Archive for Economy
The Century Foundation’s Amy Dean, writing for Aljazeera, describes the hangover Republican governors have from drinking all that tea. Those tax cuts for the wealthy haven’t performed as advertised:
In Kansas, Brownback lowered tax rates for top earners by 26 percent. Now the state faces a $334 million budget deficit. Kansas’ public services are so emaciated that the State Supreme Court ruled the funding of the school system unconstitutional. Economic growth has stalled and the state’s employment growth currently ranks 34th in the nation.
Jeff Bryant’s alarming post at Salon details some of the financial services sector’s inventive, new schemes for funding education. Wall Street already saw K-12 schools as “the last honeypot,” a steady, recession-proof, government-guaranteed stream of public tax dollars just waiting to be tapped by charter schools. It first had to convince states to increase competition – meaning eliminating teachers and other public employees standing between investors and their money.
One could argue that the right’s small government, low taxes mantra always had as its goal eliminating the “creeping socialism” of government providing education and other public services on a not-for-profit basis. (What, no middle-man markup?) “Starving the beast” was never about the size of government, but about eliminating public-sector competitors and making sure the right people take a percentage of vital services funded at taxpayer expense.
Since the collapse of the housing market, the giant pool of money is looking for other places to invest. So it’s out with the NINA loans and the CDOs and in with the SLABS, CABS, PPPs, and ISAs. Jeff Bryant writes:
It’s not hard to see the allure of SLABS [student loan asset-backed securities]. Student loans seem to be an endless stream of revenue as colleges and universities continue to increase tuition, economic conditions and employment transience feed the unemployed back into continuing education, and political leaders urge everyone to attend college. The income stream is nearly guaranteed to pay off because the loans are next to impossible to discharge in bankruptcy.
A Huffington Post article by Chris Kirkham states, SLABS offer “seemingly unlimited growth potential at virtually zero risk. The burden of college loan repayment falls entirely on students’ backs, shielding corporations from the consequences of default.”
Again this morning, Paul Krugman knocks down some of the right’s cherished beliefs about its economic theories:
At a deeper level, modern conservative ideology utterly depends on the proposition that conservatives, and only they, possess the secret key to prosperity. As a result, you often have politicians on the right making claims like this one, from Senator Rand Paul: “When is the last time in our country we created millions of jobs? It was under Ronald Reagan.”
Actually, if creating “millions of jobs” means adding two million or more jobs in a given year, we’ve done that 13 times since Reagan left office: eight times under Bill Clinton, twice under George W. Bush, and three times, so far, under Barack Obama. But who’s counting?
After the president fact-checked his critics in Cleveland last week, Susan Crabtree of the Washington Examiner, appearing on “The Last Word,” tried to tamp down his taking credit for unemployment falling to 5.5 percent, citing 30 million people who have dropped out of the workforce. Eugene Robinson would have none of it, pointing out that the Bureau of Labor Statistics figure is the “standard way that we have measured unemployment for many, many decades.” When the game is not going your way, you don’t get to move the goalposts. (IOKIYAR)
As a number of observers have pointed out, however, for big businesses to admit that government policies can create jobs would be to devalue one of their favorite political arguments — the claim that to achieve prosperity politicians must preserve business confidence, among other things, by refraining from any criticism of what businesspeople do.
Under “the confidence con,” any criticism of these “sensitive souls” will prompt Job Creators to take their investments and go home. But there is another free-market dogma not heard much anymore, one voiced by former RNC chair Michael Steele in 2009: “Not in the history of mankind has the government ever created a job.” Yet during the 2012 debate over whether the sequester would hurt the defense industry, the goalposts moved again. But worry not. Like Ah-nold, “never created a job” will be back.
Imagine a self-serving, industry-funded Sunday talk show ad:
One million workers in this country owe their cars, their homes, their kids’ education, and their steady paychecks to the private-sector, free-market entrepreneurs of the American defense industry.
