reparations after the First World War, did not insist on their pound of flesh. The entire Nazi public debt, amounting to over 600 percent of German GDP, was written off. The pre-existing unpaid debt from the Weimar period was written down to a fraction of its original cost. Claims on old debt were strictly segregated from German reconstruction funds. The German Federal Republic...

Keystone Back From the Dead

Today's Balance Sheet: TransCanada's ready to break ground on the Keystone pipeline, and the White House just might give them the permit to do it.

After the Obama administration halted progress on the Keystone XL pipeline in January—stating that the 60-day window of time permitted by Republican legislators was too small for a thorough environmental review—those against the proposal cheered and hoped the pipeline was dead. However, it looks like Keystone is emerging from the grave after only a month, as TransCanada—the company behind the pipeline— moves ahead with plans to build the segment running from Oklahoma to Texas, sections of the pipeline that don't require a federal permit. TransCanada is also in the process of reapplying for the cross-border section of the pipeline—the section for which the administration previously denied a permit. The project now seems to have the White House's support. "Moving oil from the Midwest to the world-class, state-of-the-art refineries on the Gulf Coast will modernize our infrastructure, create jobs, and encourage American energy production," White House Press Secretary Jay Carney said in a...

The Moral Calculus of Online Shopping

Amazon fulfillment center in Scotland (Flickr/Chris Watt)
I don't know too many liberals who shop at Walmart. The primary reason is principle—the company is notoriously cruel to its largely low-wage workforce, works to crush the faintest hint of a desire for collective bargaining with a ferocity that would be the envy of any early 20th century industrialist, and imposes vicious cost-cutting all the way down its supply chain. But not shopping at Walmart is also easy. The stores are rare in the urban areas where lots of liberals live, and elsewhere, there's probably a Target nearby where you can get stuff just about as cheaply (Target's own corporate citizenship is a complicated topic for another day). So it isn't like not shopping at Walmart is some kind of hardship or costs them any money. But what about Amazon? A few months ago, Harold Pollack explained why he no longer shops there: nearly every sin of which Walmart is guilty, Amazon also commits. And the online world has its own particular sweatshop: the fulfillment center, where people...

States Still Fighting Obamacare

Today's Balance Sheet: Affordable Care Act implementation is running into the roadblock of Republican governors.

States have been slow to create the health-insurance exchanges mandated by the Affordable Care Act, most likely because of recalcitrant governors waiting to hear the Supreme Court's decision on whether the law is constitutional. The Urban Institute, a think tank, has found that only 14 states have made significant progress in creating the government-subsidized exchanges while 16 had made little or no progress. The study also showed that the states that have been slowest to move have the most uninsured residents. The National Governors' Association met yesterday, and discussion on the Affordable Care Act broke down along party lines. Democrats like Pat Quinn of Illinois said “It’s already working ... We’re enthusiastic advocates" while Republicans voiced their support for repealing the law. The federal government has already given states $600 million to help create the health-insurance exchanges. The Latest Nothing to Fear but the Lack of Fear Itself The Economist Risk and Riches in...

Kansas GOP: Poor Are Too Rich

(Flickr/jimmywayne)
Kansas Republicans, under the leadership of “compassionate conservative” Sam Brownback, are working hard to stick it to the poor: A Kansas House tax committee passed a bill in which anyone making less than $25,000 a year — roughly half a million of the state’s 2.9 million residents — will pay an average of $72 more in taxes, while those making more than $250,000 — about 21,000 people — will see a $1,500 cut, according to Kansas Department of Revenue estimates cited by the Kansas City Star. The hike would come from the elimination of tax credits typically benefiting the poor. I can’t help but see this as a continuation of the conservative meme that its the poor who don’t pay their “fair share.” Last fall, as the Occupy movement gained steam, it became common for conservatives to complain about the 47 percent of Americans who “don’t pay taxes.” Presidential candidates like Michele Bachmann and Rick Perry complained about it in speeches and debate performances, while conservative...

No Silver Bullet for Gas Prices

Today's Balance Sheet: No Death Star for Earth, but no low gas prices either. 

