The European authorities seem determined to drive the continent into a repeat of the Great Depression.
The European Central Bank keeps playing a cute game designed more to impress the Germans than the financial markets or to provide real relief. Mario Draghi, ECB president, offers to buy unlimited amounts of the bonds of states that are being pummeled by speculators, but then undercuts his own offer by conditioning it on punishing austerity.
By all accounts, this was the Republicans’ election to win: an economy stuck at a level insufficient to generate enough jobs or income gains; a somewhat disillusioned Democratic base; and a stunted generation of young adults who supported Barack Obama last time by a margin of 71-29 and are unlikely to do it again.
Yet Obama’s lead keeps widening. It’s worth unpacking why.
The most obvious reason, of course, is the sheer clumsiness of Mitt Romney, God’s gift to the Democrats. If a computer had been asked to generate a candidate guaranteed to alienate independents and divide his own base, it could not have done better.
Former governor Mitt Romney’s serial gaffes seem to be doing cumulative damage not just to his own campaign, but to Senate and even House races.
In the days since Romney’s clumsy attempt to make political gain from the murder of Ambassador Chris Stevens, Politico’spiece revealing ineptitude and finger-pointing at the Republican National Convention, and the leak of the infamous “47-Percent” video, Democratic Senate candidates in most contested seats have opened up leads, according to usually trustworthy polls.
Lots of Republican conservatives, Paul Ryan and Bill O’Reilly among them, have taken the position that even if Mitt Romney’s rhetoric was clumsy, his point was basically right. Some Americans pay taxes; others collect benefits.
But his basic claim was total baloney. When you count income taxes, payroll taxes, excise taxes, and highly regressive state and local taxes, the typical lower income working American pays about one-fifth of his or her income in taxes—more than Mitt Romney!
According to a study by Citizens for Tax Justice, the bottom fifth of the income distribution paid 17.4 percent of their income in state and local taxes. The second-poorest fifth paid 21.2 percent.
Mitt Romney is the gift that keeps on giving to Democrats. The ancient Greeks had word for it—a phrase, actually: Character is Fate.
In one misstep after another, Mitt keeps revealing his true character. What we’re learning about him is that he is another rich guy who is disdainful of ordinary people; that he can’t speak off the cuff without blundering; and that he is clueless when it comes to foreign policy—not to mention ordinary diplomacy.
A lovely pattern has set in. Mitt says something truly dumb and alienating to ordinary Americans. The campaign goes into panic mode, and can’t decide whether to walk it back or double down.
Ben Bernanke’s announcement Thursday that the Fed would keep easing money sent the stock market soaring, but more important was his declaration that there is only so much the Federal Reserve can do.
The Fed’s latest move, approved by the policy-setting Open Market Committee, will buy a total of $85 billion in bonds every month, including $40 billion per month of mortgage-backed securities. This pumps vast sums into the economy. It is the equivalent of printing money. Bernanke’s hope is to drive down interest rates generally, especially on home mortgages.
In late July, European Central Bank (ECB) President Mario Draghi, speaking off the cuff in London, pledged to do “whatever it takes” to save the Euro, including massive intervention in bond markets to keep speculators from extending the Greek disease to Spain and Italy, where interest rates were ominously rising. This impressed money markets for a few days—until investors realized that Draghi’s commitment came with big strings. Strapped countries benefitting from these purchases would first have to double down on austerity. No thanks, said the leaders of Spain and Italy.
The August jobs report of the Labor Department is not great news either for the U.S. economy or for the Obama campaign. The headline drop on the measured unemployment rate, from 8.3 to 8.1 percent, conceals deeper weaknesses.
The economy generated only 96,000 jobs in August, far lower than the monthly average of around 200,000 in the spring. The nominal unemployment rate declined only because more people have given up looking for work. The ratio of employment to population declined by 0.2 percent.
The Labor Department also revised the July and August monthly jobs numbers downward by about 20,000 each, leaving the 2012 job-creation performance below that of 2011.
“I’m not a member of any organized political party,” Will Rogers famously declared, “I’m a Democrat.” Rogers would not recognize the 2012 Democrats. I’ve been attending conventions since 1964, when as a student I smuggled floor passes to the Mississippi Freedom Democratic Party insurgents in Atlantic City. And I’ve never seen anything as well choreographed and unified as night one of the 2012 convention.
The pragmatic Republican establishment (despite the Tea Party, there still is one) is frantic to jettison Representative Todd Akin’s toxic comments on conception and rape, and to quarantine the scientifically-challenged congressman.
Much of the commentary has been about how Akin’s clumsiness connects to Republican vulnerability on other issues important to women. But this raises a larger question: Why is the Republican lunatic position politically toxic only on this particular issue?
Back to Full Employment, by Robert Pollin. A Boston Review Book. The M.I.T. Press. 187 pages. $14.95
Achieving full employment has been at the center of the progressive project for more than a century. If work is available at decent wages for everyone who wants it, then the rest of the agenda is a lot easier. Opportunity proliferates. People feel a sense of dignity and worth. Human potential is fully utilized. In a virtuous circle, adequate purchasing power has a rendez-vous with the economy’s productive capacity. Tight labor markets give workers the leverage to bargain for decent wages. Social-transfer programs can be reserved for special needs rather than being strained to make up for the fundamental lack of decent income.
All the bland platitudes coming out of the Group of 20 Meeting in Mexico can’t disguise the absence of progress on the European crisis. German Chancellor Angela Merkel is totally dug in on the proposition that Greece, Portugal, and Spain need to stick to the austerity medicine that will only deepen the collapse and embolden more speculative attacks on government bonds.
Europe’s top politicians, led by German Chancellor Angela Merkel, seem determined to repeat the same mistakes over and over again. Last weekend, the financial crisis seemed to be contained for the moment when the Germans and the European Central Bank agreed to commit 100 billion euros through the European Union’s (E.U.) rescue funds to recapitalize Spain’s faltering banking system. The Spanish government bargained hard, and won an agreement that the bailout would not be tied to new austerity demands of the sort imposed on Greece and Portugal.
BERLIN—Germany, uniquely, is prospering while the rest of Europe sinks deeper into recession. And the recession is substantially the result of the very austerity that Chancellor Angela Merkel is imposing on the other member nations of the European Union.
Why is Germany spared? One good reason and two bad ones.
The good reason is that Germany promotes manufacturing, with sensible training and technology policies. Its industries have partnerships with effective unions. So Germany’s huge export surplus means that it can have tight budget policies at home and still have plenty of good jobs.
BRUSSELS—Depending on whose narrative you believe, the deepening economic crisis in Greece proves (a) that the dysfunctional and dissolute Greeks just couldn’t get their act together and keep the reform commitments that they made in exchange for debt relief from the European authorities; or (b) it only proves that austerity breeds more austerity.
Cut public spending and wages, and raise taxes in a recession, and you just dig yourself a deeper hole. Since only about 20 percent of the Greek economy is exports and less than 40 percent of export costs are wages, slashing wages just doesn’t produce much of a bounce, especially when the rest of Europe’s economy is contracting too.
Robert Kuttner is co-founder and co-editor of The American Prospect as well as a Demos Distinguished Senior Fellow. He was a longtime columnist for Business Week, and continues to write columns in the Boston Globe. He co-founded the Economic Policy Institute in Washington and serves on its executive committee.