"Unemployment? Who Cares?" Revisited

Ezra Klein at Wonkbook:

With 15 million people unemployed, and more than 20 million underemployed, you’ve got a fairly large constituency for action on the jobs crisis. But it’s not a constituency that has any evident power in Washington. … 

“Most policy changes with majority support didn’t become law,” (Jacob) Hacker and (Paul) Pierson write (in Winner-Take-All-Politics.) The exception was “when they were supported by those at the top. When the opinions of the poor diverged from those of the well-off, the opinions of the poor ceased to have any apparent influence: If 90 percent of poor Americans supported a policy change, it was no more likely to happen than if 10 percent did. By contrast, when more of the well-off supported a change, it was substantially more likely to happen.”

If 15 million college-educated professionals were unemployed right now, the political system would care.

Maddow Interviews Our Hero!

Visit msnbc.com for breaking news, world news, and news about the economy

Via Ta-Nehisi Coates 

More on Elizabeth Warren HERE

More on Fannie and Freddie - and the intentional ignorance of Mr. Brooks and Mr. Will

In the wake of the financial crisis of 2008, conservatives who rail against government regulation and for the efficacy of unfettered markets have had to circle their wagons and regroup. The crisis was caused by raging greed, lack of transparency in a huge and highly-leveraged market,  and the ability of a few powerful players at the pinnacle of our financial system to endanger the global economy and rob millions of wealth, employment and confidence in the economic and political system.

In order to regain control of their anti-government, free-market narrative we've seen attempts to blame the government-backed mortgage giants, "Fannie Mae" and "Freddie Mac," for creating the conditions that led to a near-total collapse of the housing market, while the big players walked off with enormous rewards for their nihilistic behavior.

This argument has been brewing since the earliest days of the crisis, but most recently two conservative pundits who have some credibility with "thinking liberals" have indulged themselves in the "it's Fannie and Freddie's (ergo, the government's) fault" line of defense for their faith in "free enterprise" ideology.

Both David Brooks and George Will have written high-profile columns mining a recent book that focuses the bulk of the blame for the 2008 meltdown on the "Government Sponsored Enterprises" Fannie and Freddie.  Brooks called the role of the GSEs in allegedly causing the crisis of 2008 "the most important political scandal since Watergate" and Will claimed that the former head of Fannie Mae "may be more culpable for the peacetime destruction of wealth than any individual in history."

As we have noted previously - and not terribly surprising for a Will or Brooks column - the problem with their arguments about the roots of the crisis is that they aren't honest and are based on assertion, not evidence.

Jeff Madrick and Frank Portnoy take the source of these columns apart fairly definitively in a recent New York Review of Books piece:

Prestigious Murdoch publication debunks the "Business Confidence" hype - without breaking any laws

The Wall Street Journal:

100% scandal-free reporting

The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new Wall Street Journal survey.

Via Andrew Leonard at Salon.

The Austerity Delusion

According to the International Monetary Fund, via "The Economist":

100% Hair Shirt - Available only in Small.

In a recent study of 173 fiscal-policy changes in rich countries from 1978 to 2009, economists from the IMF found that cutting a country’s budget deficit by 1% of GDP typically reduces real output by about two-thirds of a percentage point and raises the unemployment rate by one-third of a percentage point...

Whenever investors seek shelter, even from an American slowdown, they choose Treasuries, and thus the dollar. In an economy constrained by low interest rates, a stubborn trade deficit and natural demand for the world’s reserve currency, there is little to cushion the blow of austerity...

America cannot wait forever to rein in its debt. It needs to lay out credible plans for medium-term deficit reduction. But it has more leeway to delay cuts than most other countries, thanks to continued demand for its debt. Another year of recovery would help confidence more than a premature swing of the fiscal axe. 

Amen.

(Link thanks to Mark Thoma - Economist's View.)

No confidence in the "business confidence" hype

One hears a lot about "business confidence" as the key to recovery.

