Archive for the ‘The Economy Stupid’ Category

Putting “Mr. Fix It” to Rest Is Key to Obama’s Re-Election

Sunday, June 24th, 2012

Doyle McMannus’s piece in the LA Times last week had a crucial insight into the results of the presidential election: the outcome will depend largely on whether voters view it as a referendum or a choice election.

If voters think their job is to pass judgment on Obama’s performance during his first four years, the president is in trouble. Polls show his job approval rating stuck at a notch below 50%, and for good reason. Unemployment is still high, the economy is struggling and Congress remains gridlocked.

But if voters view the election instead as a choice between two sharply different strategies for fixing the economy, the president has a better chance of being reelected.

Greg Sargent took a deeper look into this idea last month in the Washington Post, pointing out that “sizable majorities agree with key aspects of Obama’s vision of the economy and what ails it.” Sargent points to the few issues such as bank regulation and income inequality that the Washington Post’s Poll surveyed in May, but his analysis can be expanded to a number of issues. Americans have overwhelmingly supported Obama’s position that the wealthy should have to pay higher taxes (and his insistence that rates stay low for middle income earners) as well as his position that budget balancing should include both tax increases and cuts in programs. And while there is skepticism about the effectiveness of the stimulus bill, Americans are broadly supportive of the type of government intervention and investment in the economy that was in the President’s 2011 jobs bill (which was (surprise!) blocked by the Republican Congress).

Despite the fact that voters strongly believe that Obama is “on their side” when it comes to issues that affect them, most voters still give Romney higher ratings on whether he would do “a better job at handling the economy,” which most people agree will be the defining issue of the race.  Sargent notes that breaking Romney’s “Mr. Fix It” spell

gets at the heart of Obama’s challenge: Persuading swing voters that they shouldn’t be seduced by whatever impressions they have of Romney’s economic wizardry, or his “understanding of the private sector,” as his supporters put it. Obama needs to convince people who find Romney’s vow to fix the economy alluring to take a harder look at the actual policies Romney is proposing to get this done, as well as at the larger economic worldview and diagnosis of what’s really gone wrong that has led Romney to offer them.

This is exactly what the Obama campaign has begun to do in recent weeks. The Bain attacks are one prong in this strategy: by pointing out that Romney’s goal at Bain was not creation of jobs, but maximization of profits and pointing out that this goal often came at the expense of working people whose jobs were outsourced, Obama borrows a page from Karl Rove’s playbook, attempting to take the candidate’s greatest strength and turn it into a vulnerability.

But more importantly, Obama has been increasingly focused on pointing out that, despite his so called “knowledge of the private sector,” Mitt Romney effectively is offering the same policies that Republicans have offered for decades and that helped get us where we are today. This was shown most pointedly earlier this month when both Obama and Romney gave competing speeches in Ohio. Obama basically gave a Democratic version of the history of the past 12 years.  After laying out the failures of the Bush Administration and the trickle down economic theories that are at the heart of these policies, the President stated: 

If you agree with the approach I just described, if you want to give the policies of the last decade another try, then you should vote for Mr. Romney…You should vote for his allies in Congress. You should take them for their word and they will take America down this path…. 

I believe their approach is wrong. And I’m not alone. I have not seen a single independent analysis that says my opponent’s economic plan would actually reduce the deficit. Not one. Even analysts who may agree with parts of his economic theory don’t believe that his plan would create more jobs in the short term… That’s not my spin. That’s not my opinion. That’s what independent economic analysis says.

Given the public aversion to the majority of the policies that Romney and Republican legislators are pushing, this has the potential to be a winning argument. Whether it will be drown out by a raft of economic news over the next few months remains to be seen.  

Frontline: Money, Power and Wall Street

Monday, May 14th, 2012

Watch Money, Power and Wall Street: Part One on PBS. See more from FRONTLINE.

Can’t recommend this 4 Part Series on the Financial Crisis and the aftermath enough.

It’s amazing, chilling and sickening.

As frustrating as it is to watch the crisis unfold, it’s even more frustrating to know that the Too Big To Fail conditions that necessitated the bailout still exist.

Awful News for Republicans

Sunday, March 11th, 2012

In awful news for Republicans, things are getting better in this country.

Courtesy of Steve Benen, here’s a color coded chart of private sector job growth since the beginning of the Great Recession.

That makes 24 straight months of private sector growth and this month’s report was extremely positive.

While the employer survey shows that the economy created 227,000 new jobs last month, the household survey shows an increase of 428,000 jobs. The unemployment remained at 8.3%, but that’s only because almost a half a million more people started looking for work last month. Being able to maintain the same unemployment rate while absorbing another half a million people is a very encouraging sign.

