News & Comment

If there’s anything frustrating about American politics at this moment, it’s the disappearance of mass unemployment as an area of elite concern. Now that joblessness is on the decline, Washington has moved away from efforts to further address the problem, despite the fact that unemployment isn’t expected to reach pre-recession levels for another four years. You can say the same for Washington’s attitude towards growth. Gross domestic product increased by 3.1 percent in the third quarter of 2012, up from 1.3 percent in the second quarter, and 1.9 percent in the first. Average GDP for the year will probably fall near 2 percent. Compared to the rest of the world, this is a solid recovery. But compared to what we need to close our output gap and begin to return to normalcy, it’s far from adequate. Despite this, neither Congress nor the White House seem interested in finding ways to generate more growth. Instead, both are preoccupied with austerity. read more »

After accepting a mini-bargain that includes tax hikes for Americans making more than $400,000 a year, Senate minority leader Mitch McConnell announced: “The tax issue is finished, over, completed.” By shutting down debate on revenues while holding the line on the debt ceiling, McConnell and the GOP hope to turn their defeat in the fiscal cliff fight into a victory for austerity in the debt ceiling and sequester battles ahead. If they prevail, Social Security and Medicare benefits could end up back on the chopping block, and other cuts to government programs could trigger a “lost decade” of American economic decline. It is impossible to negotiate with this position; it would be terrific if President Obama took Nancy Pelosi’s advice and simply raised the debt ceiling by invoking the Fourteenth Amendment’s charge to maintain the “validity of the public debt of the United States.” But Obama doesn’t want to go there, and so it falls to progressives to develop smart, aggressive alternatives to the GOP agenda. read more »

happily joined the more than 200,000 people who’ve signed the “Paul Krugman for Treasury Secretary” progressive fantasy petition. It was a clever way to tell the administration to reject this nutty austerity craze. Now, however, President Obama has made the far less exciting choice of his Chief of Staff, Jack Lew, for the job. And especially given the experience with Timothy Geithner over the past four years, it’s time to develop some more modest wishes for the new top dog at 1500 Pennsylvania Avenue. 1. If you were complicit in the 2008 crash, please fess up and make a convincing case that you’ve seen the light. 2. If you oppose a popular progressive reform, have the decency to explain your position. 3. Please don’t help rich people and corporations hide their money in overseas tax havens. 4. Don’t be a jerk to other governments read more »

TARP – the infamous Troubled Assets Relief Program that bailed out Wall Street in 2008 – is over. The Treasury Department announced it will be completing the sale of the remaining shares it owns of the banks and of General Motors. But in reality it’s not over. The biggest Wall Street banks are now far bigger than they were four years ago when they were considered too big to fail. The five largest have almost 44 percent of all US bank deposits. That’s up from 37 percent in 2007, just before the crash. A decade ago they had just 28 percent. The biggest banks keep getting bigger because they can borrow more cheaply than smaller banks. That’s because investors believe the government will bail them out if they get into trouble, rather than force them into a form of bankruptcy (as the new Dodd-Frank law makes possible). That’s why it’s necessary to limit their size and break up the biggest. Washington may be getting the message. read more »

By the conventional “peak to trough” measure, the recession that began in December 2007 ended 18 months later, in June 2009. But you’d be hard-pressed to find much evidence of “recovery” in the labor market. Job creation is barely keeping up with population growth. The marginal decline in the unemployment rate (from about 10 percent at its worst to just under 8 percent at the end of 2012) has been driven mostly by people dropping out of the labor force. And long-term unemployment remains stubbornly high. All of this begs a bigger question: What would real recovery look like? The first and simplest measure is simply to chart our progress towards regaining the jobs lost during the downturn. This yields a flat threshold at the December 2007 employment levels, and a jobs deficit that pushed past 8 million in late 2009 and now sits at about 3 million. read more »

Last February, the big banks agreed to a major “settlement” to protect themselves from litigation by state attorneys general stemming from fraudulent documentation of mortgages. Though some, such as New York’s crusading attorney general Eric Schneiderman, believed that the government had leverage to get a lot more, the settlement required the banks to pony up some $25 billion to settle outstanding charges. The banks, without admitting wrongdoing, agreed to reform fraudulent practices, such as “robo-signing” and proceeding with foreclosures on one track while supposedly helping borrowers to adjust terms on another. The settlement reserved the government’s right to continue criminal prosecutions. Schneiderman was made co-director of a federal task force on banking and mortgage abuses headquartered at the Justice Department. Schneiderman’s hope was that the leverage of increased prosecution efforts would compel the banks to part with a lot more money in a second round of settlement talks. But now, the other shoe has dropped and the banks have won again. read more »

House Speaker John Boehner spoke at length with the Wall Street Journal’s Stephen Moore about the coming confrontation over the debt ceiling, the sequester, and the spending cuts Republicans will try to achieve. Buried in the interview is a highly newsworthy nugget, in which Boehner implicitly admitted that the debt limit does not give Republicans the leverage they’ve suggested it does. Indeed, it’s hard to read this exchange as anything other than a sign that Republicans may be backing off the fight over the debt ceiling. read more »

Last year, in 2012, the U.S. government spent about $841 billion on security—a figure that includes defense, intelligence, war appropriations, and foreign aid. At the same time, the government collected about $1.1 trillion in individual income taxes. (And about $2.4 trillion in revenues overall if you include payroll, corporate, estate, and excise taxes.) In other words, about 80 cents of every dollar collected in traditional federal income taxes went for security. That's an astonishing statistic, and it captures the most underappreciated aspect of today's fiscal challenges: We have a security spending problem. Such spending is significantly higher than all non-defense discretionary domestic spending. Worse yet, almost nobody in Washington seems interested in seriously curtailing defense spending that is greater in real terms than what the U.S. spent in the Cold War. read more »

Once again we go to the cliff. Once again Republicans are threatening brinksmanship. Once again, Democrats are practicing preemptive capitulation. Once again, the media is missing the real story. You’re going to be hearing a lot from Republicans about the horrors of debt and deficits in the next couple of weeks. The last time they cranked up their fear machine prior to a vote on the debt ceiling, it caused a downgrading of the US credit rating and cost us some $90 billion. You know, crashing the economy in order to save it. Let’s be clear: Republicans don’t give a damn about debt and deficits. In fact, the bulk of our current and projected deficit is a direct result of Republican policies. And Republicans watched in silence as Reagan tripled the deficit and Bush doubled it. Both Cheney and Reagan claimed deficits don’t matter, and again, conservatives nodded in agreement. So what’s going on? read more »

Two major settlements between ten big banks and the government Monday totaling over $20 billion aimed to clear up allegations of widespread malpractice relating to the mortgage crisis. But what at first looks like great news for the 4 million Americans forced into foreclosure between 2009 and 2010, the settlements may be a greater boon to banks than burned homeowners. read more »