Here's how the argument goes: Businesses are so worried about any increases in future taxes or possible rises in interest rates (both of which are now very, very low relative to recent history) and  about deficits (which have increased dramatically in the past two years solely because of the downturn itself, but are otherwise due primarily to tax cuts and unfunded initiatives of the Bush administration) that they are refusing to invest.  Restoring "confidence" is key to unlocking investment.

The "confidence" argument underlies the Beltway obsession that "fixing" deficits need be the current central priority - as opposed to focusing first and foremost on finding ways of quickly getting people back to work, even if it means more government spending and putting deficits aside until we are experiencing significant recovery and a steep drop in unemployment.

The reality that undermines any case for the "confidence" fixation is that business profits among the major companies are currently at record highs. Further, economist Brad DeLong offers a chart that shows businesses ARE investing and that "confidence" is not an issue, at least if investment  in capital equipment and software is a relevant measure.

Corporate "500" profits at record highs! Guess whose pocket it's coming from...

Harold Myerson at American Prospect gets it from the horse's mouth:

The subject of the July 11 (“Eye on the Market” report by J.P. Morgan Chase Chief Investment Officer Michael Cembalest) is corporate profits, in particular, the pre-tax profit margins of the S&P 500, the 500 largest publicly-traded companies based in the U.S.

Those profit margins, you’ll be glad to know, are close to record highs, nearing 13 percent of company revenues - their highest levels since the mid-1960s. And since medical costs are far higher today than they were back then, how, you may wonder, have those companies climbed back to the profit margins of those earlier, less costly, more innocent times?

Our health care system... how to say it? Oh yeah - it sucks.

Here's a chart:

This chart shows trends in life expectancy by trends in health spending from 1970 to 2008. The United States still stands out, and in a big way. Our gain in life expectancy per additional health spending is much smaller than in other countries, particularly after the early 1980s when we reached expenditures of about $2,500 per person (in 2005 dollars) and life expectancy of around 74-75 years...   (Consider the Evidence via Brad DeLong)

We're paying lots more than similarly wealthy countries and getting less in return, using the basic measure of life expectancy.  One hopes that the Affordable Care Act will at least begin the process of increasing both the value and effectiveness in our health care system.

Krugman on the GOP: "Wake up and smell the crazy!"

Sorry - no Bachmann pic for you!  Too easy.

In response to late-comers,  like his colleague at the New York Times David Brooks, who have recently taken to lamenting the obvious insanity and extremism of a "Tea Partyized" GOP that most notably has shown itself unwilling even to discuss minor increases to revenue during the debt ceiling confrontations, Paul Krugman notes that this has been a long time coming.

Worse,  a lot of the folks currently freaking out at "the crazy" have been enablers of the GOP's descent into madness.

Winning 2012 - Jobs, not "deficit reduction," is key

Former Labor Secretary Robert Reich asks, can President Obama win re-election using Bill Clinton's script?

Despite a 1994 midterm election that delivered Congress to the GOP and was widely seen as a repudiation of his presidency, President Clinton went on to win re-election. And many of Mr. Obama's top aides—including Chief of Staff Bill Daley, National Economic Council head Gene Sperling and Pentagon chief Leon Panetta—are Clinton veterans who know the 1995-96 story line by heart.

The GOP's Tea Party Jacobins

Martin Wolf at The Financial Times explains why most of what we're being told about deficits and spending by the GOP - and some Democrats - is simply false.  We do not have a spending crisis - we have an unemployment crisis and a resultant revenue crisis due to the financial collapse of 2008.

Wolf also notes - as regards the debt ceiling and revenue debates - that we face a crisis driven by some combination of ignorance and dangerously extremist ideology being packaged as "fiscal conservatism":

Exploding fiscal deficits are mainly the result of collapses in (economic) activity and revenue..,

The debt ceiling impasse - will the GOPer crazies go along with McConnell's handing off to Obama?