Of course, all the usual caveats apply: it’s a giant hole we’re in, we’ll need to sustain these gains for much longer to get back to pre-bubble levels, we had good job growth early last year before Fukushima, the Tea Party Downgrade and the Greek Debt Crisis, and economists are forecasting a smaller growth rate for the rest of the year, which may dampen the rate of increase. Still, we’re off to a good start this year, and there’s finally a sense that we might be emerging from this mess.

Meanwhile, faced with this overwhelmingly positive news, the Republicans either ignored it or denied it, which once again shows how much of a stake they have in things not improving.

Obama and OWS Shift the Debate

Thursday, November 3rd, 2011

 occupiers in New York

A few weeks ago, Steve Benen wrote about how that Obama’s push for the Jobs Bill had shifted the terms of debate in this country onto a more favorable playing field for Obama and the Democrats:

For the better part of 2011, the battle lines were drawn in a way that Republicans loved. The only topics of conversation that were permitted dealt with debt reduction, entitlement “reforms,” spending cuts, and austerity. The question wasn’t whether Washington would impose pain on an already-suffering populace, but how much…

The discourse is now a very different place, because the White House had the sense to take a conversational detour. Thanks in part to a concerted p.r. campaign from President Obama, and with some pushes from Occupy Wall Street, the topics that now dominate are about job creation, financial industry responsibility, and tax fairness.

Rachel Maddow provided more evidence of this last week, when she used the simple measurement of how many times the mainstream media brought up the phrase “corporate greed” before Occupy Wall Street and after Occupy Wall Street. The results are dramatic. As Maddow noted, while much of the focus on Occupy Wall Street has been on the lack of answers the movement is providing, Occupy Wall Street has done something more fundamental: it has changed the questions that are being asked.

As I’ve said before, the top issue for the country is the same issue that it’s been for the past 4 years: jobs, jobs, jobs. For the majority of Americans, it was never about ”Obamacare” and it was never about the deficit. These are important issues, but they are not the core issues for most Americans. They were distractions from the jobs crisis that is plauging the entire country, and even more, they were distractions from the issues that predate the jobs crisis: the ongoing erosion of the middle class.

A recent study of income trends by the Congressional Budget Office showed that, in the past 40 years, incomes increased for the top 1% by over 275% on average as compared to a an 18% increase for the bottom 20% and just under 40% for the middle of the income scale. To many Americans, this will just confirm what they already know: the middle class continues to struggle as the rich get richer.

What looks to be a long term presence of the Occupy Wall Street movement guarantees that these issues will continue to be covered in the news. This is good news for Democrats. To be sure, Democrats have been part of the problem when it comes to regulating big business in America. Even with a 60 vote majority in the Senate, they still didn’t have the votes for a Wall Street reform bill with any teeth. But there’s a difference between being a part of the problem and being a wholly owned subsidiary of the large corporations and top 1% of earners.

As Jonathan Alter notes:

a healthy rebalancing of the national conversation is…under way. The Tea Party directed public anger against the federal government in general and President Barack Obama in particular; Occupy Wall Street directs that ire against Wall Street in general and — inevitably — Romney in particular.

This will have no effect on Romney in the Republican primaries, of course, but in a general election it could make him the poster boy of the big banks that many see as the cause of their woes. The specifics of his record running Bain Capital LLC will be subsumed in the image of his rationalizing the actions (resisting any tax increases) of the “1 percenters.”

But an even more important than the highlighting the consequences of Republican laissez-faire economic policies would be for Occupy Wall Street to put some steel in Obama and the Democrats’ spines and convince them that there is broad support for common sense regulations on big business and other policies that shore up the middle class.

Time will tell, but the events of the past few weeks offer some hope.

The Promise of Occupy Wall Street

Tuesday, October 18th, 2011

A protester holds a sign at the Occupy Wall Street protest last weekend

In 2009 when the Republicans looked like they were about to vanish from the political scene in the United States I was debating online with one of my regular Republican sparring partners and I said something about how the Republicans didn’t stand a chance in the next elections.

He said simply: “we’ll see. There is a great stirring out there.”

He turned out to be right, and 2010 followed 2008.

It’s hard to tell what the ultimate effect of the Occupy Wall Street movement will be on American politics, but it’s clear that the protestors are tapping into something significant and that this could have huge implications for our politics. A month into the movement, protests broke out yesterday in 951 cities across 82 countries.

Most of the criticisms of the movement center on a lack of clarity on their agenda, but a few things seem clear: they’re protesting a system where entrenched special interests call the shots and everyone else pays the price.

