Archive for category Unemployment
The Congressional Progressive Caucus budget promises to create 7 million new jobs in one year, and includes $4.4 trillion in deficit reduction and $112 billion in infrastructure investment. That beats any other budget proposal in Washington, by far – including the Obama administration’s yet-to-be-released budget. And it won’t cut Medicare benefits to pay for more tax breaks for millionaires and billionaires.
[T]alk of a fiscal crisis has subsided. Yet the deficit scolds haven’t given up on their determination to bully the nation into slashing Social Security and Medicare. So they have a new line: We must bring down the deficit right away because it’s “generational warfare,” imposing a crippling burden on the next generation. …
…Yet there is, as I said, a lot of truth to the charge that we’re cheating our children. How? By neglecting public investment and failing to provide jobs.
My initial response to that question was to say, “Huh?”
But we’re talking about complex, interconnected systems. The argument goes something like this:
Start by recognizing that international economics and politics are a set of networks. Each national economy is a network connected to a larger, international network. These networks have key nodes. In terms of finances, the US and UK are two nodes whose influence is outsized simply because they are connected to so many other networks. The more links a network has to other networks, the easier it is to spread problems.
. . . if contagion spreads across links, network topology will have important consequences for the likelihood of spread. As it turns out, there is strong reason to believe that the international financial system is one of the latter kinds of networks rather than one of the former. On two measures of financial ties, most countries on the periphery of the network have few links to other peripheral countries, but pretty well everyone has links to the US, and many have links to the UK too.
In other words, the US exported its economic downturn to the rest of the world when our financial system crashed. What does that have to do with Iraq?
Military Keynesianism, says Thomas Oatley.
Now consider the Iraqi case. The sharp increase of military spending sparked by 9/11 and Iraq followed a massive tax cut (and coincidentally, we had a massive tax cut in 1964). Like Vietnam, therefore, the US borrowed to pay for the War on Terror. If the Vietnam War experience is any guide, this budget deficit must have had consequences for US macroeconomic and financial performance. The deficit was larger and persisted for longer than the Vietnam case. I argue that the choice to finance the War on Terror by borrowing rather than by raising taxes worsened the US external imbalance and the resulting “capital flow bonanza” triggered the US credit boom. The credit boom generated the asset bubble the deflation of which generated the great global crisis from which we are still recovering. Obviously, it takes a lot of heavy lifting to get from the war-related budget deficit to the global financial and economic crisis.
Oatley is writing a book exploring this theory.
In a less networked, less connection international economy, the effects of the US economic crash might have been limited to the US. Instead, however, the distortions of the US economy caused by the spending for the War on Terror in general and the Iraq war specifically, and the massive tax cuts that caused us to pay for it through borrowing, created ripples in the US economy the ultimately caused a US crash which, through our connection to all the networks, casued a worldwide economic crash.
Everything is connected to everything else. We’re talking aobut complex systems here, systems playing out in unexpected ways. It’s a prime example of the levels of complexity Adam Kahane talks about – social, dynamic and generative complexity working concurrently in crazy making ways. Tax cuts in 2001 and 2003 causing a crash in 2008? The Iraq war causing a global economic meltdown? It seems daft until you start thinking about interlocking parts connected to other interlocking parts. So, in a way, you can start building a case that the 2001 Bush Tax cuts are ultimately responsible for the economic problems in Greece, Spain and Cyprus.
One of Oatley’s colleagues explores the idea further, arguing that there’s a distinction between core and peripheral nodes and their crises. A peripheral node crisis is unlikely to spread further while a core node crisis will spread further:
Or take the examples of Iceland and Ireland. Iceland repudiated the debt of its banks, imposed capital controls, and told international investors to take a hike. Once again, this is a recipe for contagion yet systemic crisis did not result. Ireland did the opposite: it guaranteed the debt of its banks, did not institute capital controls, and paid off international investors. Systemic crisis also did not result. The opposite local policy response produced the same global outcome. Only the local outcome varied.
Contrast those cases (and all the other eurozone cases, and Argentina, and E Asia, and etc.) with the US in the Fall of 2008. A couple days of dithering — of the sort that the eurozone has made its speciality — lead to an immediate and profound downturn in global markets, including the largest single-day evaporation of wealth in absolute terms in history. The US tried to kick the can down the road, but couldn’t because it is the core node; the EU has been able to repeatedly kick the can down the road because those crises are in the periphery.
