Economy

Occupy the Alps

Today's Balance Sheet: The conference in Davos is no laughing matter, but apparently Federal Open Market Committee meetings were.

Thousands of the world’s business and political leaders are all heading to Davos, Switzerland—the home of Thomas Mann's fictional sanatorium—for this year’s five-day World Economic Forum. The euro crisis will be a dominant theme of the conference and Angela Merkel will serve as the keynote speaker. The conference comes as public confidence in world leaders' ability to fix the economic crisis hits a new low. In 2011’s “truth barometer” poll , conducted by the Edelman PR firm, 11 countries—twice as many as last year—said they are "skeptical" of government, business, non-governmental organizations, and the media. The drop in trust is most attributable to a loss in faith in political leaders—52 percent of "informed people" polled trusted government last year; this year the figure has dropped to 43 percent. Trust in business dropped too, from 56 to 53 percent. "European policy makers at Davos will keep doing everything possible to try to calm markets,” William Browder, a Davos-goer for 12...

Mega-Crackdown

Today's Balance Sheet: The FBI shuts down Megaupload in what the Justice Department is calling its biggest copyright case ever.

AP Photo/Greg Bowker
Yesterday, on the same day that major websites like Wikipedia, Wordpress, Reddit, and Wired went dark to protest the Stop Online Piracy Act (SOPA), the Justice Department shut down Megaupload , one of the largest file-sharing sites on the Internet. The site’s seven founders were arrested in New Zealand and are accused of making $175 million in profits while costing copyright holders an estimated $500 million in revenue. They face up to 20 years in prison for violating international copyright laws. Lawyers for the men said Megaupload allows users to legitimately transfer large files. But the government maintains that the service is simply a front for piracy, racketeering, and money-laundering. Hackers responded swiftly to the crackdown, with the group Anonymous taking responsibility for briefly shutting down the Department of Justice and Universal Music Group websites. The Latest Intel and Microsoft Post Gains in Last Quarter as Google Dips Bloomberg Businessweek European Debt Crisis:...

The Internet Strikes Back

Today's Balance Sheet: A war is brewing between the Internet and the entertainment industry, and it looks like things might get brutal this week.

The coming week is shaping up to feature a hostile fight between tech companies and content producers as the Stop Online Piracy Act (SOPA) and PROTECT-IP bills are debated in Congress. Reddit and Wikipedia have announced their intention to go dark for 12 hours on Wednesday to protest the bills, and rumors that Google, Facebook, and Twitter might join in have circulated. These tech companies are framing the issue as a battle between profits and free speech, an argument that has rallied opposition to the legislation. In a sign of support, 19,000 people on Twitter have changed their profile pictures to an icon saying "Stop SOPA." The White House joined Team Internet on Saturday, stating "While we believe that online piracy by foreign websites is a serious problem that requires a serious legislative response, we will not support legislation that reduces freedom of expression, increases cybersecurity risk, or undermines the dynamic, innovative global Internet." These measures, plus the...

Handicapping 2012

Today's Balance Sheet: Starting off the 2012 race between a tortoise and our economic recovery

In the past few weeks, the good economic news pouring in has kept newspaper business sections buoyant, but the celebrations may be premature. One of the biggest problems barring a quick comeback for the economy is inadequate aggregate demand —without demand, we can't produce more goods and can't hire more people. The Treasury estimates that the gap between actual and potential output is over 7 percent—that's equal to $1 trillion worth of goods and services. The U.S. has a considerable 12.1 million jobs gap as well, which won't close until 2024 if we keep adding 200,000 new jobs per month, the pace set in December 2011. Recovery so far has been somewhat backwards too—consumer spending, housing, and construction are usually signs of early growth, but they have been the last things to bounce back. Instead, manufacturing and business investments—leading to downturns in unemployment—have been at the forefront of our recovery. These changes have led to a tepid increase in consumer spending...

Lonely at the Top

The debate among the Republican candidates over Mitt Romney’s time at Bain Capital has raised again questions about whether Romney’s tenure in the “1 percent” will damage his campaign. The Obama team certainly welcomes this debate. After all, they have been attacking Romney along precisely these lines: The day after Mr. Romney squeezed out a razor-thin victory in the Iowa caucuses, Mr. Obama’s political brain-trust trained most of its fire on him, painting him as both a Wall Street 1 percent type and an unprincipled flip-flopper. Some new survey data that Lynn Vavreck and I have gathered in collaboration with YouGov suggests that Romney is vulnerable to this line of questioning. In a survey conducted nationwide from January 7-10—right about the time that the Republican attacks on Romney’s “vulture capitalism” were crescendoing as the New Hampshire primary approached—we asked respondents: How well do you think each the following describes Barack Obama/Mitt Romney: very well, somewhat...