The Defense Industry — meeting demand for fine consumer products like the F-35 Joint Strike Fighter, the fuel-efficient M1 Abrams tank, Tomahawk cruise missiles, the new Zumwalt class guided missile destroyer, and the Hellfire-equipped Predator drone. Predator — for when you really want to reach out and touch someone.
Free Market Capitalism — because government never created a job.
(Cross-posted from Hullabaloo.)
We know Cleveland rocks. But on Wednesday, President Obama visited Cleveland to rock back.
For an infuriatingly long time, he’s been loathe to toot his own horn and play offense when that’s just what fellow Democrats needed him to do in 2010 and 2014. Where’ve you been Barack? [news quote extended, bolded]:
“It was one thing for them to argue against Obamacare before it was put in place,” Obama, using the nickname for his signature Patient Protection and Affordable Care Act, said during an afternoon address to the City Club of Cleveland.
“Every prediction they made about it turned out to be wrong. It’s working better than even I expected. But it doesn’t matter. Evidence be damned. It’s still a disaster. Well, why?”
“The truth is, the budget they’re putting forward and the theories they’re putting forward are a path to prosperity for those who have already prospered.”
Good line. Obama ticked off a number of things his opponents got wrong. Got in Republicans’ faces about it even. And with a smile on his. That probably ticked off them too. It’s the sort of thing Democrats are way to reluctant to do. As Drew Westen says (okay, I’m paraphrasing), if the message isn’t pissing off your opponents, you’re not doing it right. They’ll be on the Sunday bobblehead shows any minute to wag their fingers and wring their hands over the president’s “angry” words and inappropriate swagger.
It’s not as if there isn’t a wealth of material to work from. Perhaps the only sour note in Cleveland was Obama’s continued support for the proposed Trans-Pacific Partnership trade pact opposed by critics in his own party. We’ll leave that for another time.
Anyway, I sourced some of the president’s Cleveland material, maybe improved on it, and added a few peeves of my own. It’s the sort of thing I open carry on my smart phone for those “close encounters.”
People believed them.
Instead, while the national debt did increase as it has every year since the Clinton budget surpluses, budget deficits shrank from $1.4 trillion when Obama took office to $483 billion in 2014.
(Washington Post 10-15-14)
Republicans said Obama’s “socialist policies” would increase the size “of our already bloated government,” lead us towards “national socialism,” and “the country’s economy is going to collapse.”
(NC Rep. Robert Pittenger 01-21-15; Kansas Sen. Pat Robert 09-24-14; Rush Limbaugh 09-10-12)
People believed them.
Instead, federal government employment has shrunk since January 2009, “corporate profits have nearly tripled” and the stock market doubled in six years.
(BLS 03-21-15; New Republic 08-04-14; FactCheck.org 01-09-15; Google Finance)
Republicans said if Barack Obama was reelected, “gas prices will be up at around $6.60 per gallon.”
(Utah Sen. Mike Lee 03-07-12)
People believed them.
Gas prices dropped below $2 per gallon in early 2015.
Republicans said Obama’s policies would destroy “nearly 6 million jobs over the next decade” and lead to “diminishment of employment in America.”
(John McCain campaign 10-31-08; Texas Rep. Pete Sessions 11-07-09)
People believed them.
Instead, 12 million new jobs created, more under 6 years of Obama than under 12 years of two Bushes, “the best private sector jobs creation performance in American history [that] outperformed President Reagan’s in all commonly watched categories” according to Forbes.
(ElectaBlog 10-03-14; Forbes 09-05-14)
Meanwhile, “small-government, pro-business” George W. Bush presided over “the biggest federal budget expansion since Franklin Delano Roosevelt” and saw only 1.3 million net jobs created in 8 years (7 million net for Obama in 6 years). The Wall Street Journal called Bush’s “the worst track record on record.”