I conclude from this that policy always matters locally, but it only matters systemically when the crisis is in a core node. No matter what the policy response to peripheral crises is, systemic contagion is exceedingly unlikely.
This is a fascinating intellectual exploration. The part that should have been predictable but apparently wasn’t is the transmittability of economic problems throughout the network designed to facilitate capital flows. The US exported its financial crash to the rest of the world.
Worst. King. Ever. “Game of Thrones” Joffrey Baratheon. “You can’t talk to me like that. The king can do as he likes!”
HBO’s “Game of Thrones” is the best show on TV. Unfortunately, powerful people behaving badly isn’t only the stuff of fiction.
Out of 141 countries, the U.S. has the 4th-highest degree of wealth inequality in the world, trailing only Russia, Ukraine, and Lebanon.
In 1983 the poorest 47% of America had $15,000 per family, 2.5 percent of the nation’s wealth.
In 2009 the poorest 47% of America owned ZERO PERCENT of the nation’s wealth (their debt exceeded their assets).
Inequality is stifling our economy, because the customers business depends on are broke. The Consumer Confidence Index dropped 8 points this month, as Washington politicians imposed austerity and higher taxes on what’s left of the middle class. There are still 12 million Americans who need jobs. Most Americans have experienced unemployment at some level in the past five years. Yale Economist Robert Shiller warns that the massive losses suffered in the housing market won’t be made good anytime soon.
We need jobs and a stable economy. All we’re getting from Washington is budget cuts and more talk of dismantling Social Security, Medicare, and Medicaid. The “Affordable Care Act” is going to make health insurance less affordable.
Tax time is coming in less than a month. Unless you’re with the 1 Percent, it will cost you. Paul Buchheit on AlterNet:
Corporations have simply stopped paying their taxes, perhaps using the 2008 recession as an excuse to plead hardship, but then never restoring their tax obligations when business got better. The facts are indisputable. For over 20 years, from 1987 to 2008, corporations paid an average of 22.5% in federal taxes. Since the recession, this has dropped to 10% — even though their profits have doubled in less than ten years.
We’re in “a golden age for corporate profits,” according to the New York Times. But not a golden age of job creation. In fact, some of the biggest and most profitable corporations are dodging taxes while cutting jobs. The list includes: General Electric, Boeing, Exxon Mobil, Verizon, Kraft Foods, Citigroup, Dow Chemical, IBM, Chevron, FedEx, Honeywell, Apple, Pfizer, Google, and Microsoft.
N.J. taxpayers protest corporate ‘dodgers’
Recently we learned that real disposable income was down in January, partly due to the payroll tax hike that was part of the “fiscal cliff” deal. The federal government went over the so-called “cliff” anyway.
Today there was a party on Wall Street as the Dow Jones industrial average reached a record high shortly after the opening bell. It’s on track to close above the previous record of 14,164 reached on Oct. 9, 2007. It’s up 7.8 percent for the year. Some call it a “TINA market,” for “there is no alternative.” Interest on savings and bond yields are at rock bottom due to Fed policy, forcing investors to rely on stocks.
However, as Pat Garofalo points out on Think Progress, workers’ wages as a percentage of the economy are hovering near record lows.
Hey, check out what happened with wages during the Clinton administration (1993-2000). Only time since 1970 that wages recovered after a recession.
As Quartz’s Matt Phillips put it, “in many ways Americans are still sucking wind after the gut punch they suffered in 2008.” In fact, the richest 1 percent of Americans have captured 121 percent of the income gains achieved during the current recovery, meaning everyone else has actually lost ground in terms of income since the economy bottomed out.
Those jobs we lost in Bush’s Great Recession have either not come back, or they have been replaced by lower-paying jobs. Party on, Wall Street.
Robert Reich: Why There’s a Bull Market for Stocks and a Bear Market for Workers
Rarely before in American history have public policies so radically helped the most fortunate among us, so cruelly harmed the least fortunate, and exposed so many average working Americans to such widespread insecurity.