No matter what side of the political fence you’re on, it should be clear that the U.S. political system has still not dealt with the problems that led to the Great Recession and the underlying economic and political institutions that enabled those problems. Three years after the economic collapse, we have a real unemployment rate that is close to 15%, a huge deficit problem, the highest spending in years, the lowest taxes in a few generations and a Congress that would rather spend their time casting symbolic votes for a Balanced Budget Amendment than actually coming up with a plan that asks for sacrifice on the part of anyone except the most vulnerable in our society. Their solution to deal with the unprecedented deficits is to give even more tax breaks to the wealthy and dismantle the already frayed American social safety net that so many people fought so hard to create.

The ultimate result of the Tea Party elections in 2010 is that the Congress has been taken over by a small minority of zealots who have done nothing to deal with the problem that most Americans are concerned about: the persistently high unemployment rate. Since the March 2009 lows, the stock market has been on a tear as corporate profits have steadily increased, but the unemployment rate has stayed stubbornly high and now close to 1/3 of Americans are underwater on their mortgages. Meanwhile, the banks that hold these mortgages get money at zero interest from the government which they then turn around and gamble in rigged capital markets that almost guarantee profits.

Moderate legislation to control those banks is opposed by that same small band of ideological zealots who protect these powerful interests and their cowardly Democratic friends who live in fear of being called Socialists for breaking up a cartel that lets four institutions control almost 40%  and ten institutions control 60% of the assets in this country.

Three years after the Republicans were defeated soundly in the 2008 elections, the Bush tax cuts still remain in effect even though the numbers of people who would rather see tax increases on the top 2% before they see cuts in government spending ranges from two-thirds to three quarters of American’s. Once again, even attempts to increase those taxes to the levels they were during the greatest economic boom in twenty years is decried as Socialism.

Meanwhile, the trends on income disparity are even more dramatic. From 1952 to 1982, the percentage of wealth made by the top 10% remained fairly steady at around 35%. Beginning in 1982 the percentage of income made by the top 10% began to increase dramatically. By 2007, at the height of the Bush economy, the top 10% earned more than 50% of the wages in America.  During the same years, middle class incomes remained stagnant and poverty actually increased.

Republicans continue to say that the country is “broke,” but they oppose any attempts to cut back on our military presence around the world while our internal infrastructure continues to crumble and (does anyone see a pattern emerging?) any attempts to make investments in America are decried as Socialism.

Enough already.

Anyone but the Fox addled (and that is apparently a significant segment of America) can see that the Tea Party missed the mark: that the problems of this country don’t end with cutting taxes and starving government; that it’s a galling contradiction to vehemently oppose the bailout and then completely punt when given a chance to support regulations that would prevent the need for the next bailout; that the real problem  is a system that is so controlled by special interests that it makes real change almost impossible, no matter who is in control of Congress.

Many of these problems are intractable and systemic, but others can be remedied with some common sense measures. Occupy Wall Street and their supporters should push for a constitutional amendment rolling back the Citizens United case. I’ll leave the drafting to the lawyers, but an amendment should give the government the power to regulate campaign contributions, should stipulate that corporations are not entitled to the same rights as citizens and that giving money to political contributors shall not be considered speech. Constitutional Amendments are extraordinarily difficult to pass, but the prolonged effort needed will help to create a movement and politicians who believe that giving money is the same thing as speech and corporations are people,” will have to answer for that.

Unfortunately, it may be a long time before conditions are right for Congress to revisit financial reform, but that shouldn’t stop Occupy Wall Street and their allies from pushing for it. 

There are a few premises that should be self evident to anyone who thinks about it for a moment or two:

  1. If a bank is too big to fail, it is too big to exist
  2. Allowing four companies control 40% of the assets in the country isn’t healthy
  3. Banks should not be able to run what are effectively hedge funds out of the back door of their banks.  Make a choice: you are either a hedge fund or a bank. Not both.

Regarding income inequality, when the top 1% control 35% of the wealth in a country and the top 20% control over 85% of the wealth in a country, that is a real problem and it needs to be dealt with. Not only should the rich be paying higher taxes in this country, but the upper middle class should be as well. 

As I said initially, it’s far to early to predict the effect of Occupy Wall Street on American politics. The demonstrator’s demands may not fit within the range of possibilities of our sclerotic political system, un which case they will become an interesting footnote in American history. Still, this movement has potential and I’m cheered by the fact that the Left is finally waking up in this country and that there may finally be a counterweight to the corrosive efforts of the Tea Party.

Photos from Occupy SF

Saturday, October 15th, 2011

 

The 99% are waking up.

