Robert Kuttner

Enter Yellen

AP Images/Eugene Hoshiko
With President Obama’s belated decision to name Janet Yellen to chair the Fed, several questions arise. First, is Yellen likely to be confirmed? Almost certainly. The Republicans have lost a lot of public support by shutting down the government and playing chicken with the debt ceiling. They are not likely to trifle with the one functioning branch of government. Despite the Republicans’ intermittent uses of the filibuster, I’d be surprised if they went to the barricades to block Yellen. Second, there is the question of whether Yellen will have the same working majority on the Fed’s board of governors and open market committee that Ben Bernanke has enjoyed. There are now three vacancies on the Fed. One will be filled by Treasury Undersecretary for International Affairs, Lael Brainard, a woman who is close to both Larry Summers but also to Dan Tarullo, the progressive Fed governor responsible for banking regulation at the Fed. However, the shift of Fed Governor Sarah Bloom Raskin to be...

Budget Roulette: The Uncertain End Game

AP Images/Carolyn Kaster
AP Images/Carolyn Kaster This budget crisis, weirdly, has nothing to do with the budget. It is the expression of the Tea Party Republicans’ animus against Obamacare, their general loathing of government, and their willingness to resort to wildly destructive tactics. As Senate Majority Leader Harry Reid, one of the few heroes in this mess, put it so aptly, “They’ve lost their minds.” A fine irony is that one of the few things that the government shutdown doesn’t affect is the Affordable Care Act, which takes effect today. The Act is a mandate to purchase affordable insurance via hybrid “exchanges,” which are not closed by the failure to approve a budget. In a just world, the extremist Republicans would take the fall. Republicans as conservative as Dana Rohrabacher of California, who came to prominence as an ally of the John Birch Society, and arch conservative Karl Rove, have warned that the Republicans are courting political suicide. “What we’re doing here is shooting ourselves in the...

Obama’s Foreign-Policy Realism

AP Images/Meisam Hosseini
AP images/Meisam Hosseini President Obama’s attempted rapprochement with Iran and Syria takes him full circle, back to the Obama of the 2008 campaign and the Obama who was (prematurely) awarded the Nobel Peace Prize. Evidently the United States is now willing to foreswear the use of force if these still-nasty regimes will give up weapons of mass destruction. It’s both a remarkable shift, and a low bar. This new course presents a tricky set of diplomatic challenges. It falls squarely within the school of foreign policy known as realism: give up on ideals that are unattainable and focus on those that serve core national interests and that can be achieved at proportional cost, even if that means making peace with regimes you detest. In modern times, Henry Kissinger, sponsor of détente with China, was the great advocate of realism—with the notable exception of the failed crusade in Vietnam. Realism says that we should try to get along with even brutal status-quo powers, not topple them,...

The Fed Stays the Course

AP Photo/Susan Walsh
F inancial markets rallied when the Federal Reserve defied the rumor-mongers and resolved to continue its program of keeping interest rates very low until the unemployment rate improves. There was only one dissenting vote on the Fed’s policy-setting open market committee. What’s going on here? Ever since the run-up to the collapse of 2008, what’s good for Wall Street hasn’t exactly been good for the rest of the economy. Are these ultra-low interest rates just pumping up more financial bubbles, as critics fear? Or does a still weak economy need this form of stimulus? Think of it this way. There are risks to continuing a policy of very easy money, but premature tightening would be even worse. The markets and the pundits got this one wrong because the hawks in the Fed system had been leaking rumors that they had the votes and that the Fed would soon be “tapering” (pulling back) its program of $85 billion-a-month in bond purchases. Chairman Ben Bernanke, to appease the hawks, lent...

Shutdown Report: How to Play Chicken and Lose

AP Images/J. Scott Applewhite
AP Images/J. Scott Applewhite R epublicans are likely to incur serious political damage in their effort to hold hostage continued funding of the government in exchange for deep spending cuts. This routine has become an annual ritual, and in the past President Barack Obama has been the first one to cave. The 2011 Budget Control Act, which includes the automatic sequester, is one bitter fruit of the president’s past failure to hang tough in the face of Republican extremist demands. But this time is different. The Tea Party Republicans, who dominate the GOP House Caucus, are demanding that President Obama de-fund the Affordable Care Act in exchange for their willingness to fund ordinary government spending in the new fiscal year, which begins October 1. But they picked the wrong demand. In the past, Obama was willing to make deep cuts in federal spending in order to get a budget deal with Republicans. The Affordable Care Act, however, is a nonnegotiable for the president. It’s his...

