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 The ECB promised that it would get some $25 billion euros to the banks, more than the amount that had been withdrawn in panic.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...

Wall Street Likes Facebook

Today's Balance Sheet

Facebook makes its blockbuster market debut today, and as The New York Times points out , "the trading on Friday is the the equivalent of a must-see Super Bowl Sunday showdown for people who don’t ordinarily watch a football game." The social network's stocks have been priced at $38 a pop, which means the company is valued at $104 billion, making it the second biggest initial public offering ever. If the company's first day on Wall Street follows the tech trend, it could be worth $137 billion by the end of the day. The next big, and potentially difficult step for the company will be proving it's worth the investment. The site already accounts for 9 percent of all web traffic in the United States, but it's going to need to grab more revenue as time goes on, which means more ads, more Farmville-esque spending opportunities, or breaking off into new territory like smartphones and data analytics. The Latest GOP rookies buck Grover Norquist POLITICO The $1 Billion Club Gets Crowded The...

Is a Vote Against Austerity Enough?

(AP Photo / Michel Spingler)
The voters in France and Greece have rejected the parties of austerity. But it is not yet clear that the party of growth can deliver the recovery that the citizenry wants. On both sides of the Atlantic, the obstacles are more political than economic. In Europe the conventional wisdom, enforced by Germany and the European Central Bank, still holds that the path to growth is budget restraint. Unfortunately, the more that budgets are tightened, the more economies shrink and the more revenues fall. No large economy has ever deflated its way to recovery. Meanwhile, frustrated voters in nation after nation are turning away from the center-left and center-right parties that support the European project. Only governments can resolve the economic crisis, but governments are losing legitimacy with their citizens. With fragmentation of protest comes political paralysis and deepening recession, and the cycle worsens. All over Europe, left parties are making gains, but because of the multiple...

Calling for a Kinder Capitalism

Is the change that Occupy Wall Street and other groups have been fighting for finally on its way?

(Flickr / Atomische • Tom Giebel)
In a 2009 poll conducted by the BBC, only one out of every four Americans thought that capitalism in its current form was working well . Then came Occupy Wall Street (OWS), a physical manifestation of the anger of millions of Americans at an economic system in which big banks are bailed out by taxpayers only to turn around and pay billions in bonuses while filing record home foreclosures. Between the second quarter of 2009 and the fourth quarter of 2010, our nation's total income rose by $528 billion, but of that economic growth, 88 percent went to corporate profits and just 1 percent—that's right, 1 percent— went to workers . A popular sense of injustice appeared to be America’s leading growth industry as we embarked on the 21st century. But just as pressure builds between tectonic plates and eventually leads to massive earthquakes, so too can the slow grind of protests eventually change the political landscape. In 2011, grassroots economic-justice organizations mobilized protests at...

Back to the Deficit

Today's Balance Sheet

The House plans to vote today on a Republican plan to avoid the $110 billion in Pentagon sequestration cuts that would be triggered at the end of the year because of the failure of last year's supercommittee. "People know at the end of the day that this is not going to be all sunshine and cotton candy," said Representative Tom Cole, a Republican from Oklahoma. Unfortunately, the Republicans' plan to fix the deficit hurts the poorest in our country the most—the bill, which would save $261.5 billion over the next ten years, would leave an estimated 1.8 million people without food stamps, cut Medicare by $22.7 billion, and stop a program that helps homeowners facing foreclosure. Senate Democrats and Obama have threatened to "pull the trigger" on the defense cuts unless Republicans agree to work with them on a compromise that entails spending cuts and tax increases."My message to them is simple," Obama said. "No. I will veto any effort to get rid of those automatic spending cuts to...

Job Openings on the Rise, Hiring, Not So Much

Today's Balance Sheet

There were 3.74 million job vacancies at the end of March, the highest level since July 2008. The rise was attributed to increased demand in construction and manufacturing, and could show that companies are gaining confidence in the recovery as the year goes on. The small business optimism index rose to 94.5 , a high not seen since February 2011 However, the pace hiring hasn't budged much. The number of people hired in March fell to 4.36 million from February's 4.44 million, keeping the hiring rate steady at 3.3 percent. As Lou Crandall, chief economist at Wrightson ICAP LLC says , "The progress is incremental at best and the levels are still very low." The Latest Can Texting Save Stores? The Wall Street Journal Liberal Donors’ Plan Worries Top Democrats The New York Times How Europe's Austerity Backlash Might Change U.S. Politics Bloomberg Businessweek The Maturation of the Billionaire Boy-Man New York Chart of the Day Twenty percent of the seats in the world's parliaments are now...