(Washington Times 10-19-08; ElectaBlog 10-03-14; Wall Street Journal 01-09-09)
Finally, for those with short memories:
Republicans said we had to invade Iraq because Saddam Hussein had stockpiles of chemical and biological weapons. We even knew where they were. We’d be out in six months, it would cost at most $60 billion, “We do not torture,” etc.
People believed them.
How much longer will people believe these guys?
General Atomics MQ-9 Reaper at Creech Air Force Base, NV, one of several test sites promoted by the state.
We’ve also discovered through intelligence that Iraq has a growing fleet of manned and unmanned aerial vehicles [UAVs] that could be used to disperse chemical and biological weapons across broad areas. We’re concerned that Iraq is exploring ways of using these UAVs for missions targeting the United States. – Pres. George W. Bush, Cincinnati, OH, October 7, 2002
That was the first time many of us heard the term “unmanned aerial vehicles.” Ticking off a litany of bogus reasons for invading Iraq, Bush hoped we would collectively wet our pants in fear of unmanned drones over America unleashing death from above. That was then. This is now.
You know, when I saw that headline in the Guardian, I thought I was looking at a decade-late review of the 2004 Vin Diesel film, The Chronicles of Riddick. If you missed Chronicles on cable, the film’s Big Bad (h/t to you Buffy fans) is a murderous group of interstellar religious fanatics called the Necromongers. They rampage across the galaxy, like ISIS in space ships, converting or killing everyone in their paths. They also “believe heavily in a philosophy that says ‘you keep what you kill’, believing that ending another’s life entitles you to their property and position.” Having screwed investors, thrown families from their homes, brought the planet to its economic knees, and demanded tribute (bailouts) lest they take us all down with them, that pretty much describes Wall Street’s philosophy these days, too. Which is why, as Suzanne McGee writes, “’You eat what you kill’ is the motto on many a trading desk.”
What Wall Street doesn’t believe in is its own bullshit, business school catechism about how in a meritocracy pay is a function of celestial mechanics that must not be perturbed lest we offend the Market gods – pay is an elegant function of one’s contribution to the enterprise’s bottom line. How do we know they don’t believe this?
… Wall Street’s profits aren’t what they used to be. Pretax profits fell 4.2% in 2014 to $16 billion, according to New York’s office of the state comptroller. If you think that sounds like a relatively modest decline, consider that 2014 profits were 33% below 2012 levels, and a whopping 74% below 2009, when Wall Street posted record results as markets zoomed back to life after the crisis and banks profited from ultra-low asset values and interest rates.
So what? Well, in spite of the falloff, bonuses rose for the second straight year, with “a 30.1% decline in profitability, and a 15% increase in bonus payments” in 2013, followed by a more modest 2% increase this year.
Somwething Digby posted today is worth reposting for the North Carolina audience. FL Gov. Rick Scott’s tweet yesterday (I assume) is intended to convince the uncritical reader that Florida’s economy must kick California’s ass. Digby notes that the same day, Bloomberg posted this:
There are plenty of reasons to presume that California must be a bad place to do business. The Tax Foundation says the state’s tax structure is the third worst for business in the U.S. Forbes ranks California’s business costs fifth highest among the 50 states and its regulatory environment the eighth most burdensome.
Just how burdensome, you ask? (Emphasis mine.)
The exceptional performance of California companies helps explain why (with no official gross domestic product data available yet) the state would have the world’s seventh largest economy if it were a country, bigger than Brazil’s, which saw its GDP decline in 2014. Here’s the rough calculation: Companies based in California grew 4.7 percent during the first three quarters of last year. Using 4.7 percent as a proxy for the growth of the market capitalization of California, the total market cap of the state grew to $2.3 trillion from $2.2 trillion in 2013. (Brazil’s GDP declined 1 percent from $2.25 trillion in the first three quarters of 2014 as its exports of raw materials fell.) As of March 10, 33 California companies are included in the 500 largest companies in the world. At the end of 2009, when the U.S. was recovering from the worst recession since the Great Depression, there were only 24 California companies in the Global 500, according to Bloomberg data.