Is the GOP's Senate leader capitulating on the debt ceiling, salvaging nothing out of the negotiatons but some weak version of "face"?  Explanations and analysis of Mitch McConnell's somewhat arcane proposal to take an elaborate dive - while wagging a finger at the President - from Talking Points Memo HERE and Ezra "Wonkbook" Klein HERE.  If this thing flies, it looks like President Obama's game of high-stakes chicken with his adversaries has succeeded. Or not, in the less sanquine view of Salon's Andrew Leonard, HERE. We'll see how this scheme plays out very soon.

"Unemployment? Who Cares?"

Two pieces on the scourge of lingering unemployment from the New York Times "Economix" blog. First, reporter Catherine Rampell:

More bad news on the job market front: the number of jobless workers per job opening stayed flat at 4.7 in May, according to a new report from the Labor Department. That is more than twice the average ratio seen during the boom years that preceded the Great Recession.

Next, addressing the apparent lack of urgency over the desperation of these job-seekers, Nancy Folbre, an economist at the University of Massachusetts-Amherst, wonders why there is so little sense of crisis coming from the Beltway:

High unemployment has become the new normal. Two years after the official end of the recession, the monthly refrain of poor jobs reports showing an unemployment rate stalled at about 9 percent does little to increase any sense of political urgency.

GOP insanity - our ace in the hole?

Another view on the debt ceiling battle from Ezra Klein:

I knew the White House wanted a compromise on the debt ceiling. I just didn't expect them to do quite so much, well, compromising.

Here's what appears to have been in the $4 trillion deal they offered the Republicans: A two-year increase in the Medicare eligibility age. Chained-CPI, which amounts to a $200 billion cut to Social Security benefits. A tax-reform component that would raise $800 billion and preempt the expiration of the Bush tax cuts -- which would mean, for those following along at home, that the deal would only include half as much revenue as the fiscal commission recommended, and when you add the effect of making the Bush tax cuts a permanent part of the code, would net out to a tax cut of more than $3 trillion when compared to current law.

That last bit apparently killed the deal. It But it was actually the biggest concession on the table.

Is Obama Besting Boehner in the Budget Battle?

by Mark McCutchan (cross-post from Winning Progressive):

House Majority Leader John Boehner turned down President Obama’s offer to “go big” on the budget deal – a $4 trillion budget reduction was offered Saturday night in exchange for a rise in the debt ceiling.  I, along with many progressives, was furious with the president for even saying he would put Social Security, Medicare and Medicaid on the negotiating table.  However, upon closer examination of his words, I realized that the president was referring, for example, to savings due to improving Medicare efficiencies and rationalizing health care spending through an Independent Patient Advisory Board, as discussed in a previous Winning Progressive column, rather than making cuts to entitlement benefits.

I now realize Obama knew the GOP would never say “Yes” to a deal that included $1 trillion in removing tax loopholes for corporations and the wealthy, even if it were sweetened with $3 trillion in budget cuts to entitlement programs and some defense expenses. That’s because Boehner’s buddies in the House are bound to a cause higher than their party or their constitutional duty: 235 House Republicans have signed Grover Norquist’s “No Taxes” pledge.  Signees must oppose any new taxes or new tax revenue, or suffer the wrath of Norquist and his group “Americans for Tax Reform”, which would mean a sure political death in today’s conservatives-only GOP.

President Obama has reaped a huge political gain by appearing to go out of his way to maintain the fiscal solvency of the federal government, and the Republicans look like the bad guys again.

Secretary Geithner: "For a lot of people...it's going to feel very hard, harder than anything they've experienced in their lifetime"

Where does it end?

The prospects for a lagging economy look bleak. Spending cuts are on the table in debt ceiling negotiations. State budgets are shrinking and public employees are losing jobs.

And there's another hit to the demand side just around the corner - one that also entails a lot of personal pain in an economic landscape that isn't producing jobs at a significant rate, according to an article in today's New York Times:

An extraordinary amount of personal income is coming directly from the government.

Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government.

