Economy

For Europe, High Stakes in Greece

Stabilizing one teetering economy won't end the eurozone's dance of death.

(Flickr/Oscar Alexander)
T he problems of the euro turned critical when the Greek government nearly defaulted in May 2010 and the International Monetary Fund and European Union agreed to a bailout. In truth, the 17-nation euro area had deep troubles long before that. Its oversized and undercapitalized banks, its common monetary policy but diverse and fragmented fiscal policies, the persistent economic imbalances among nations that use the euro, and a cumbersome decision-making structure all made the euro-area economy vulnerable. The crisis, which still bears the mark of the Greek tragedy that first set it off, has now spread far beyond Greece. The euro was created for normal times, but the EU lacked good mechanisms for crisis management. At every step of the Greek drama, policy-maker responses have remained behind the curve of economic deterioration. Slowly but surely, this erosion of confidence ensnared other countries, such as Ireland and Portugal, then spread to Spain and Italy, both perceived to be...

Foreclosed for Business

Before the Republican presidential primary debate in Nevada, 2012 GOP frontrunner Mitt Romney told the editorial board of the Las Vegas Review Journal that government shouldn’t be in the business of trying to help families about to lose their homes. “ Don’t try and stop the foreclosure process ,” he said. Former pizza magnate Herman Cain claimed following the debate that the best way to help homeowners facing foreclosure is to “ get government off the back of the banks .” Former Speaker of the House Newt Gingrich’s prescription for aiding homeowners, meanwhile, is to repeal the Wall Street reform law that Congress passed last year. Listening to the GOP presidential candidates, you’d never know that Nevada was the state hardest hit by the bursting of the housing bubble, that it has led the nation in foreclosures for 56 consecutive months , or that last year one in nine Nevada households received a foreclosure notice. The one time that foreclosures came up during the debate, none of the...

Obama's Wheel and Deal

The administration's recent trade agreement with Korea, Colombia, and Panama is expected to destroy more than 200,000 American jobs.

President Barack Obama stands after signing the Korean Free Trade Agreement in the Oval Office of the White House in Washington, Friday, Oct. 21, 2011. He is joined by, from left, Korean Ambassador Han Duk-soo, Commerce Secretary John Bryson, DOW Chemical Company CEO Andrew Liveris, Boeing CEO Jim McNerney, US Trade Representative Ron Kirk, Rep. Dave Camp, R-Mich., Xerox CEO Ursula Burns, Korean Alliance for Free Trade William Hwang and Correct Craft, Inc., CEO William Yeargin. (AP Photo/Susan Walsh)
(AP Photo/Susan Walsh) President Barack Obama stands after signing the Korean Free Trade Agreement in the Oval Office of the White House. A s he gears up for a difficult re-election campaign, President Obama risks losing key swing states that he won in 2008 because of a recent flip-flop on trade commitments. Back on the campaign trail, Obama had committed to a new approach to trade deals that would protect the environment, boost manufacturing, and protect food safety. That was then; this is now. On October 12, he shoved through three NAFTA-style trade deals with Colombia, Korea, and Panama that are officially projected to increase the U.S. trade deficit and cost tens of thousands of American jobs. These deals were negotiated and signed by George W. Bush in 2007, but had not been formally approved by Congress. While Wall Street and the Chamber of Commerce applauded the deals, Obama’s base and most congressional Democrats opposed them; the GOP provided almost all of the votes for...

On Borrowed Time

President Obama's new student loan plan isn't enough to help students saddled with debt.

AP Photo/Ed Andrieski
On Tuesday, the Obama administration announced its new plan for student loans: new graduates can cap their student loan repayments to 10 percent of their monthly income. After 20 years, their debt will be forgiven. Graduates already repaying their loans can consolidate and get half a percent interest rate cut. These changes will go into effect next year, two years before they were already scheduled to do so, and the administration said the move was in response to an online petition drive on its “We the People” site. The high student-debt burden—it will reach $1 trillion this year—is also a centerpiece of the Occupy protests around the country. The loan plan is clearly a move to ignite college student and recent graduate support, and it’s also a change President Obama doesn’t have to go through Congress to enact. All of which makes this move understandable from a political standpoint. The problem is that it actually doesn’t do much to help students. The administration and others will...