Did Summers Spoil It for Yellen?

AP Images/Mark Lennihan
AP Images/Mark Lennihan Now that Larry Summers is out of contention for chairman of the Federal Reserve, the nomination of Janet Yellen should be assured. Unfortunately, Yellen still is far from a safe bet. Her qualifications, certainly, are not in doubt. Yellen is currently vice chair of the Fed and before that she was president of the Federal Reserve Bank of San Francisco. She has had a distinguished academic career, which she interrupted to serve as chair of President Clinton’s Council of Economic Advisers, and after that, as a governor of the Federal Reserve. Yellen is better positioned than any other woman to break the glass ceiling that has kept the Fed from having any female chair throughout its century-long history. Yellen, who began her scholarly career as a labor economist, has also been outspoken about the need for the Fed to continue its policy of economic stimulus to help strengthen the faltering economic recovery. Nobel Laureate Joseph Stiglitz, who preceded her as chair...

A True Liberal Mayor At Last?

AP Images/Bebeto Matthews
New York City is on the verge of electing its first progressive mayor in a generation. In most polls, Public Advocate Bill de Blasio is well over the 40 percent threshold required to avoid a runoff in the Democratic Primary. And in the Big Apple, the Democratic nomination is tantamount to a win. Even if he is pushed into a runoff, DeBlasio is strongly favored to come out on top. The early front runner, Christine Quinn, stumbled badly, partly because of her close association with Mayor Michael Bloomberg. As city council chair, Quinn was the key enabler of Bloomberg’s overriding of the city’s term limits law. All of Bloomberg’s latent unpopularity among the non-affluent began culminating during his final months in office, and it cascaded onto the unfortunate Quinn . Even among women, she has only 19 percent support in the polls. Quinn had been poised to become not only New York’s first female mayor but its first lesbian mayor. But that historic breakthrough is on the verge of being...

The Summers Dossier

AP Images/J. Scott Applewhite
To: President Obama From: Your Political Team Re: Larry Summers Vetting Report Dear Mr. President, Welcome home. You have several immense challenges in the coming days and weeks: marshaling support for the Syria attack, dealing with the next artificial budget crisis contrived by the Republicans, and continuing to move forward with implementation of the Affordable Care Act against fierce partisan opposition. This memo on Larry Summers’s confirmation as Federal Reserve Chairman is written with all that in mind. The staff investigation of Summers in anticipation of a potentially bruising confirmation hearing is now complete, and you face a tricky decision. On the one hand, there is no single smoking gun that disqualifies him outright. With a lot of political heavy lifting, we might get Summers confirmed. On the other hand, it would eat up a lot of political capital and credibility at a time when we are seeking to rebuild both, not to incur political debts needlessly. Here are Summers’s...

Fashioning Justice for Bangladesh

AP Images/Ismail Ferdous
AP Images/Ismail Ferdous O n April 24, the Rana Plaza garment factory in Bangladesh collapsed, killing 1,129 workers and injuring at least 1,500 more. Most were young women earning about $37 a month, or a bit more than a dollar a day. The collapse was the worst disaster in the history of the global garment industry, evoking the 1911 Triangle Shirtwaist factory fire in New York City. The Rana Plaza factory made apparel for more than a dozen major international fashion brands, including Benetton, J.C. Penney, and Wal-Mart. This was the third major industrial accident in Bangladesh since November, when 112 people were killed in a fire at a garment factory producing mainly for Wal-Mart. At Rana Plaza, cracks appeared in the eight-story building the day before it collapsed. Police ordered an evacuation of the building. But survivors say they were told that their pay would be docked if they did not return to the factory floor, and most did. Bangladesh, a nation of more than 160 million, has...