Americans’ personal income decreased $505.5 billion, or 3.6 percent, in January (on a seasonally adjusted and annualized basis), according to the Commerce Department’s Bureau of Economic Analysis. It was the biggest one-month drop in 20 years.
Consumer spending rose just 0.2% with most of it going toward higher heating bills and filling up the gas tank. Consumer spending accounts for about two-thirds of the U.S. economy.
The drop in income was partly driven by the end of the payroll tax cut, which means middle-class workers must pay 2 percentage points more in taxes this year on wages up to $110,000. But Congress has made the Bush Tax Cuts permanent for 98 percent of Americans, all except families with income more than $450,000 and individuals making more than $400,000.
Right-wing Republicans now declare that any ideas about raising tax rates or eliminating loopholes to boost revenue are off the table. They demand “cuts-only” deficit reduction. This means $85 billion in “automatic” austerity budget cuts kick in today (although Congress can cancel this so-called “sequester” anytime). The result will be a partial government shutdown, as many agencies are forced to furlough employees beginning in April.
Meanwhile, even Federal Reserve Chairman Ben Bernanke has said that the Washington obsession with budget deficits is hurting the economic recovery. The immediate crisis is our jobs deficit. Robert Reich:
Unemployment is still sky high. The current official rate of 7.9 percent doesn’t include 8 million people (5.6 percent of the workforce) working part-time who’d rather be working full time. Nor those too discouraged even to look for work. The ratio of workers to non-workers in the adult population is lower than any time in the last thirty years — and that’s hardly explained by boomer retirements.
Wages continue to drop because the only way many Americans can find (or keep) jobs is by settling for lower pay. Most new jobs created since the depth of the Great Recession pay less than the jobs that were lost. That’s why the real median wage is now 8 percent below what it was in 2000.
…The budget deficit and cumulative debt are not the “transcendent issue of our time.” The transcendent issue is jobs and wages. Cutting the budget deficit now will only result in higher unemployment, lower wages, and more suffering.
The next opportunity for Republican economic sabotage will be on March 27, when the continuing budget resolution expires.
Once again, President Obama is pressing for a “Grand Bargain” that basically gives the right-wing Republican Party everything they have been asking for. The President wants to implement cuts to Social Security and Medicare, coupled with across-the-board discretionary spending reductions (aka austerity budgeting), and tax reform. You may recall that Willard (“Mitt”) Romney and his running mate, Rep. Paul Ryan, talked constantly about a plan to eliminate tax deductions during the 2012 election campaign.
So, basically, Obama is telling the right-wing “Here’s something you want, and something else you want, and I’m not going to ask for anything that progressives want.” And the GOP answer so far is a big fat NO. They would rather take the blame for a partial government shutdown. Does this make sense?
Jonathan Chait tries to explain:
President Obama is offering up something — hundreds of billions of dollars in cuts to Social Security and Medicare — that Republicans say they want and which (because of their unpopularity) they have proven unable to obtain even when they have had full control of government. They are instead undertaking a public showdown against a figure who is vastly more popular and trusted, who possesses a better platform to communicate his message, and whose message itself — spread the pain among rich and middle class alike, don’t cut retirement programs more deeply than needed in order to protect tax loopholes for the rich — commands overwhelmingly higher public support.
I think the Republican Party’s behavior can be at least partly explained, though not necessarily rationalized. The main thing that’s going on is that, in the face of cross-pressures, the party’s anti-tax wing has once again asserted its supremacy.
…Part of the confusion is that Republicans have been saying for months that they really just want to stop tax rates from raising. They’re happy — nay, eager — to make the rich pay more taxes by reducing their tax deductions. Certain conservative economists believe this as well. Since Obama is offering to increase revenue in exactly this way, his plan might seem inoffensive to Republicans.
…The answer to this piece of the mystery is clear enough: Republicans in Congress never actually wanted to raise revenue by tax reform. The temporary support for tax reform was just a hand-wavy way of deflecting Obama’s popular campaign plan to expire the Bush tax cuts for the rich. Conservative economists in academia may care about the distinction between marginal tax rates and effective tax rates. But Republicans in Congress just want rich people to pay less, period.