Something’s Happenin’ Here

Saturday, October 15th, 2011

And it looks big.

Steve Kornacki: How a One Term President is Made

Monday, July 11th, 2011

Here’s Steve Kornacki on why those abysmal June jobs numbers could be a huge problem for Obama.

Could be an interesting 2012.

I’m With Krauthammer

Tuesday, January 4th, 2011

Just catching up from the holidays and posting a few things I missed while gone.

This is from the aftermath of the tax deal.

While the Democrats were damning the president for giving up core principles and Republicans were crowing about the fact that they got their number one priority (tax cuts for the top 2%) by threatening to stop all legislative activity, (including benefits for 9-11 first responders and tax cuts for 98% of Americans) Fox News Commentator Charles Krauthammer wrote this piece, in which he called the tax cut deal a “really big win for the president.”

He cited some of the same reasons that I had given for arguing that it wasn’t such a bad deal for Obama, namely that Obama, in effect, tricked the Republicans into running short term deficits to stimulate the economy after they spent two years arguing that deficits were no good and very bad, even during a recession.

In a somewhat discordant note, Krauthammer noted that the deal “will add as much as 1 percent to gross domestic product and lower the unemployment rate by about 1.5 percentage points.”… Sounds good to me so far… but, he quickly added, ”that easily could be the difference between victory and defeat in 2012.”

For someone who spends their time writing and thinking about politics, that is a stunning statement to make. We’re in the greatest recession since the Great Depression, hiring has stagnated and we are debating a policy that you believe will add 1% to the GDP and lower unemployment by 1.5%… But you consider that a bad thing because Obama might get re-elected when more people have jobs? That’s positively Limbaugh-esque.

But I digress…Krauthammer followed this one up with another article in which he said that, if Obama is reelected, “historians will mark his comeback as beginning on Dec. 6, the day of the Great Tax Cut Deal of 2010.” There’s a lot of water that needs to pass under that bridge, but this may ultimately be true. If the economy comes back, Obama’s going to get the lionshare of the credit. The stimulus effectively built a floor under the economy and (we can hope) the new package will prime the pump for more private sector hiring to get this economy going.

All in all, Obama ends his 2nd year with a ton of challenges, but also a ton of accomplishments.

As I joked recently, Obama’s first two years have been a total failure:

  • preventing a Great Depression
  • stabilizing the US banking system
  • rescuing the American Auto Industry
  • equal pay for women
  • a children’s health care expansion
  • ending subsidies to corporate banks for college loans
  • a major national service program expansion
  • the largest federal investments in energy and education in the country’s history
  • the largest federal investments in infrastructure in the country’s history
  • health care for 30 million more Americans (which eluded progressive presidents for 70 years)
  • significant increases in assistance for veterans
  • repeal of Don’t Ask Don’t Tell
  • a new START Treaty with Russia

And even though the Democrats had historic losses in the House, his approval is still better than Reagan and Clinton at the same time in their presidencies.

and now comes the pivot to the center.

All this against the backdrop of a Republican Congress that ended the year explaining how some $17 billion in unemployment extensions during the worst recession since 1932 “need to be paid for” but $140 billion in tax cuts for the top 2% can just be added to the deficit.

As Krauthammer notes, soon after they voted for the tax deal,

Republicans began righteously protesting $8.3 billion of earmarks in Harry Reid’s omnibus spending bill. They seem not to understand how ridiculous this looks after having agreed to a Stimulus II that even by their own generous reckoning has 38 times as much spending as all these earmarks combined.

Hey, I’m all for ending earmarks. They’re symbolic of a broken process in which even the so called “fiscally conservative” bring home the goodies for their constituents. But let’s get real: they account for one half of one percent of the federal budget; and defeating a proposal that has $8.3 billion in earmarks with one hand while you increase the federal deficit by $900 billion with the other does not show “fiscal responsibility.”

As I noted before, the biggest short term benefit to this deal for Obama is to show how hypocritical the Republicans are when it comes to running deficits that benefit their core constituency (those in the upper income brackets).

At least on that point, I’m with Krauthammer.

Obama Makes Lemonade out of Lemons

Friday, December 17th, 2010

I have to say that I have been surprised at the liberal fulmination over the two year extension of Bush tax cuts. On one level, I get it: it’s frustrating as hell that the Republicans acted as irresponsibly as they did over the past two years and have been rewarded with a control of the House, 6 new seats in the Senate and the policy that they care about the most: tax cuts for the rich (which are also the least economically stimulative of the policies that have recently been considered). Still, it’s hard to say that you couldn’t see this coming and I would argue that the total package is not a bad deal either politically for Obama or economically for the country.