A Scary Guide to the GOP Tax Plans

When did tax-reform plans become so sexy? It seems like every day now GOP candidates are flaunting a new, slimmer tax plan, complete with a catchy name and nonsensical (or nonexistent) ideas supporting them. After a while, they can all start to look the same, but they vary widely on the craziness spectrum. Homeland Security decided that colors are passé as a way to measure threat, so here is my patented Herman Cain “I am America” smile threat level system. The Baseline: There are some basic conservative calling cards that the GOP tax plans share. They would all eliminate the 15 percent capital gains tax (Mitt Romney would only eliminate the tax for families making less than $200,000 a year) and the estate tax, and all the candidates have vowed to repeal the Affordable Care Act and Dodd-Frank. If your only source of news for the past couple of weeks has been the GOP debates, you would think that these were the two most dangerous pieces of legislation ever to be passed in the United...

Europe Buys Some Time

The stock market liked the European deal that was announced in the wee hours of Thursday morning. At this writing, the Dow is up 268 points. But the market, as is so often the case, could well be wrong. For starters, this is not yet a done deal. The European leaders agreed that the banks will take "voluntary" losses of about 50 percent on their holding of Greek bonds, so that the Greek economy can gain some room to breathe—but the banks did not agree. Charles Dallara, who heads the international bankers' lobby, the misnamed Institute for International Finance, was quoted by The Wall Street Journal as saying that "there is no agreement on any element of a deal." He later told CNBC that the deal was "voluntary," permitting issuers of credit-default swaps (mostly banks) to avoid payments they would have to make in the case of a formal restructuring or a default. But never underestimate the ability of banks to impose their losses on somebody else. Under the proposed deal, the banks also...

What Americans Make

Last Friday, the Social Security Administration released its figures on how much money Americans made in 2010 from wages, salaries, and tips (but not from capital gains, dividends, or rents). Turns out that the 150,398,796 Americans for whom employers issued W-2 forms made just over $6 trillion in net compensation. If you calculate the raw mean average, that comes out to $39,959.30 per worker. But 66 percent of wage earners actually made less than that (or that amount exactly)—which means, the high level of pay for upper-income workers produced a much higher mean average than the average American worker actually makes. The median wage—the dollar amount that 50 percent of wage earners made more than, and 50 percent made less than—was $26,363.55. Twenty-six thousand bucks is what the average American worker makes on the job. That’s right in line with the figures for median household income, which hover around $49,000 once you total the income for everyone at home who has a job. To be...

The GOP's Broken Record

For the eight years of the George W. Bush presidency, economic policy in the United States had as its lodestar the view that we needed to lower taxes. Liberals objected that Bush-era tax-policy proposals were regressive, tilting the majority of their benefits to high-income taxpayers who had the least need for additional funds. The retort at the time was that this was a misleading way to think about it: The lower taxes weren't simply designed to bolster individual incomes; they were supposed to bolster overall economic growth. Higher growth rates would result in higher incomes for people up and down the economic ladder. The results of this policy have been disappointing, to say the least. Even those who claim that the economic health of the middle class is being understated are producing charts that show ten years of flat incomes for the median American household . In response, Republican presidential candidates are uniformly proposing new rounds of regressive tax cuts. The right's...

Rick Perry Promises Four Years of Abysmal Job Growth

Texas Governor Rick Perry has released his first television ad, and in it, he makes a big promise. “As president, I will create at least 2 and half million new jobs.” The problem, as Steve Benen points out , is that this is a lot less impressive than it sounds. Since the recession officially ended a year and a half ago, the economy has added 2.56 million private-sector jobs . Unfortunately, thanks largely to public sector layoffs, net job growth comes to 2.1 million jobs. Even still, President Obama’s record of 2.1 million jobs in eighteen months – lackluster as it is – is far preferable to Perry’s promise of 2.5 million jobs in four years.

Doomed to Fail

Once again, the Obama administration has announced a plan to shore up housing prices and underwater homeowners—and once again the plan is very likely to fail. This latest effort will try to use Fannie Mae and Freddie Mac, now wards of the government, to help homeowners refinance mortgages at lower interest rates. The premise is that with interest rates at record lows, homeowners can save hundreds of dollars a month in their mortgage payments by refinancing. For example, by refinancing a 5.5 percent mortgage to a 4.5 percent mortgage, a homeowner with a $300,000 loan could save about $250 a month. In theory, as many as 1.6 million people could qualify for this kind of refinancing, putting more money in their pockets. So this new program would be a source of economic stimulus as well as housing relief. But the devil is in the details. Fannie and Freddie lost a ton of money in the subprime disaster. That’s why the government had to take them over. So the last thing they want to do is...