Obama has upped his campaign game on energy in the past week, while conceding there is little he can do to combat the rising gas prices before November. The president has been advocating an "all of the above" response to gas prices, including pushing more domestic oil production and stricter fuel-efficiency standards. Average gas prices reached $3.65 a gallon last week, about 12 percent higher than last year. “Four dollars per gallon has typically been the tipping point when people go from complacency to exasperation,” said pollster Geoff Garin. Republican presidential candidates have been quick to jump on the issue, especially Newt Gingrich, who has been promising $2.50 a gallon gas this week as a last-ditch effort to save his falling poll numbers. The White House was quick to pounce on its critics' claims. “There is no silver bullet. There never has been,” Obama said on the trail yesterday. “It’s the easiest thing in the world to make phony election-year promises about lower gas...

Obama's Squandered Recovery

In The Escape Artists, Noam Scheiber depicts a White House out of its depth on the financial crisis.

The Escape Artists: How Obama's Team Fumbled the Recovery . By Noam Scheiber, Simon & Schuster, 351 pages, $28.00. A guy I know told me a story. He had a friend who was working on the 55th floor of the South Tower of the World Trade Center on that terrible day. When the plane hit the North Tower, everybody in the office understandably got very worried. When the plane hit the South Tower, people were going crazy. But the authorities on the floor—calm, experienced—told them not to panic. The guy’s friend thought to himself, “Fuck this, we’re all going to die," and raced downstairs, exiting the building right before it collapsed. I thought of that story when reading Noam Scheiber’s The Escape Artists, about the economic crisis at the start of Obama’s presidency and the administration’s response. In the book, based upon hundreds of on- and off-the-record interviews with principals and other witnesses to the events described, Obama and his top economic and political staff emerge as, to...

Occupy's Return From Hibernation

The movement will next take on foreclosures.

(AP Photo/Mary Altaffer)
As winter fades, the Occupy Wall Street movement is heating up again. But don’t expect the same focus on physical encampments and rowdy protests. While the blood of the 99 percent is still boiling at the injustice of growing inequality, in organizing meetings and workgroups, cooler heads are prevailing. This is Occupy 2.0—the mainstreaming of momentum. From my conversations with Occupy organizers and supporters, my sense is that the main thrust of organizing energy and attention will go toward Occupy Our Homes — a coalition of Occupy activists joining with existing grassroots groups to support families that are facing foreclosure or have been evicted by big banks. Prioritizing Occupy Our Homes is great choice for two reasons. First, the foreclosure crisis is immense and growing. Despite the recent mortgage settlement with state attorneys general that will grant 750,000 foreclosed-upon families a whopping $2,000 each (!), 4.2 million families have already been foreclosed upon during...

Internet Privacy: It's Complicated

Today's Balance Sheet: The White House takes on Internet behemoths.

The White House plans to release guidelines for internet companies to help them protect consumers' privacy today. However, the rules are voluntary, which means the web will likely remain an information free-for-all. The Federal Trade Commission will only police companies who agree to the administration's Consumer Privacy Bill of Rights. The only real incentive for companies to agree to the rules is to boost consumer confidence. "As the Internet evolves, consumer trust is essential for the continued growth of the digital economy,” Obama said in a statement. “For businesses to succeed online, consumers must feel secure.” Although the White House did not include the "Do Not Track" button, which stops advertisers from recording user traffic, in its guidelines, a coalition of very powerful web companies have announced support for the button. Among them is Google, whose Chrome browser should have a "Do Not Track" button by the end of the year. The Latest Debt Will Swell Under Top GOP...

Obama's Tax Code Spring Cleaning

Today's Balance Sheet: The White House vacuums out the corporate tax code. 

Obama is stealing the spotlight from Mitt Romney—who plans to announce a new economic plan on Friday —by announcing his framework for simplifying the corporate tax code. The White House is asking Congress to lower the top corporate tax rate to 28 percent, while ridding the code of any loopholes and subsidies. Manufacturers will get special breaks, in accordance with Obama's push to spur domestic manufacturing jobs, and their maximum effective tax rate would be set at 25 percent. Republicans have long argued that the U.S. has one of the steepest corporate tax rates in the world. But, while the U.S. does have a high tax rate, after factoring in all the loopholes, many U.S. businesses end up paying taxes that are even lower than businesses in other rich countries., according to the Organization for Economic Cooperation and Development. The Latest Fed’s Push on Housing Crosses a Line, Critics Say The Washington Post Watchdog Targets Overdraft Charges The Wall Street Journal Euro-Area...

