Economy

Important Election News from Across the Pond

Over the last week, there has been a torrent of stories illustrating the extent to which the Obama re-election team is observing the Republican presidential contest and developing their strategy for the general election season. And while I’m sure that the Obama team has devoted a fair amount of attention to events in the GOP, I’m also sure that they’ve devoted even more time to events across the Atlantic, where—as Carmel Crimmins and Gavin Jones note for Reuters—austerity has pushed Europe to the edge of another recession:

Britain Hesitates

David Cameron's veto of an EU integration plan reveals England's deep skepticism about the union.

AP Photo/Yves Logghe

European leaders went one better this time. Not content with failing to resolve the debt crisis tearing through the eurozone and threatening a global recession, they have now managed to create a new source of instability: the rift between Britain and the rest of the European Union, whose consequences may prove to be momentous indeed.

Elizabeth Warren: Bailout Queen

Karl Rove’s latest ad has to set an all-time record for hypocrisy and factual inversion. The ad actually manages to blame Elizabeth Warren for the bank bailouts.

As anyone who hasn’t spent the past three years in a cave must know, Warren has been the nation’s single most effective, relentless, and brave critic of the bailouts. It was that service as chair of the Congressional Oversight Panel that made her one of America’s most admired public leaders.

The Wrong Fix

AP Photo/Bernd Kammerer

Yesterday, both Bob Kuttner, here in the Prospect, and I ,in my Washington Post column, noted that the deal that German Chancellor Angela Merkel and French President Nicolas Sarkozy struck to save the Eurozone will inflict years of austerity on European nations that are already mired in depression. Spain, for instance, has an unemployment rate of about 20 percent and a youth unemployment rate that is approaching a mind-boggling 50 percent. It needs a massive Keynesian jolt to its economy, not budgetary constraints that will condemn it to a decade or quarter-century of penury.

Made in America — Again

Leaders discuss returning manufacturing to the U.S. in a Prospect roundtable.

AP Photo/Madalyn Ruggiero

Andy Grove was, successively, the director of engineering, president, CEO, and Chairman of Intel Corporation. In an article last year, Grove proposed levying tariffs on goods produced offshore and dedicating the funds to help companies scale up production in the United States.

Andy Grove was, successively, the director of engineering, president, CEO, and Chairman of Intel Corporation.

Europe's Deal: So Who Wins?

The grand bargain between Germany, France, and the European Central Bank (ECB) is being hailed as a diplomatic breakthrough that will save the euro and the European Union (EU).

The essence of the deal is this: EU nations commit to an enforceable austerity program, which is ad hoc for now but will eventually become a formal part of the EU treaty. It will take the shape of tight limits on budget deficits, with penalties. That, in turn, gives the ECB the fig leaf it needs to heavily support purchases of bonds from countries like Italy, whose debt has come under speculative attack. All of this reassures markets, and the cost of borrowing comes down. In turn, bank holdings of sovereign bonds retain their value.

GOP vs. Job Creators

In the ongoing battle over extending the payroll tax cuts that currently save the median American household about $1,000 a year, one salient point is commonly overlooked: The proposal that the Obama administration and congressional Democrats are championing also cuts in half the payroll tax for employers. Currently, employers are subjected to a payroll tax of 6.2 percent on every paycheck they write. The Democratic proposal would reduce that to 3.1 percent on the first $5 million in taxable payroll—that is, it would chiefly benefit small and middle-sized businesses.

Schooling Capitalism

This week, both coasts saw student marches on Monday and big-city police raids on Tuesday. As the chancellors of the University of California met by teleconference, students throughout the U.C. system held demonstrations and teach-ins opposing tuition hikes and police violence. At U.C. Davis, they called a student strike. Meanwhile, their counterparts at the City University of New York marched on their own board of trustees as it voted on five years of tuition hikes.

Game Plan

With a labor agreement tentatively in place, the NBA's next challenge will be bringing the fans back.

AP Photo/Mike Segar

With its labor dispute nearly behind it, the NBA is facing another mammoth problem: winning fans back.

In a time when the unemployment rate remains stubbornly high and the economy won’t grow, many basketball fans viewed the NBA strike as an ugly and petty fight of rich players against wealthy owners over a few more million.

“It’s the most ridiculous thing I saw in my life,” one longtime fan ranted to the New York Post. “They make so much money. It’s childish.”

GOP vs. Job Creators

Republican opposition to extending the payroll tax misses the point.

In the ongoing battle over extending the payroll tax cuts that currently save the median American household about $1,000 a year, one salient point is commonly overlooked: The proposal that the Obama Administration and Congressional Democrats are championing also cuts in half the payroll tax for employers. Currently, employers are subjected to a payroll tax of 6.2 percent on every paycheck they write. The Democratic proposal would reduce that to 3.1 percent on the first $5 million in taxable payroll – that is, it would chiefly benefit small and middle-sized businesses.

NBA, Final

A league labor agreement includes a surprising caveat to protect owners from ... themselves.

AP Photo/Hans Deryk

After spending almost half the year in a pitched labor dispute that shutdown league operations, the NBA owners and players union agreed to a new collective bargaining agreement last weekend. The reformed players union—which had disbanded last month to file an antitrust lawsuit against the owners as a negotiating tactic—and league representatives are set to meet again Friday afternoon to come to official terms on the ten-year contract. As long as the final details (such as drug testing and player age restrictions) are worked out over the next week, a shortened 66-game season will kickoff on Christmas Day.

Justice, Deferred

It may be frustrating when federal watchdogs strike toothless deals with Wall Street, but it reflects regulators' alarming lack of resources.

During the early aughts, the financial sector freely gambled with money implicitly or directly guaranteed by taxpayers, selling securities based on worthless subprime mortgages to their customers. We all know how that turned out. Yet those responsible for the worst recession since the Great Depression have for the most part escaped federal prosecution. Given this context, it is easy to understand why United States District Court Judge Jed Rakoff angrily rejected a proposed deal between the Securities and Exchange Commission (SEC) and Citigroup over the company's practice of selling toxic mortgage-backed securities to its customers at the same time it bet against them.

Way Down in the Hole

The big number from today’s labor report is 0.4, the percentage by which unemployment dropped in November. Overall, the economy created 120,000 jobs (compared to 100,000 for the previous month) and the unemployment rate declined to 8.6 percent, a substantial improvement over where the economy was in the previous month. In addition, the employment numbers for September and October were revised upwards by a total of 70,000 jobs, another positive sign.

The Cost of Free Trade

Every president asserts that the next trade treaty will turn America into an export powerhouse, but that's just not true.

Any renaissance of American manufacturing must begin by fundamentally reversing our trade policies—both in general and in particular toward China. Over the past two decades, leading U.S. manufacturers, both the venerable (like General Electric) and the new (like Apple), have offshored millions of jobs—by one recent estimate, 2.9 million—to China to take advantage of the cheap labor, generous state subsidies, and low currency valuation that are linchpins of China’s mercantilist development strategy.

Bring Back the Space Race

To remain competitive, the U.S. needs to rebalance its portfolio of talent.

After the Soviets launched Sputnik, the U.S. created NASA and funneled millions of resources into technological and scientific research to shore up U.S. competitiveness. In China today, the government has had the foresight the U.S. once did and has put in place a talent program to support its students in the pursuit of higher education and innovation. Returning to the investment in science education of the Sputnik days and fostering technical talent like the Chinese may at once help reduce U.S. employment and make the country more competitive technologically.

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