As unemployment declined to 7 percent in December from a peak of 12.4 percent in 2011, California’s growth was substantial enough that during the 24-month period ended Sept. 30, 2014, the jobless rate fell the most of any state. This helps explain why California remains the No. 1 state for manufacturing, producing $239 billion, or 12 percent of all manufacturing in the U.S., according to Bloomberg data. Texas is No. 2 with $233 billion.
If taxes are really the bane of California existence, why aren’t they preventing rich people from making the state their primary residence? Some 123 of the world’s wealthiest 400 people live in the U.S., and 28 of them, or 23 percent, are California residents, according to data compiled by Bloomberg. New York is No. 2 with 22 billionaires, or 18 percent, according to the Bloomberg Billionaire’s Index.
Uh, because they’ve hidden so much of their wealth offshore?
NC Gov. Pat McCrory has been following the playbook of ALEC, Scott-free Walker and Sam Brownback. Consider the above next time he brags about his Carolina Comeback. Is it even a halfback?
Demos research associate Sean McElwee’s post this week reviews economic research showing that “Democrats make the pie bigger for everyone, while Republicans redistribute income toward the rich and whites.” But you already knew that. Still, McElwee’s link-filled column at Aljazeera compiles a lot of supporting studies in one convenient location.
Examining changes in poverty, unemployment and income under every president since 1948, political scientists Zoltan Hajnal and Jeremy Horowitz found that blacks, Latinos and Asians fare better under Democratic presidents. But so do whites:
“Put simply: However measured, blacks made consistent gains under Democratic presidents and suffered regular losses under Republicans,” the authors said. While there’s limited data, the findings hold true for Latinos and Asians.
Princeton economists Alan Blinder and Mark Watson found that for the same period, “gross domestic product, employment, corporate profits and productivity grew faster under Democrats than Republicans.” Income too — contrary to shrieks by Republican flacks that if their opponents are elected, Democratic Dorothys will throw buckets of water on all their beautiful wickedness.
— Sean McElwee (@SeanMcElwee) February 27, 2015
On a more local level, US Uncut’s Carl Gibson details how under governor Mark Dayton’s Democratic policies have treated Minnesota. Gibson writes:
Between 2011 and 2015, Gov. Dayton added 172,000 new jobs to Minnesota’s economy — that’s 165,800 more jobs in Dayton’s first term than Pawlenty added in both of his terms combined. Even though Minnesota’s top income tax rate is the 4th-highest in the country, it has the 5th-lowest unemployment rate in the country at 3.6 percent. According to 2012-2013 U.S. census figures, Minnesotans had a median income that was $10,000 larger than the U.S. average, and their median income is still $8,000 more than the U.S. average today.
By late 2013, Minnesota’s private sector job growth exceeded pre-recession levels, and the state’s economy was the 5th fastest-growing in the United States. Forbes even ranked Minnesota the 9th-best state for business (Scott Walker’s “Open For Business” Wisconsin came in at a distant #32 on the same list). Despite the fearmongering over businesses fleeing from Dayton’s tax cuts, 6,230 more Minnesotans filed in the top income tax bracket in 2013, just one year after Dayton’s tax increases went through. As of January 2015, Minnesota has a $1 billion budget surplus, and Gov. Dayton has pledged to reinvest more than one third of that money into public schools. And according to Gallup, Minnesota’s economic confidence is higher than any other state
Dayton’s GOP adversaries, of course, warned that billionaire Dayton’s plans to raise taxes would offend “the job creators.” (Luckily, there are no volcanoes in Minnesota, or the Job Creators would demand virgins.)