Scarcity Came to Town

Two leading minds on our lean times

Jeff Madrick , the author most recently of Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present (Knopf), exchanges questions and ideas with Thomas Byrne Edsall , whose book The Age of Austerity: How Scarcity Will Remake American Politics (Doubleday) is out this week. Madrick : Your book places the current extreme partisanship in its critical economic context. There are cultural and religious conflicts in America, but it is economic scarcity that underlies much of our political paralysis. Is that so—scarcity lately more than culture? And scarcity has tended to favor conservatives? Edsall : Scarcity trumps culture, but it would be a mistake to view culture and the economy as inhabiting discrete spheres. Diminishing resources tend to push people in a conservative direction by increasing pressure to protect one’s own interests while simultaneously lessening generosity of spirit. Scarcity sharpens survival instincts, leading to a dog-eat-dog worldview that...

The Class War Turns

Yesterday, the Pew Research Center released a report showing that the American public now perceives the conflict between the rich and poor as more prevalent and intense than conflicts between black and whites or conflicts between immigrants and the native-born. The number seeing those class conflicts has jumped 19 points since 2009, and amazingly, even 55 percent of Republicans think there are strong conflicts between rich and poor. For the GOP, about to nominate a guy who earned a couple of hundred million dollars as what one of his opponents calls a "vulture capitalist," this is disconcerting news. First, a graph: It's no surprise that the Republican establishment is freaking out a bit over the new attacks on Mitt Romney's career in private equity, particularly this remarkable video from a super PAC supporting Newt Gingrich. They've worked very hard for the last couple of decades to construct and reinforce a narrative that redirects class resentment—encourages it, actually, so long...

Insourced

Today's Balance Sheet: Obama tries to bring manufacturing jobs back home. 

As part of an effort to push "insourcing," President Obama is proposing tax incentives for companies that move manufacturing jobs back to the United States. “I don’t want America to be a nation that’s primarily known for financial speculation, and racking up debt and buying stuff from other nations,” Obama said during an announcement yesterday. “I want us to be known for making and selling products all over the world stamped with three proud words, ‘Made in America.’” The U.S. economy added manufacturing jobs for the first time in over a decade the past two years, so the president hopes the incentives will help deepen that trend. The proposal—which would also curtail tax breaks for those who continue to search for cheaper labor abroad—gives a hint of the populist economic message Obama plans to use in his State of the Union address and the general-election campaign. Reviving American manufacturing is a compelling narrative, especially on the campaign trail, but the truth is it's still...

An Ax to Grind

AP Photo/Mike Carlson
Cable-news pundits rejoiced a week ago when Rick Santorum drew Mitt Romney into an essential tie for first place in the Iowa caucuses. For all the ups and downs throughout the fall, this election has been inherently boring. Until Iowa, Romney had inched along unremarkably to the general election while a rotating group of talking heads ran nominal presidential campaigns in order to boost their fees on the lecture circuit. But then Rick Santorum arrived in the spotlight and won an actual vote, not just front-page headlines. Finally, we could train our sights on someone who could, just maybe, make Romney work for the nomination, pushing him out of the general-election comfort zone that he had coasted on all last year. Unfortunately for those invested in an extended horse race, the Santorum surge hasn't panned out. His campaign was an abject failure in New Hampshire last night, even under the arbitrary rules of the expectations game, finishing a distant fifth. Turns out, despite his weak...

The Tough Sell

AP Photo/Charles Dharapak
Nashua, New Hampshire— Mitt Romney is the sort-of acceptable man in this year’s Republican field. His strong victory here yesterday was rooted in his support from all quadrants of the Republican Party. He carried 40 percent of the voters who told exit pollsters that they supported the Tea Party movement, a far higher percentage than anyone else in the field. (Ron Paul finished second with 22 percent of Tea Partiers.) Romney also led the field among voters who said they were neutral toward the Tea Party. Only among voters who said they opposed the Tea Party—and that was just 17 percent of yesterday’s Republican electorate—did he come in second, to Jon Huntsman. Romney also carried all but one income category, doing best among voters whose annual income exceeded $200,000. The only income category he lost was those voters whose annual income was less than $30,000, a group won by Ron Paul. Paul’s voters were disproportionately young, male, low-income, unmarried—and not self-described...