Steve Jobs and the Chinese Wall

Walter Isaacson’s biography of Steve Jobs hit the bookstores on Monday (or, worse, the websites that have replaced bookstores as the place where people go to buy books), and the more piquant details have already started popping up in the press. Among those details—actually, it’s a good deal more than details—is Jobs’s Manichean view of humankind (at least, those elements of humankind with whom he came into contact). As Michael Rosenwald summarizes it in Monday’s Washington Post : In his personal life, [Jobs] was capable of seeing people in only two ways – as enlightened or as bozos. There was no in-between, and he would ruthlessly cast aside whoever he deemed a bozo…. Those who were deemed enlightened were granted the right to work with Jobs in his binary world where products were either ‘the best’ or ‘totally [expletive],’ Isaacson writes. Isaacson’s description may make it easier to understand Apple’s production process, in which its products were designed to a fare-thee-well in...

Occupy Wall Street's Race Problem

Young protesters at an Occupy Wall Street demonstration in New Jersey Oct. 6 with a debt=slavery sign.
The economic crisis has disproportionately affected people of color, in particular African Americans. Given the stark economic realities in communities of color, many people have wondered why the Occupy Wall Street movement hasn’t become a major site for mobilizing African Americans. For me, it's not about the diversity of the protests. It's about the rhetoric used by the white left that makes OWS unable to articulate, much less achieve, a transformative racial-justice agenda. One of the first photos I saw from the Occupy Wall Street protests was of a white person carrying a flag that read “Debt=Slavery.” White progressive media venues often compare corporate greed or exploitation to some form of modern-day slavery. But while carrying massive amounts of debt, whether in student loans, medical bills, or predatory balloon-payment mortgages is clearly a mark of a society that exploits poor and working-class people, it is not tantamount to chattel slavery. In...

Occupy the Web

AP Photo/John Minchillo
This is a guest post from sociologists Neal Caren and Sarah Gaby of UNC -Chapel Hill. The paper they are discussing is available here . While Occupy Wall Street has received most of its attention for its sustained public displays of numbers and commitment in New York City and many other locations, the movement also has an impressive online infrastructure. In addition to individual websites, multiple Twitter hashtags and dozens of Livestreams, more than 400 Facebook pages have been established in support of various US Occupy mobilizations. In order to begin to understand how activists and their supporters are using Facebook, we have been creating an archive of all the posts and comments shared on these pages since the movement began. In our working paper, we detail the data we have collected, including trends by location and major categories of posts; here we highlight some of the basic trends we have identified. The data here includes information collected up until October 17th. A...

Businesspeople Don't Always Make Good Politicians

The Huffington Post has early access to the Walter Isaacson biography of Steve Jobs, which – among many other things – reveals the Apple CEO’s distaste for President Obama and his policies: When he [Jobs] finally relented and they met at the Westin San Francisco Airport, Jobs was characteristically blunt. He seemed to have transformed from a liberal into a conservative. ‘You’re headed for a one-term presidency,’ he told Obama at the start of their meeting, insisting that the administration needed to be more business-friendly. […] Though Jobs was not that impressed by Obama, later telling Isaacson that his focus on the reasons that things can’t get done ‘infuriates’ him , they kept in touch and talked by phone a few more times. [Emphasis mine] You should count this as a data point in my contention that business makes a poor training ground for lawmaking. Governing is messy, difficult work, and requires people with a willingness to make deals and sacrifice the perfect to the good. The...

The Wrong Kind of Government Subsidy

Matt Yglesias notes that the city of Seattle is putting up $4 million to subsidize the operations of a downtown public parking garage. This is on top of $1.5 million the city already lent the garage last year. Apparently, when one subsidy wasn't enough to create sufficient demand for the parking spaces, a second was thought a good idea. An even worse example of this kind of government subsidization occurred in the Bronx, where the government paved over neighborhood baseball diamonds to facilitate heavily subsidized parking garages for the new Yankee stadium (even though it is smaller than the old one). Just as in Seattle, the city is going to lose a fortune on this, as very predictably not very many people want to pay $35 to park near a stadium serviced by two subway lines, a commuter railroad, and numerous cheaper parking alternatives. Why New York City taxpayers should be paying to provide parking spaces for some the wealthiest Yankee fans was always unclear. If the market can't...

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