Robert Reich offers a better strategy for President Obama: Clear up all the confusion by taking on the Republicans’ big lies directly.
The first big lie is austerity economics — the claim that the budget deficit is the nation’s biggest economic problem now, responsible for the anemic recovery.
Wrong. The problem is too few jobs, lousy wages, and slow growth. Cutting the budget deficit anytime soon makes the problem worse because it reduces overall demand. As a result, the economy will slow or fall into recession — which enlarges the deficit in proportion. You want proof? Look at what austerity economics has done to Europe.
The second big lie is trickle-down economics — the claim that we get more jobs and growth if corporations and the rich have more money because they’re the job creators, and job growth would be hurt if their taxes were hiked.
Wrong. The real job creators are the broad middle class and everyone who aspires to join it. Their purchases keep economy going.
The Obama administration doesn’t have to play this crazy game of offering right-wing Republicans everything they say they want, knowing that they will refuse to take it. What they ought to be doing is explaining to the public that the right-wing is wrong, that they are lying.
Republicans have run on big across-the-board spending cuts for literally decades.
…But here we are. For the first time I think in our history we are about to go over the precipice of genuine across-the-board spending cuts. And Republicans are completely freaking out. There’s no other way to describe it.
America needs a raise. At $7.25 an hour, the minimum wage is 21 percent below its 1968 level. President Obama has proposed raising the minimum wage to $9.00 an hour by 2015, and indexing it to inflation. And the right-wing has responded with one of their favorite zombie lies – always wrong, endlessly repeated.
Speaker John Boehner: “When you raise the price of employment, guess what happens? You get less of it.”
Rachel Maddow: “We can check to see if that argument works… This is empirical. This is knowable. And here’s what we know: Raising the minimum wage basically has little to no effect on the amount of low-wage employment.”
Center for Economic and Policy Research: New Paper Finds Modest Minimum Wage Increases Have Little Impact on Employment
Source: Us Against Greed
Ten Numbers the Rich would like Fudged
The numbers reveal the deadening effects of inequality in our country, and confirm that tax avoidance, rather than a lack of middle-class initiative, is the cause.
1. Only THREE PERCENT of the very rich are entrepreneurs.
According to both Marketwatch and economist Edward Wolff, over 90 percent of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), personal business accounts, the stock market, and real estate. Only 3.6 percent of taxpayers in the top .1% were classified as entrepreneurs based on 2004 tax returns. A 2009 Kauffman Foundation study found that the great majority of entrepreneurs come from middle-class backgrounds, with less than 1 percent of all entrepreneurs coming from very rich or very poor backgrounds.
2. Only FOUR OUT OF 150 countries have more wealth inequality than us.
In a world listing compiled by a reputable research team (which nevertheless prompted double-checking), the U.S. has greater wealth inequality than every measured country in the world except for Namibia, Zimbabwe, Denmark, and Switzerland.
3. An amount equal to ONE-HALF the GDP is held untaxed overseas by rich Americans.
The Tax Justice Network estimated that between $21 and $32 trillion is hidden offshore, untaxed. With Americans making up 40% of the world’s Ultra High Net Worth Individuals, that’s $8 to $12 trillion in U.S. money stashed in far-off hiding places.
Based on a historical stock market return of 6%, up to $750 billion of income is lost to the U.S. every year, resulting in a tax loss of about $260 billion.
4. Corporations stopped paying HALF OF THEIR TAXES after the recession.
After paying an average of 22.5% from 1987 to 2008, corporations have paid an annual rate of 10% since. This represents a sudden $250 billion annual loss in taxes.
U.S. corporations have shown a pattern of tax reluctance for more than 50 years, despite building their businesses with American research and infrastructure. They’ve passed the responsibility on to their workers. For every dollar of workers’ payroll tax paid in the 1950s, corporations paid three dollars. Now it’s 22 cents.
A deal to resolve the so-called “fiscal cliff” has not been announced, with only 10 hours to go until tonight’s deadline.