Mittmentum, Meet High Unemployment

Today's Balance Sheet: As the race moves south, the candidates will need to tackle states with much higher unemployment rates. 

Winning the Iowa caucus and the New Hampshire primary puts Mitt Romney in a good place for the remaining primaries in South Carolina and Florida this month. But a grimmer economic picture in these states has the potential to damage his momentum. New Hampshire, with an unemployment rate of 5.2 percent in November, had the fourth-lowest unemployment rate in the country, and Iowa's 5.7 percent was similarly below the national rate. South Carolina and Florida, with unemployment rates of 9.9 and 10 percent respectively, will be much more focused on the candidate's economic credentials, and perhaps be open to platforms offering more radical change—like those of Ron Paul or Rick Santorum—than Romney's comparably moderate economic plan. The latest barrage of anti-Romney attacks in South Carolina aim to capitalize on local disappointment with the current state of affairs. But if the documentary painting Romney as a “predatory corporate raider," and Romney's economic stance aren't enough to...

Nothing Certain But Death and Tax Evasion

Today's Balance Sheet: Romney meets the 99 percent, and the 1 percent avoids paying taxes. 

The Internal Revenue Service recently updated its tax-gap estimate using 2006 tax year liabilities, and the numbers show that underreported income—largely from the one percent—remains a big obstruction to collecting taxes. Even though 83 percent of the country voluntarily pays its taxes, there are still $450 billion worth left unpaid. The IRS believes tougher enforcement could help it collect an additional $65 billion, but that still leaves $385 billion that will never be paid. That's a lot of money—enough to pay for more than 11 payroll-tax-cut bills like the one passed by Congress at the end of last year. A study into the collection gap found that over 50 percent of tax evasion was undertaken by individuals with business income, and that misreporting is highest among those who have an adjusted gross income between $500,000 and $1,000,000. Even as tax evasion has increased, the number of IRS workers has decreased —falling from 116,673 in 1992 to 84,711 in 2010—leaving the institution...

Same Schtick, Different Day

AP Images/Vince DeWitt
DERRY, NEW HAMPSHIRE— Newt Gingrich is a master of Stalinist history. In the New Hampshire campaign’s closing days, he made much of his own role in the job creation of the Reagan and Clinton years (though he never mentioned Clinton by name) and contrasted himself with his rivals by touting his ability to reach across the aisle during Clinton’s presidency. As Gingrich recounted it to a crowd of 300 gathered in a high-school auditorium in Derry late yesterday afternoon, he and Clinton both “concluded very early on that we really wanted to get together to do something for the country.” They would meet privately, he said, while bashing each other publicly. His account is notable for its obvious omissions. It makes no mention of Gingrich’s forcing Clinton to close the government down at the end of 1995 (Clinton wouldn’t accede to Gingrich’s demands to cut Medicare). It leaves out Gingrich’s decision to have congressional Republicans campaign for office in 1998 on a platform of impeaching...

Romney's Mini-Flub

Thanks to the array of options to watch TV online, I don't bother paying for cable at my home in DC. But I've been able to reacquaint myself with the hyperbole of cable news as I've been on the road reporting. This morning I learned of Mitt Romney's "breaking news" flub from MSNBC. At a morning stop in New Hampshire, Romney said, "I like being able to fire people who provide services to me." With increased attention being paid to Mitt Romney's time buying and selling companies, now might not be the best moment to revel in handing out pink slips. Hours later, Jon Hunstman has already incorporated the line into his attacks on Romney and the DNC was quick to push out this video clip: Politicians always disavow these kinds of quotes as being taken out of context by the media, and this is the rare instance where that's a proper defense. Here's the full quote from Romney discussing health insurance: I want individuals to have their own insurance. That means the insurance company will have...

Battle of the Supremes

The Montana high court upholds the state's anti-corruption laws—and challenges Citizens United in the process.

The Montana Supreme Court in Helena stands just off the main drag, dramatically called Last Chance Gulch Street. The picturesque setting is fitting for an institution that has just challenged the U.S. Supreme Court to a legal showdown on the enormously important question of whether corporations should have an unfettered right to dominate elections or whether citizens have the right to adopt commonsense protections to defend democratic government from corruption. Get the kids off the streets, because this could be an epic confrontation. In upholding the section of Montana’s Corrupt Practices Act that restricts direct corporate political spending, the Montana Supreme Court attacked the Citizens United fiction that independent expenditures aren’t corrupting and that corporate political spending isn’t a danger to democratic government. The Montana jurists’ decision in Western Tradition Partnership states unequivocally, “The impact of unlimited corporate donations creates a dominating...

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