News & Comment

The Independent Foreclosure Review was supposed to be a full and fair investigation of the big banks' foreclosure abuses, and it was trumpeted as the government's largest effort to compensate victimized homeowners. Federal regulators, who designed the review, forced banks to spend billions to carry it out. Millions of homeowners were eligible and hundreds of thousands submitted claims. But Monday morning, the very regulators who launched the program 18 months ago announced that it had all been a massive mistake and shut it down. Instead, 10 banks have agreed to pay a total of $3.3 billion in cash to the 3.8 million borrowers who had been eligible for the review. That's an average of around $870 per borrower. But typical of a process that's been characterized by confusion, delays and secrecy, regulators said the details of how the money will be doled out were not yet available. read more »

Should our politicians dedicate themselves to solving the problems we face now? Or should they spend their time constructing largely theoretical deficit solutions for years far in the future to satisfy certain ideological and aesthetic urges? This is one of the two central choices the country faces at the beginning of President Obama’s second term. The other is related: Will the establishment, including business leaders and middle-of-the-road journalistic opinion, stand by silently as one side in the coming argument risks cratering the economy in an effort to reverse the verdict of the 2012 election? Yes, I am talking about using the debt ceiling as a political tool, something that was never done until the disaster of 2011. My first questions are, admittedly, loaded. They refer to a difference of opinion we need to face squarely. read more »

It has become accepted economic wisdom, uttered with deadpan certainty by policy pundits and budget scolds on both sides of the aisle, that the only way to get control over America’s looming deficits is to “reform entitlements.” The accepted wisdom is wrong. f anything, America’s safety nets have been too small and shot through with holes. That’s why the number and percentage of Americans in poverty has increased dramatically, including 22 percent of our children. “Entitlement reform” sounds like a noble endeavor. But it has little or nothing to do with reducing future budget deficits. Taming future deficits requires three steps having nothing to do with entitlements: Limiting the growth of overall healthcare costs, cutting our bloated military, and ending corporate welfare (tax breaks and subsidies targeted to particular firms and industries). Obsessing about “entitlement reform” only serves to distract us from these more important endeavors. read more »

It’s that time again: the annual meeting of the American Economic Association and affiliates, a sort of medieval fair that serves as a marketplace for bodies (newly minted Ph.D.’s in search of jobs), books and ideas. And this year, as in past meetings, there is one theme dominating discussion: the ongoing economic crisis. This isn’t how things were supposed to be. If you had polled the economists attending this meeting three years ago, most of them would surely have predicted that by now we’d be talking about how the great slump ended, not why it still continues. So what went wrong? The answer, mainly, is the triumph of bad ideas. read more »

Three trillion dollars a year. That's how much the wealthiest Americans avoid through the system of subsidies and schemes and sweet deals that deprive middle-class workers of their earned benefits. That's three times more than the deficit. That's enough for a full-time job for every middle-class household in America. Here are the distressing details. read more »

The budget deal that just averted the supposed fiscal cliff was only a warm up. The next fiscal cliff is the $110 billion in automatic budget cuts (sequesters) that last week’s budget deal deferred only until March. But, as long as we are using topographic metaphors, this is less a cliff than a bluff. On the Sunday talk shows, Republican leaders were full of bravado and swagger. Representative Matt Salmon of Arizona, on CBS “Face the Nation” said it was about time “for another government shutdown.” Senate Minority Leader Mitch McConnell, speaking with ABC’s George Stephanopoulos, ruled out any further tax increases, declaring that “the tax issue is finished, over, completed.” He insisted, “Now it’s time to pivot and turn to the real issue, which is our spending addiction.” But is spending really the problem? read more »

Even for someone unmoved by hyper-ideological, right-wing rhetoric, Senator John Cornyn’s most recent op-ed for the Houston Chronicle is astounding in its mendacity and utter disregard for responsible governance. To wit, after engaging in a little bizarro history—where he blames the president for brinksmanship on the debt ceiling and the fiscal cliff, as if Obama has an obligation to implement the GOP agenda—the two-term Texas lawmaker presents a government shutdown as a responsible way to force spending cuts. Ignoring, for now, Cornyn’s assertion that the United States will end up like Greece—which, as I noted a few days ago, is ridiculous given our ability to print money—it’s worth elaborating on what Cornyn means when he says “shutdown.” read more »

The centrist fantasy of a Grand Bargain on the budget never had a chance. Even if some kind of bargain had supposedly been reached, key players would soon have reneged on the deal — probably the next time a Republican occupied the White House. For the reality is that our two major political parties are engaged in a fierce struggle over the future shape of American society. Democrats want to preserve the legacy of the New Deal and the Great Society — Social Security, Medicare and Medicaid — and add to them what every other advanced country has: a more or less universal guarantee of essential health care. Republicans want to roll all of that back, making room for drastically lower taxes on the wealthy. Yes, it’s essentially a class war. The fight over the fiscal cliff was just one battle in that war. It ended, arguably, in a tactical victory for Democrats. The question is whether it was a Pyrrhic victory that set the stage for a larger defeat. read more »

The new job numbers are out and, at first glance, there is nothing surprising here. But here's a statistic that jumped out at me: 89,000 public sector workers lost their jobs in October, November, and December—with most of those losses, 66,000, occurring in October. Large-scale layoffs of government workers continue across the United States. Such layoffs undermine local economies and stymie the recovery. For every five workers who were hired in the past three months, one was laid off by government. This doesn't make sense. Government may not always do such a great job of stimulating employment growth through fiscal and monetary policy, but it sure as heck can bolster the job market by continuing to employ those people who do have jobs. Instead, thanks to austerity policies, government has been doing the exact opposite. read more »

The news today from the Bureau of Labor Statistics is that the U.S. job market is treading water. The number of new jobs created in December (155,000), and percent unemployment (7.8), were the same as the revised numbers for November. Also, about the same number of people are looking for work (12.2 million), with additional millions too discouraged even to look. Put simply, we’re a very long way from the job growth we need to get out of the gravitational pull of the Great Recession. That would be at least 300,000 new jobs per month. All of which means job growth and wage growth should be the central focus of economic policy, not deficit reduction. read more »