With the caveat that no reporter is privy to the details of the offers being swapped, here is the deal that seemed to be emerging: Democrats would get an extension of unemployment benefits for 2.1 million people; they’d patch the alternative minimum tax for a year to protect the middle class from sharp tax hikes; and they’d implement a “doc fix” to ensure that Medicare reimbursement rates to doctors don’t fall precipitously and limit patients’ access to medical care. Republicans would get to preserve Bush-era income tax rates for households making up to $400,000 (rather than the $250,000 limit Democrats prefer). They’d also get a lower tax rate and a much higher threshold for inheritance taxes (set to revert to 55 percent on estates of more than $1 million on Tuesday). And significantly, Republicans would hold onto their greatest point of leverage in upcoming negotiations over entitlement cuts, because the deal wouldn’t raise the debt limit.
Here’s what’s important about everything Democrats would get: It’s temporary; everything expires (presumably) within a year. Here’s what’s important about what Republicans would get: it’s permanent. The tax rates won’t expire.
Yesterday the Senate GOP caucus gave up on a demand to cut Social Security benefits (via the so-called “chained CPI”) as part of a deal.
“CPI has to be off the table because it’s not a winning argument to say benefits for seniors versus tax breaks for rich people,” said Sen. John McCain (R-Ariz.). “We need to take CPI off the table — that’s not part of the negotiations — because we can’t win an argument that has Social Security for seniors versus taxes for the rich.”
Even without “chained CPI,” any deal that makes the Bush-Obama Tax Cuts For The Rich permanent is a bad deal. Along with the continuing economic slump, tax cuts and the Pentagon budget are the primarily drivers of deficits. Any credible deficit reduction plan must include major economic stimulus, expiration of ALL the tax cuts for the rich, and a significant reduction in military spending.
UPDATE: Tonight, MSNBC and CNN are reporting that President Obama has abandoned his campaign promises from 2008 and 2012, and agreed to make the Bush-Obama Tax Cuts For The Rich permanent for the first $450,000 of income. That nets an estimated $600 billion in revenue over 10 years, not enough to make a dent in deficits. The AMT is fixed permanently. If you are lucky enough to inherit up to $10 million, it’s all tax free. Capital gains will be taxed at 20 percent.
Ordinary working Americans will lose the payroll tax holiday, reducing the take-home pay of the median household by $1,000. Federal unemployment benefits will be extended for one year. Earned Income Tax Credit extended for five years.
The deal sets up three more fake crises early in 2013: (1) over the debt ceiling (which the Treasury has already hit), (2) over sequestration (in two months), and (3) when the continuing resolution expires on March 27 (enabling the GOP to threaten a government shutdown). Worst of all, once again the Republicans get away with hostage-taking tactics – which will encourage them to do it again, threatening to wreck the economy unless Dems cave to their demands.
UPDATE: At 11:45 pm Utah time, the Senate is voting. Senator Tom Harkin (D-IA) delivered an eloquent speech on C-SPAN2 denouncing trickle-down theory, and the idea that $400,000 a year is somehow “middle class” when it represents the top 1 percent. He also pointed out that tax breaks for the rich are made permanent in the bill, while true middle class items like the Earned Income Tax Credit, child tax credit, tuition tax credit and unemployment benefits are only temporary. The vote was 89-8 in favor of the deal.
UPDATE: Paul Krugman:
Anyone looking at these negotiations, especially given Obama’s previous behavior, can’t help but reach one main conclusion: whenever the president says that there’s an issue on which he absolutely, positively won’t give ground, you can count on him, you know, giving way — and soon, too. The idea that you should only make promises and threats you intend to make good on doesn’t seem to be one that this particular president can grasp.
And that means that Republicans will go right from this negotiation into the debt ceiling in the firm belief that Obama can be rolled.
UPDATE: Eric Cantor Really Hates the Senate’s Cliff Deal. There’s a chance that Speaker Boehner won’t keep his promise to let the House of Representatives vote on the Senate-passed bill because House Majority Leader Eric Cantor, the No. 2 Republican in the House, is against it.
UPDATE: Tax cuts for the rich have been made permanent, mostly with Democratic votes. The entire Utah House delegation voted no.
[T]he House passed the measure Tuesday evening by a vote of 257-167, with 85 Republican votes. 151 Republicans, including House Majority Leader Eric Cantor (R-VA) and Majority Whip Kevin McCarthy (R-CA), and 16 Democrats voted against the bill.