Robert Kuttner

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...

The End of the Austerity Crusade?

Rex Features via AP Images
I s President Obama planning to reverse course on deficit reduction? You will recall that the president joined the deficit-hawk crowd in calling for more than $4 trillion of deficit reduction over the next decade; that he has offered to cut Social Security and Medicare as part of a grand bargain (that the Republicans mercifully rejected); that it was Obama who appointed the Bowles-Simpson Commission; and that his own budget for FY 2014 includes substantial spending cuts. But, with the 2014 midterm election looming and the recovery stuck in second gear with mediocre job creation, there is zero chance of a grand-budget bargain that includes tax increases, and interest rates are creeping up (which will slow the recovery further). Europe demonstrates that austerity economics are a proven failure. Even the International Monetary Fund says so . So let us read the tea leaves. First, the president has just named Jason Furman to chair the Council of Economic Advisers (CEA). Furman was a...

Jobs: The Bigger Picture

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The government’s April jobs report produced some happy headlines and a big stock market rally. The dismal March jobs tally was revised upwards from under 100,000 new jobs to a still feeble 138,000. In April, the economy created 165,000 jobs. The nominal unemployment rate dropped all the way from 7.9 percent to 7.5 percent. But look a little deeper and you’ll appreciate just how crummy these numbers are. The typical new job pays far less than the jobs that have been lost. We are still down a net 2.8 million jobs from the number of people who were employed in 2007 before the recession started. All told, there are 22 million Americans either unemployed or under-employed—looking for full-time work and not finding it. One telling indicator is the very low percentage of people who are in the labor force. Before the recession, in 2007, the employment-to-population ratio was above 63 percent, down slightly from its peak of over 64 percent in 2000. Since the great collapse, the ratio has been...

A Crossroads for Hillary

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Titanic Belfast / Flickr H illary Clinton is making all the early moves of someone preparing to run for president, though she has given herself plenty of time to rest, rejuvenate, and review a final decision. Now, however, President Obama’s ill-conceived plan to cut Social Security benefits via a “technical” change in the inflation index will force Clinton to make an awkward choice. Most Democrats in both houses of Congress are not happy with this backdoor cut in Social Security. It is both fiscally unnecessary and spectacularly bad politics. Republican leaders are already bashing Obama for selling out retirees. After Obama released his budget, Republican Congressional Committee Chairman Greg Walden of Oregon went on CNN to accuse the president of "a shocking attack on seniors." Resolutely defending Social Security in the face of periodic Republican forays at cutting or privatizing America’s most popular program has always been one of the Democrats’ great appeals. Obama gave that away...

Jack Lew: Obama’s Austerity Ambassador

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There is something seriously off about the mission of the new Treasury secretary, Jack Lew, to Europe. Secretary Lew has been visiting European capitals to persuade leaders there to ease up on the austerity. He has not had a good reception. Speaking at a joint press conference with the chagrined Lew in Berlin, Wolfgang Schauble, the German finance minister and uber-austerity enforcer, dressed down Lew thusly: “Nobody in Europe sees this contradiction between fiscal consolidation and growth.” Nobody among the elite, that is. Ordinary people in Greece, where output has declined by nearly 25 percent since the austerity tonic began, surely see the contradiction. So do young people in Spain, where the youth unemployment rate has reached 56 percent. Even if the cure should eventually work—which it won’t—we will have lost a whole generation. Only in the rarified power precincts of Brussels and Berlin is austerity “working.” But Jack Lew doesn’t exactly come to this mission with clean hands...

Destroying the Economy and the Democrats

AP Photo/Susan Walsh
AP Photo/Susan Walsh President Barack Obama speaks at the Police Academy in Denver yesterday. J ob creation slowed to just 88,000 in March, signaling a sluggish economy. And President Obama, with unerring timing, picked this moment to put out an authorized leak that he is willing to put Social Security and Medicare on the block as part of a grand budget bargain that will only slow the economy further. The deterioration in economic performance was all too predictable, given the combined lead weights of the March 1 $85 billion of budget cuts in the sequester and the January deal to raise payroll taxes by about $120 billion. (The tax hike on working people was almost double the much-hyped tax increase on the top one percent, which totaled a little over $60 billion.) Taken together, these twin deflationary deals cut the deficit by around $270 billion dollars this year. That’s close to two percent of GDP. And according to the Congressional Budget Office, this combined contractionary...

Cyprus's Big Bluff

AP Photo/Petros Karadjias
The Cyprus banking crisis presents, in microcosm, everything that is perverse about the European leaders’ response to the continuing financial collapse. And bravo to the Cypriot Parliament for rejecting the EU’s insane demand to condition a bank bailout on a large tax on small depositors. If this crisis threatens to spread to other nations, it’s a good object lesson. Here is the punch line of this column: It's time for Europe’s small nations, who are getting slammed into permanent depression by the arrogance of Berlin and Brussels, to think about abandoning the euro. At least the threat would strengthen their bargaining position, and if they actually quit the euro, the result could hardly be worse than their permanent sentence to debtors’ prison. More on that in a moment. The back story: Cyprus, with just over a million people, is not a poor country. Its per capita GDP is actually above the European Union average. Cyprus has only used the euro since 2008. Once Cyprus was in the...

Grover Norquist’s Last Laugh

Flickr/Gage Skidmore
When President Obama got Republicans to raise taxes on the top one percent of income earners as part of the January deal that ended the threat of the fiscal cliff, some Democrats gloated that Republicans had been made to go back on the famous Grover Norquist pledge never to raise taxes. It appeared that Obama, fresh from his November victory and taking advantage of Republicans’ divisions, had won big. Well, think again. If you compare the leverage that Obama had in that set of bargaining with the leverage he has now in the post-sequester budget negotiations, it is like night and day. Had Obama hung tough and demanded a lot more in the way of tax increases on the wealthy, Republicans were just stuck—because no action would have caused taxes to increase on everyone. Obama had begun the bargaining requesting a reversion to the pre-Bush tax levels on the top two percent, targeting revenue increases of at least $1.6 trillion over a decade. Instead, he settled for just $620 billion—meaning...

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