Mortgage Reform: Watch Your Fannie

AP Images/ Manuel Balce Ceneta
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. Obama said, “For too long these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag. It was 'heads we win, tails you lose,' and it was wrong. The good news is right now there's a bipartisan group of senators working to end Fannie and Freddie as we know them. And I support these kinds of reform efforts." It sounds good, but there is reason to worry that this plan would protect the government against losses but at the price...

Post-er Boy Bezos

AP Photo/Richard Drew
AP Photo/stf/bd M ost liberals I’ve spoken with are appalled that Amazon founder and CEO Jeff Bezos is buying The Washington Post . I’m no great fan of Bezos or of Amazon’s user-friendly though predatory retailing tactics, but here is a contrarian view of the Post purchase. A widely-shared concern is that one of the last family-owned newspapers with a sense of civic mission is being bought as a trophy property by a billionaire. But wealthy moguls have always been the owners of newspapers. Occasionally, we get lucky with a family that happens to care about the public wellbeing, such as the Sulzbergers at The New York Times , the Grahams at the Post , or the Bancroft family at The Wall Street Journal in the pre-Rupert Murdoch days. But for every one of those, there is a Murdoch or a Hearst. Alas, The Washington Post is no longer your father’s Post . It’s been a long downward slide since the glory days of Kay Graham, Ben Bradlee, Woodward, and Bernstein. The current publisher, Katharine...

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. Revised figures show that GDP growth fell to a rate of just 1.4 percent in the first six months of 2013, even less than last year’s dismal rate of 2.2 percent. These numbers are not enough to create an adequate supply of jobs, much less good jobs, much less wage growth. And sure enough, when the employment numbers for July were released on Friday, the grim trend was confirmed. Just 162,000 jobs were added in July, and most of them were relatively low-wage jobs. Average earnings actually fell. At this rate it will take another six years to get unemployment back to pre-2008 levels according to the Economic Policy Institute, and more than a decade according to the Hamilton Project. The official unemployment rate dropped slightly, from 7.6 to...

Must Austerity Keep Winning?

T he 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. So austerity is the wrong medicine for the prolonged aftermath of a financial collapse. Case closed. But hold on. Winning the intellectual debate doesn’t matter, because we keep losing the politics. Until we start changing the policies, or at least begin causing more political embarrassment for the budget hawks, austerity will reign, no matter how perverse...

Brave Words, Awaiting a Stronger Program

AP Photo/Susan Walsh P resident Barack Obama gave a fine speech at Knox College, the scene of one of his most effective pre-presidential moments—a 2005 commencement address he gave as an Illinois senator. Now we need to see whether he follows up with a clear and comprehensive program and brave politics to match. On the plus side, he did not shrink from calling out the Republicans for their sheer negativity and their embrace of trickle down economics. If you ask some of these Republicans about their economic agenda, or how they’d strengthen the middle class, they’ll shift the topic to “out-of-control” government spending—despite the fact that we have cut the deficit by nearly half as a share of the economy since I took office. Or they’ll talk about government assistance for the poor, despite the fact that they’ve already cut early education for vulnerable kids and insurance for people who’ve lost their jobs through no fault of their own. Or they’ll bring up Obamacare, despite the fact...

Nothing to Hide, Much to Fear

AP Photo/Marcio Jose Sanchez
I n reviewing the public’s ambivalent reaction to the disclosures of NSA data mining , I find that some people conclude that it’s no big deal, while others are uneasy but can’t quite explain why. It’s just a modest generic invasion of privacy that is not even activated in most cases. Presumably, this is a weapon that the authorities need to keep us safe. After closed-door hearings yesterday, some skeptics on Capitol Hill were somewhat reassured that safeguards are adequate. If you are in this camp, here are three good reasons to reconsider. First, the history of such surveillance is that it tends to be abused. As heedless of civil liberties as Attorney General Eric Holder has been, he is surely better than whoever the next Republican Attorney General might be. Remember Alberto Gonzalez? Secondly, the authorities tend to define terrorism down. After the Patriot Act was passed, Attorney General Gonzalez kept assuring the Congress and the American public that its sweeping powers would...

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