Regarding the extension of tax cuts for the rich, the die was probably cast when the Democrats punted on taxes in the run up to the election. They didn’t have the votes in the Senate for an extension of tax cuts for just the middle class (due to Republican filibuster threats and Democrats that vote like Republicans) and didn’t want to put a handful of their own members in a situation of filibustering the Democrats’ tax bill just before a tough election. The House, in turn, refused to take another tough vote if the Senate couldn’t pass the bill.

The Democrats problem here was the same one that they had for the past two years: they were afraid to stand up to the Republicans and provoke a fight over taxes. What they should have done is made the Republicans (and Lieberman, Ben Nelson, Blanch Lincoln, etc.) filibuster….and I don’t mean have a cloture vote, say that they couldn’t get 60 votes and then go home early for the weekend. I mean make them stand up on the Senate floor and talk and talk and talk about why they were filibustering tax cuts for 98% of the people so that they could preserve taxes for the top 2%.  They may not have gotten their bill passed, but it would have been a clear contrast for the American people and they could have prepared the public for the fight we are having now and put pressure on Republicans for a better deal. Senate Democrats have complained that Obama is not standing up enough to the Republicans, but they are the ones responsible for not dealing with this issue until the last two weeks of this session and giving the Republicans maximum leverage.

And while the deal cut with Republicans is far from an optimal deal, there are a number of ways that this deal works politically as well as economically for the President and the country as a whole. First, most economists agree that the economy needs additional stimulus and that the worst thing you can do during a deep recession is to cut government spending and raise taxes. Obama clearly believes this as well, since he has argued for it both domestically and internationally again and again, even when he can’t get agreement from allies.

A comparison of the framework agreement between the Obama administration and congressional leaders and another option

Just after the election, I commented on Peter Beinart’s lamenting ”the Death of Keynesianism” as a result of the Republican victory. In the aftermath of the election it seemed that the dysfunction in Washington left Ben Bernake’s Fed holding the only weapon in the fight to revive our economy. But the president is showing that the death of Keynesianism has been greatly exaggerated, at least for the short term. While the policies agreed to in the compromise are far from the most effective stimulative policies, they will provide some lift to the economy that would have been missing had the Republicans governed like they campaigned.

As I’ve said before, I’m not completely opposed to a 2 year extension of the Bush tax cuts for the top 2%, although I would rather see those provisions expire and the money be redirected to tax cuts that actually stimulate more (like a payroll tax cut that benefits employers as well as employees (instead of just employees)). It also would have been nice to get some construction projects to deal with our crumbling national infrastructure, but perhaps this was a bridge too far for the Republicans. What we will get is a  package of tax cuts that, depending on how you break them out, amount to close to a stimulus of $900 billion (or $600 billion over and above what had previously been supported by both parties).

In addition to the economic benefits of the tax cut deal, Obama may reap some political rewards as well. As Chuck Todd has pointed out, part of Obama’s problem over the past two years has been that he has acted more like a Prime Minister trying to shepherd his agenda through Congress than a President using the bully pulpit to call legislators out in order to build support for his agenda (as he was able to do so effectively in the 2008 campaign). And while the strong reaction from the left has been surprising, recent opinion polls have showed broad support for the deal. In addition, economists have projected that the tax cuts will increase the  GDP by as much as 1%, create an additional 3 million jobs and decrease the unemployment rate by close to 1.5%.

As an added bonus, the debate has shown just how hypocritical the Republican party’s leaders really are. For the past two years, they consistently complained about the budget deficits that were run in order to prevent an even larger economic collapse than we actually had. They pretended that they couldn’t distinguish between short term deficits to prop up the economy, and long term structural deficits that were unsustainable. As my conservative uncle liked to say, the Tea Party led Republicans were going to bring “fiscal responsibility” back to Washington. And what did they do within a month of their election? Add another $900 billion to the deficit before the new Congress even got there. Like I said previously, I understand that you need to run deficits in times of economic downturn. But I didn’t spend the last two years running a constant campaign against those deficits. 

Some have argued that the Republicans may be successful at extending the Bush tax cuts for the top earners in 2012. But this also sets up a fight that Obama can use to his advantage. If the Republican House brings up the extention in 2012, it should die a quiet death in the Senate. Plus, the country will be focused on deficit reduction by then, and Mitt Romney can explain to the country in the presidential debates why he wants to add another $700 billion to the debt and the onus will be on him to propose cuts to programs in order to pay for them.

The deal is far from perfect. But, all in all, it’s a much better deal than I thought Obama could get just a few months ago.

But don’t take my word for it. Take Charles Krauthammer’s.