By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year.

In terms of economic impact, that is slightly less than the spending cuts Congress enacted to keep the government financed through September, averting a shutdown.

Unless hiring picks up sharply to compensate, economists fear that the lost income will further crimp consumer spending and act as a drag on a recovery that is still quite fragile. Among the other supports that are slipping away are federal aid to the states, the Federal Reserve’s program to pump money into the economy and the payroll tax cut, scheduled to expire at the end of the year.

"The Worst Time to Slow the Economy"

New York Times' Sunday editorial says it all:

It was not surprising to hear the Republican presidential candidates repeat their tiresome claim that excessive government spending and borrowing were behind Friday’s terrible unemployment report. It was depressing to hear President Obama sound as if he agreed with them.

"The Terrible June Jobs Numbers"

Rortybomb:

The jobs numbers are horrible, worse than anyone had thought they’d turn out to be. 18,000 total jobs created, with a decrease of 39,000 government jobs...

Bad numbers, bad news...we need a sense of urgency about something other than deficits. Now.

Where is "Middle America" on the issue of cuts vs. taxes?

What's up in Cleveland?

Folks steeped in stereotypes of the Midwest might be surprised by this. The political reality is that a broad spectrum of voters support raising taxes on high earners and oppose cutting so-called "entitlements" as paths to deficit reduction.

Poll of swing state "likely voters" by Public Policy Polling (commissioned by MoveOn, DFA, Credo and Bold Progressives):


TAXING THE WEALTHY

QUESTION: In order to reduce the national debt, would you support or oppose raising taxes on those with incomes over $150,000 a year?
Ohio	66% support	31% oppose
Missouri	58% support	36% oppose
Montana	62% support	34% oppose
Minnesota	67% support	30% oppose

QUESTION: In order to reduce the national debt, would you support or oppose raising taxes on those with incomes over $250,000 a year?
Ohio	72% support	26% oppose
Missouri	67% support	30% oppose
Montana	69% support	28% oppose
Minnesota	71% support	27% oppose

QUESTION: In order to reduce the national debt, would you support or oppose raising taxes on those with incomes over $1,000,000 a year?
Ohio	78% support	21% oppose
Missouri	76% support	22% oppose
Montana	77% support	21% oppose
Minnesota	79% support	19% oppose

QUESTION: Would you support or oppose a proposal that said personal income above $1,000,000 would be taxed at 45%, income above $20,000,000 dollars would be taxed at 47%, and income above $1,000,000,000 would be taxed at 49%?
Ohio	62% support	29% oppose
Missouri	56% support	30% oppose
Montana	56% support	33% oppose
Minnesota	61% support	29% oppose

CUTTING SOCIAL SECURITY, MEDICARE, AND MEDICAID

QUESTION: In order to reduce the national debt, would you support or oppose cutting spending on Social Security, which is the retirement program for the elderly?
Ohio	16% support	80% oppose
Missouri	17% support	76% oppose
Montana	20% support	76% oppose
Minnesota	23% support	72% oppose

QUESTION: In order to reduce the national debt, would you support or oppose cutting spending on Medicare, which is the government health insurance program for the elderly?
Ohio	20% support	76% oppose
Missouri	19% support	77% oppose
Montana	24% support	71% oppose
Minnesota	26% support	69% oppose

QUESTION: In order to reduce the national debt, would you support or oppose cutting spending on Medicaid, which is the government health insurance program for the poor, disabled, and children?
Ohio	33% support	61% oppose
Missouri	32% support	63% oppose
Montana	36% support	59% oppose
Minnesota	33% support	62% oppose

 Polling done in late April and early May. Via Winning Progressive

Worried about the "balance"

Jonathan Cohn at The New Republic:

Obama has talked frequently about the need for both parties to make painful decisions (in the debt ceiling showdown) that hurt their constituencies or require compromising core values... But only one party seems to making those painful decisions right now – and, come to think of it, only one party has been making those decisions for quite a while.