Friday, December 2, 2011

Mike Konczal takes a hard look at the Obama administration's handling of the economy and doesn't like what he sees:
With job growth failing to exceed population growth each month, and with no serious increase in the percent of Americans working, 2011 was a lost year for the economy.

Lost years for the economy have major consequences. Beyond the human misery that results, they put the entire project of liberal governance at risk. Choices made early by this administration resulted in no advancement on three fronts... fiscal policy... monetary policy... and dealing with the problems in the housing market....

In the 2010 State of the Union, President Obama stated that he would freeze 2011 discretionary spending even though unemployment was projected to be above 8 percent... This conventional wisdom gave the Republicans the leverage they needed to destroy any pro-active economic agenda.

Thus the Democrats spent 2011 -- which could have been a crucial year for the recovery -- in a futile debate with the Republicans over the budget. From the original government shutdown in April to the debt ceiling fights in July, Republicans showed that they were capable of making even the most trivial changes to the budget costly to the Democrats. As time went on the administration became ever more willing to make huge concessions to get a deal and restart the economy, and each time was left at the table....

Monetary policy is another avenue that spent 2011 in limbo... In the midst of collapsing prices, President Franklin Roosevelt in a fireside chat in 1933 announced that "[i]t is the Government's policy to restore the price level first"-- a signal to the markets that the New Deal was going to take monetary policy very seriously. President Obama has shown less interest in monetary policy, reappointing the moderate Republican Ben Bernanke to office and leaving [Fed board] seats open for years.... Obama's lack of movement on recess appointments has left the Fed tilted to the right. Since the other people that sit on the Federal Reserve are hard conservatives appointed by banks, getting people concerned about unemployment there is even more important.

At the end of 2011, key liberals... started talking about a new way of doing Federal Reserve policy based on "nominal GDP targeting" which would allow for higher inflation in weak economic times. Meanwhile, Chicago Federal Reserve President Charles Evans put out a plan to allow 3 percent inflation while unemployment is above 7 percent. These are good ideas; the administration could put them into practice by filling vacancies with appointees who understand their value.

The third important element of the recovery is restoring the housing sector... Foreclosures are a lose-lose-lose, devastating homeowners and neighborhoods, ravaging municipality budgets and hitting the creditors themselves... The most obvious way to deal with this is to allow courts to write down mortgage debt in bankruptcy, but the Obama administration passed on requiring bankruptcy modifications...

Ever since then, abuses in the mortgage payment "servicing" system-ranging from robo-signing to phantom foreclosure referrals to illegal foreclosures on servicemen overseas-have been reported by both community activists and from financial analysts. In late 2010, the largest banks voluntarily halted foreclosures to investigate before going back to business as normal.

The administration could have pushed hard on investigating the foreclosure market. Instead they pushed for quick settlement with the largest banks...

In 1938, shortly after premature fiscal and monetary tightening triggered a recession, the economist John Manyard Keynes wrote a worried letter to President Roosevelt. He was, he wrote, "terrified lest progressive causes in all the democratic countries should suffer injury, because you have taken too lightly the risk to their prestige which would result from a failure measured in terms of immediate prosperity. There need be no failure. But the maintenance of prosperity in the modern world is extremely difficult; and it is so easy to lose precious time."

Everything progressives have fought for -- from the policy advancements of the Obama administration like healthcare and financial reform to the New Deal and Great Society programs that remain, like Social Security and Medicare -- has been at risk as a result of this Great Recession. A longer period of sustained joblessness will wreck the working class and devastate the budget, leaving our economy even weaker.... There are ways forward; it is just a question of whether the administration is prepared to take them. It is easy to lose precious time, and we've just lost a full year with nothing to show for it.

Thursday, December 1, 2011

Taxing the 1%

Nick Hanauer, a 0.1%-er on taxing the rich... his whole op/ed is worth a look, but here's the best quote, which helps explain why top-heavy societies don't work:
Since 1980, the share of the nation's income for fat cats like me... has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007... In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.

One reason this policy is so wrong-headed is that there can never be enough super-rich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don't buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.

If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend.