Economy

Mortgage Reform: Watch Your Fannie

AP Images/ Manuel Balce Ceneta

Speaking in Phoenix on Tuesday, President Obama associated himself with a bipartisan proposal to slowly get Fannie Mae and Freddie Mac out of the business of backing mortgages. According to the plan, formulated in the Senate, a new federal agency called the Federal Mortgage Insurance Corporation would backstop banks and other private investors against catastrophic mortgage losses, but only after they had run though their own substantial capital first.

L.A. Story

The Los Angeles Alliance for a New Economy: a new model for American liberalism?

flickr/AlphaProject

Take a left as you exit the Long Beach Airport, and you’ll pass three acres of greenery named “Rosie the Riveter Park.” The park stands at the southeast corner of what had once been the mammoth Douglas Aircraft factory, where DC-3s, -4s, -5s, all the way up to -10s, were once manufactured, and where, during World War II, 43,000 workers, half of them women, built the B-17 bombers and C-47 transports that flew missions over Europe and the Pacific.

World War II and then the Cold War remade Long Beach. Federal dollars funded the Douglas factory, a new naval shipyard, and numerous defense firms. An entire city—the working-class community of Lakewood, which borders Long Beach on the north—was built to house the sudden influx of defense workers. Long Beach became and remains the second-largest city in Los Angeles County.

The new jobs paid well; powerful unions represented the workers in the factories and on the docks. Military spending, though, began to decline after the Vietnam War, and when the Cold War ended, Long Beach and the broader Los Angeles economy took a hit from which neither has recovered. The naval shipyard closed in 1997. Douglas, Lockheed, and North American Aviation—the aircraft manufacturers that had been the region’s largest private-sector employers—downsized and eventually shuttered almost all their Southern California plants.

Part-Time America

AP Images/Matt Slocum

Of the 963,000 jobs created in the past six months, according to the Bureau of Labor Statistics’ (BLS) Household Surveys, 936,000 of them are part-time. That doesn’t mean that just 27,000 of the people hired on to new jobs got full-time work. The total for part-time jobs includes both newly created jobs and formerly full-time gigs that were cut-back to part-time, and the BLS doesn’t pose the questions that would enable it to quantify these two kinds of new part-time jobs. But factoring in both kinds, we do know that the net number of full-time jobs in America has risen by just 27,000 since the end of January.

The Long Road to a Decent Economy

AP Images/Carolyn Kaster

To underscore a weeklong initiative by President Obama on behalf of rebuilding the middle class, the latest figures on GDP growth, released Thursday, and on job growth, made public Friday, show just how far from a healthy middle class economy we are.

Young Detroiters Double Down

The American Prospect/Aaron Cassara

Margarita Barry was nursing her eight-month-old and browsing the news online when a headline caught her eye: “Detroit Declares Bankruptcy.” Pretty soon, her inbox and Facebook feed were clogged with reports from family and friends sharing the news that Detroit had become the largest U.S. city ever to file for Chapter Nine. Barry, a 28-year-old African American web designer and entrepreneur who was born and raised on the northwest side of the city, knew it would happen eventually. “It was only a matter of when,” she says.

Strikes, Alliances, and Survival

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Fast-food workers in seven cities are set to walk off their jobs today in one-day actions, escalating what is quickly becoming a nationwide effort to win pay hikes in one of America’s premier poverty-wage industries. Backed by the Service Employees International Union (SEIU), the campaign is succeeding in publicizing the plight of low-wage workers in a growing number of states and cities.

The Commodities Market: A Big Bank Love Story

The Fed loosened rules to allow banks to buy commodities, driving up everyday prices for consumers. Who the next chair is matters if these kinds of practices are ever to be stopped. 

AP Images/Carolyn Kaster

Who becomes the next Federal Reserve chair matters, not only because of the implications for economic and monetary policy, but because the Fed remains one of the nation’s chief financial regulators. There are dozens of policies, some we don’t even know about, over which the Fed wields critical influence. While the past year has seen a small but important shift toward tighter controls, particularly on the largest Wall Street institutions, all of that could change if President Barack Obama selects another deregulator in the Greenspan tradition.

Must Austerity Keep Winning?

The EU’s extreme version of budget cutting has pushed the European economy ever deeper into its worst recession since World War II. The United States, pursuing a bipartisan target of $4 trillion in budget cuts over a decade, is mired in an economy of slow growth and inadequate job creation. Our government’s failure to give debt relief to indentured college students and underwater homeowners functions as a multitrillion-dollar twin drag on a feeble recovery. The smart money knows just how weak this economy is. Federal Reserve Chair Ben Bernanke had only to suggest that he might nudge interest rates up a bit, and markets panicked.

Subsidizing Poverty

AP Images/Rich Pedromcelli

Want to know the problem with enterprise zones? Then check out Sunday’s Riverside Press Enterprise, one of the best midsized newspapers in California.

A story in it covers Governor Jerry Brown’s successful campaign to have the legislature put enterprise zones out of their misery. (Brown recently signed the bill abolishing the zones.) Conceived by the late Jack Kemp and other unusually well-meaning right-wingers to bring jobs to the inner-city, enterprise zones have provided subsidies to businesses for creating jobs they might have created in any case. Disproportionately, the jobs created were low-paying.

The Depressing Picture of Economic Mobility in America

Today's New York Times has a big article by David Leonhardt on a new study of income mobility with a bunch of interesting findings, the core of which is that, especially for middle-class and poor people, where you live matters tremendously to your chances of improving your economic station. Here's an excerpt:

What Tom Friedman Doesn’t Understand About the Economy, Part 72

AP Images/Charles Dharapak

“Average is over,” New York Times columnist Tom Friedman likes to proclaim, and in at least one particular, he’s right. Friedman no longer writes average columns. With each passing week, his efforts become steadily more moronic.

His latest, in Sunday’s paper, is entitled “Welcome to the Sharing Economy,” and in it, Friedman mistakes economic marginality and desperation for innovation and opportunity. The subject of this particular essay is Airbnb, a website where travelers go to rent bedrooms in other people’s homes.

Coming Home for the Recession

AP Photo/Bob Leverone

One mosquito-heavy evening in May, I met 30-year-old Pat Valdez near San Antonio’s old Lone Star brewery. Valdez makes $15 an hour working in the human-resources department of Wells Fargo. She takes classes part-time at an online university, where she hopes to earn a degree in journalism. With $30,000 in student-loan debt, she’s living paycheck to paycheck. But unlike other Millennials struggling to make ends meet on their own, she’s not in dire straits. After a short, “way too expensive” stint in California living with her older brother, she’s back at home with her parents.

The Great Detroit Betrayal

AP Photo/Paul Sancya

Detroit has filed for bankruptcy. Most of the spot-news coverage has focused on the immediate fiscal crisis of the city, but the immediate fiscal crisis really isn’t what got the city into such deep trouble. Certainly, Detroit’s contracts with its employees and its debts to its retirees don’t really explain anything about how and why this once-great city has come to such grief. Those contracts and retirement benefits are par for the course for major American cities—certainly, no more generous than those in cities of comparable size.

Any remotely accurate autopsy of the city will find that the cancer that killed Detroit was the decline of the American auto industry.

Netanyahu versus the EU

EU sanctions against Israeli settlements are a warning from friends that their patience has run out.

Sipa via AP Images

"This is the chronicle of a crisis foretold years in advance," said the Israeli ex-ambassador to Germany, in that petulant tone of a diplomat working very hard not to sound infuriated. Shimon Stein was trying to explain new European Union sanctions against Israeli settlements. Neither journalists nor politicians should sound so shocked by the EU move, he lectured the anchor of state radio's morning news program. He was right, but he was trying to outshout a hurricane of public anger and disbelief. The anchor herself had begun the show with a riff of indignant surprise that the EU considered her Israeli neighborhood in East Jerusalem to be a settlement.

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