Bare Minimum Wage

Big business lobbyists work to prevent any rise in workers' paychecks.

(Flickr/wbeem)
The federal minimum for an hourly wage was $3.35 in 1982 and now it’s $7.25, up 120 percent. Inflation, meanwhile, has climbed during that period by 135 percent. Eight states, including New York, Connecticut, and New Jersey, are considering legislation to boost the base wage. Advocates say that such state measures are fair and make good economic sense: Putting more money in the hands of workers means more demand—good news for small businesses struggling to overcome poor sales . Then there’s politics. More than two-thirds of Americans favor raising the hourly wage to at least $10. You’d think it would be a win-win for state officials, but it’s not. While truly small businesses like restaurants and retail shops have said in the past that raising the wage will have little or no effect on labor costs , large corporations that pay minimum wage, like fast-food chains, have enormous incentive to propagandize against any increase. One of the most active in the propaganda industry has been the...

The Eurozone Marathon

Today's Balance Sheet: Greece has a new eurozone bailout, but that doesn't mean the country is out of the woods just yet.

Early today, eurozone finance ministers finally approved the €130 billion rescue package to prevent Greece from defaulting, a move that will hopefully keep the country off the precipice before its bond repayment comes due March 20. Investors who own €200 billion of Greek debt have been asked to forgive 53.5 percent of the face value of the bonds, which will cut Greece's €350 billion debt load by €107 billion. This rescue package is contingent on Greece enacting stricter austerity measures. Although the eurozone is taking big actions to prevent a financial crisis from spreading, its members are nowhere near being out of the woods. March 20 will be an important milestone, but even then the eurozone won't be out of ulcer-inducing territory for months. As Olli Rehn, European monetary affairs commissioner, said after the 14-hour meeting that hammered out the bailout plan, “I have learnt that marathon is indeed a Greek word.” The Latest Bailout News Aids U.S. Futures The Wall Street Journal...

Foxconn Tiptoes Out of The Jungle

Today's Balance Sheet: Foxconn announced a 25 percent pay raise for their factory workers on Saturday.

Foxconn Technology—responsible for assembling iPhones, Xbox 360s, and Dell computers— announced a 25 percent pay raise for its employees at Chinese factories on Saturday. News of the raise comes after weeks of increased scrutiny of the working conditions at the plants, which together employ 1.2 million workers who work as much as 14 hours a day. The pay raise comes with a limit on overtime hours. “This is the way capitalism is supposed to work,” said David Autor, a MIT economist, to The New York Times. “As nations develop, wages rise and life theoretically gets better for everyone. The reaction from consumers will test the viability of moving away from low factory wages. As Autor said, "In China, for that change to be permanent, consumers have to be willing to bear the consequences. When people read about bad Chinese factories in the paper, they might have a moment of outrage. But then they go to Amazon and are as ruthless as ever about paying the lowest prices.” The Latest Surge in...

Money Makes Good Partners

Today's Balance Sheet: The United States is a bit nervous about getting any more involved with the euro crisis.

EPI
As Europe works toward bringing Greece back from the edge of default, the United States is trying to puzzle out how good of a partner we want to be to the eurozone. Lael Brainard, the Treasury's top international diplomat, told the Senate banking committee yesterday that the International Monetary Fund doesn't need an infusion of cash from the U.S. in order to create a buffer from whatever may happen with Greece and the other European economies. “The challenge Europe faces is within the capacity of the Europeans to manage,” she said. The IMF is trying to amass $500 billion for a safety lending fund in case Europe takes a turn for the worse, and with the U.S. sitting out and only $196 billion pledged from the eurozone, the organization is turning to emerging markets to make up the difference. Even without Brainard's caution, the Obama administration would likely shy away from giving billions to Europe during an election year overshadowed by domestic economic problems. The Latest...

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