What caught my attention most was this from McElwee:
Similarly, in absolute terms, whites do better under Democratic than under Republican leadership. But that doesn’t really matter. People weigh their well-being relative to those around them. There is strong evidence that whites often oppose actions against inequality because of “last place aversion,” the desire to ensure that there is a class of people below oneself. Among white voters, racial bias is strongly correlated with lower support of redistributive programs. For example, research shows that opposition to welfare is driven by racial anger. Approximately half of the difference between social spending in the U.S. and Europe can be explained by racial animosity.
Chronic lefty complaints about working-class whites “voting against their best interests” has long set my teeth on edge. Born of frustration, it’s just an intellectual-sounding way of calling them stupid, and no way to win friends and influence voters. Voters see right through it. Besides, progressives don’t really want them voting what’s best for No. 1. But last-place aversion (a term I’ve not seen before) offers an alternate explanation for why, in spite of the economic data above, many working-class whites vote Republican. President Lyndon Johnson long ago demonstrated an intuitive understanding of last-place aversion as one element of the Republicans’ Southern Strategy:
If you can convince the lowest white man that he’s better than the best colored man, he won’t notice you’re picking his pocket. Hell, give him somebody to look down on, and he’ll even empty his pockets for you.
Two of McElwee’s links go to Stanford studies suggesting how last-place aversion explains why, for example, “individuals making just above the minimum wage are the most likely to oppose its increase.” (Last-place aversion, by the way, holds “for both whites and minorities.”) It works like this (emphasis mine):
By the logic developed in the above evolutionary models, not only would humans care about relative position in general but a strong aversion to being near last place would arise because in a monogamous society with roughly balanced sex-ratios, only those at the very bottom would not marry or reproduce. Indeed, being “picked last in gym class” is so often described as a child’s worst fear that the expression has become a cliché.
That explains a lot.
(Cross-posted from Hullabaloo.)
Paul Krugman this morning smacks down three of the right’s preeminent purveyors of supply-side voodoo. The column is sure to leave them fuming.
“Charlatans and cranks,” Krugman suggests, invoking a phrase used by former George W. Bush chief economic adviser, Greg Mankiw. The occasion was Republican Gov. Scott Walker’s appearance at a New York dinner featuring supply-siders Art Laffer (of the eponymous curve), CNBC’s Larry Kudlow, and Stephen Moore, chief economist of the Heritage Foundation. Making obeisance before the high priests of bunk – like questioning climate change, evolution, and the current president’s American bona fides – has become a “right” of passage for Republican presidential contenders.
Reality takes a holiday. Ideology takes precedence. Because, to riff on a song, it’s all about that base. But we’ll come back to Krugman later.
The New York Times also reports this morning on something I’ve mentioned before. The University of North Carolina’s Republican-appointed Board of Governors is closing several academic enters on its campuses dedicated to studying poverty, climate, and social change. It couldn’t also be about ideology, could it? The Times writes:
Nice to see Matt Taibbi back at Rolling Stone. But not so nice for the financial services industry.
Taibbi reports on a memo from Jason Furman, Chairman of President Obama’s Council of Economic Advisors, detailing the stings and errors average investors fall prey to from their brokers. “The current regulatory environment,” Furman explains in the document obtained by Bloomberg, “creates perverse incentives that ultimately cost savers billions of dollars a year.”
“For instance,” Taibbi writes, “it might surprise a lot of Americans to know that brokers handling retirement funds aren’t required by law to act in the best interests of their clients.” In nontechnical jargon, you might call this a “red flag.” When brokers “churn” accounts, performing needless trades to rack up fees, long-term investors can lose as much as 1-3 years worth of retirement withdrawals.
The Obama administration is proposing to fix the problem by changing the rules and imposing a fiduciary duty standard on brokers, forcing them to act in their clients’ best interests. If this Labor Department proposal ever gets past the 50 yard line, expect the financial services lobby to carpet-bomb Washington with studies showing that apart from nuclear winter or inviting al-Qaeda to occupy the White House, nothing could be worse for America than forcing brokers to act in the best interests of their clients.
Bloomberg has more details.
(Cross-posted from Hullabaloo.)