Dems Get a Super PAC Jump-Start

Today's Balance Sheet

Billionaire George Soros is jumping into the 2012 election funding race, donating $1 million apiece to pro-Democratic super PACs America Votes and American Bridge 21st Century. This cash infusion— much needed given how Democratic super PACs have struggled to match the fundraising pace of the conservativeAmerican Crossroads—may bring other liberal donors to the fray despite longstanding misgivings of the influence of super PACs from both the Obama camp and the pool of untapped liberal donors. Democratic supporters will have to be quite generous to outpace their conservative competition—super donor Harold Simmons plans to funnel $36 million into super PACs this election cycle, and Casino mogul Sheldon Adelson has already given at least $10 million during the Republican primary. Even if Soros' contribution starts a new trend in Democratic fundraising, for now the Obama campaign seems to think they're on their own on the money front. While Republican super PACs have taken the reins on...

Marchons, Marchons!

François Hollande's victory in France offered a stiff rebuke to Germany's austerity regime, but the new president faces challenges in delivering on his campaign's pro-growth rhetoric.

(AP Photo/Francois Mori)
(AP Photo/Francois Mori) French president-elect Francois Hollande reacts to supporters with his companion Valerie Trierweiler while celebrating his election victory in Bastille Square in Paris, France, Sunday, May 6, 2012. France handed the presidency Sunday to leftist Hollande, a champion of government stimulus programs who says the state should protect the downtrodden - a victory that could deal a death blow to the drive for austerity that has been the hallmark of Europe in recent years. In the end, it was closer than expected. In an election that could change the direction of European economic policy, François Hollande became the first socialist to win the French presidency in 24 years yesterday. Hollande took 51.7 percent of the vote in Sunday’s runoff election against incumbent Nicolas Sarkozy, who was sent packing after a single five-year term in the Élysée Palace with 48.3 percent of the vote. Speaking from the Bastille last night, Hollande gave a clear sense of how he sees his...

Look to the Revisions!

As far as April is concerned, the jobs report is disappointing ; 115,000 new jobs, just enough to keep pace with population growth. Unemployment dropped to 8.1 percent, but labor force participation also declined, which means that joblessness is lower because fewer people are searching for jobs. What’s interesting is that this runs counter to a host of other economic indicators, all of which point to a brighter picture. According to Gallup , for example, economic confidence is a four-year high, consumer spending has edged up, and small-business optimism has risen to its highest levels since the summer of 2008. Why is job growth so sluggish when the economy is looking brighter in other regards? The answer might lie with the revisions contained within the jobs report. Remember, this number isn’t particularly accurate; for almost every month of the last three years, it has been revised (usually upwards) after the fact. This time isn’t any different; according to the Bureau of Labor...

A Post-Buffett Rule Corporate Tax Reform Push? Not Likely.

Today's Balance Sheet

Although tax reform has been in the national spotlight lately—between the Obama team's April Buffett Rule push and the Republican primary candidates' proposals (remember 9-9-9?)—don't expect corporate tax reform to be a legislative priority in the near future. “From the beginning, we acknowledged that this would be a heavy lift and take time,” an official from the Treasury Department said . One of the big reasons corporate tax reform may be a long shot is the daunting policy docket shaping up for the end of the year, including dealing with the Bush tax cuts. Also, lowering the statutory tax rate to 28 percent—which Obama's proposal suggests, along with closing the many tax loopholes—would require cutting out $12 billion annually in corporate tax breaks. Add the fractious political climate in Congress, and corporate tax reform may have to stay in the campaign speech arena for a long time. The Latest Obama’s Not-So-Hot Date With Wall Street The New York Times Magazine Tax Receipts Not...

The Case for Just Giving Money to People, Part Infinity

In a few weeks, tens of thousands of students will graduate from college or university, and attempt to make their way in the economy. During better times, these former students would find jobs, rent apartments, and almost immediately begin to pump money into the economy. But—three years after the nadir of the economic crisis—the job market for young people is still terrible, and many have opted to live with their parents in order to save money. This, you can probably imagine, has only made the economy worse. Here’s The Washington Post : More than one in five adults between ages 25 and 34 live with their parents or in other “multi-generational” living arrangements, the highest level since the 1950s, according to the Pew Research Center. Analysts estimate that there are more than 2 million fewer occupied homes than there would have been had Americans continued moving into new homes and apartments at the rate they did before the recession. Not only are young people returning to the nest...