Category Archives: Economy
The 2012 State of the Union was yet another eloquently delivered speech by our president, Barack Obama. While talking to a buddy of mine who isn’t entirely on the progressive side of things, he admitted that “it’s good to have a President that doesn’t make up words and sayings.” My sentiments entirely. Far gone are the Bush days of “misunderestimating,” “Axes of Evil,” and being the laughingstock of the world. Our President also showed his bipartisan nature by highlighting many things the two sides agree on, including merging six government agencies into one, cutting out needless bureaucracy, rewarding teachers for doing a good job and inspiring their students, strengthening the border, and cutting taxes for companies that keep jobs here in America. He then essentially threw the ball in the Congressional court, telling them that if they pass bills with the above ideas that both sides agree on, he will “sign them right away.”
He additionally gave progressives a lot to be happy about, with his statements on asking the Top 2% of Americans to pay their fair share, citing Mitt Romney’s insanely low tax percentage as evidence that the richest Americans are getting away with paying the same percentage of taxes as the bus driver or coal miner barely making ends meet. He highlighted the need for environmental change, citing what he’s already done and what he plans to do with increasing funding for natural gas, wind, solar, and biofuel research. He also showed the three million job increase that has occured in the last 22 months, a revolutionary increase in jobs. Finally, he said that enough was enough with Congresspeople engaging in insider trading, and requesting a fair playing field for all people living in this country.
Whether or not you support progressivism (although if you’re reading this you probably do), it’s hard to deny Barack Obama’s still got game. It’s time for Washington embrace the no-drama attitude Obama has embodied for years, and get things done in this country. I’m proud Obama is the leader of my party, and am beyond honored that he’s coming to U of M to speak at the Al Glick Field House on Friday (get your tickets at the Michigan Union Ticket Office tomorrow morning at 9 am!). Seeing the man in person will certainly be an honor.
As pretty much everyone and their mother knows by now, the “debt ceiling,” a Congressionally mandated line-in-the-sand that the U.S. National Debt is not allowed to surpass, has been surpassed and must be raised incredibly soon to avoid possible depression, collapse of the world banking industry, and essentially total ruin. Treasury Secretary Tim Geithner has gone on record saying that the deal to raise the debt ceiling must go through by August 2 and that there are “no other option(s) to buy more time for Congress.” With that said, deals usually require some form of compromise, right? While both sides agree the national debt must come down in the long term in order to facilitate this short term ceiling rise, the Democrats and Republicans each have key ways to make this happen. In a compromise then, logic dictates, each side would get some of what they want.
In the case of the debt ceiling, Democrats want to preserve entitlements so that what’s left of the social safety net in America can be secured, ask the wealthiest Americans to pay a little more, and trim the enormously bloated defense budget slightly. Republicans want to keep taxes cut as low as they are for Americans, cut spending on entitlements, and save the defense budget. While Obama has signaled he would accept a 3:1 ratio as part of the deal (3 parts spending cut to one part revenue gain through asking those making half a million or more to pay a little extra), that is still apparently not enough for the Republicans in the House and Senate. When Boehner signaled he was leaning toward accepting the deal, he faced an enormous backlash from his own party. Of course, the GOP is veering so far to the right that there are plenty of Tea Party Caucus GOP members who will vote against the debt ceiling increase regardless, including chair Michelle Bachmann.
So, analysis time. In sum, I believe Obama has the upper hand here. He has clearly signaled to the American people his willingness to compromise and cut spending on prized programs such as Medicare and defense, and in exchange he is asking for the very wealthiest to pay a bit more. I feel the American public will side with Obama on this issue because raising taxes on the wealthy has always polled incredibly well. A PPP poll of four swing states showed that 80% of voters in said states supported tax increases on those making a million dollars or more a year.
In short, the GOP look like the babies in this situation with their refusal to budge even a bit. One modest show of centrism by Boehner was met with a proverbial crowd of angry Republicans with torches and pitchforks. They are putting total economic collapse on the table just so that their wealthy friends can avoid paying a bit more on taxes. That is a message that the David Plouffe-led White House communication staff will be playing hard and fast from now all the way through the 2012 elections, guaranteed. Boehner and the GOP still have a chance to show that they can see the light and veer a bit back to the saner days of Bob Dole and Newt Gingrich, when compromises were actually able to go through leading to a balanced budget, but I wouldn’t exactly be betting the farm on that one.
As the austerity obsession popularized by the tea party continues to grip Washington, a number of Republicans have adopted an intriguing – but baseless and bizarre – argument that the present economic downturn has been perpetuated and exacerbated by President Obama’s fiscal policy. This assertion, though, has little empirical or theoretical grounding, including in two oft-repeated tenets of conservative economic philosophy: opposition to Keynesian economics and concern about the so-called “crowding out” effect.
The empirical flaw in the GOP’s argument about Obama’s fiscal policy is clear: while the state of the economy leaves much to be desired, it is in much better shape than when the Republicans last controlled the White House. In the last full year that George W. Bush was president, the economy shed 2.4 million jobs, the Dow Jones Industrial Average lost a third of its value, and some of the largest US financial institutions imploded. While the unemployment rate remains stubbornly high, it is much lower than it likely would have been in the absence of Democratic-led economic interventions, such as the bailouts that saved Chrysler and General Motors – and hundreds of thousands of jobs in the Midwest. Today, the economy is adding jobs, the stock market is recovering, and the financial system has regained stability.
Perhaps more troubling than the factual falsities that underly the GOP argument, though, is its apparent disconnect with economic theory. Indeed, anti-Keynesian arguments do not explain continued sluggish growth. In a nutshell, Keynesian economics holds that governments should adjust spending to counteract aggregate demand shocks. The 2009 stimulus bill, for example, sought to offset a decrease in private spending with an increase in public spending. Conservatives argue, though, that the taxes that fund government spending disincentivize the private economic activity that would otherwise lead to economic growth. For better or for worse, though, taxes have not increased since Obama took office; in fact, the stimulus bill included massive tax cuts for individuals and businesses. In other words, Obama’s fiscal policy has not negatively impacted the economy through an increase in taxes.
The other mechanism through which conservatives argue government spending can undercut economic growth is the crowding out effect, under which increased public borrowing raises demand for loanable funds and thereby drives up the cost of borrowing for the private sector. But, the crowding out effect acts on the economy only as much as public borrowing increases the interest rate. Interestingly, the Federal Reserve has taken extraordinary measures over the past three years to force down interest rates and unfreeze capital markets. As a result of these interventions, interest rates remain low today and the private sector continues to have access to loanable funds.
It seems that absolute opposition to public intervention in private markets is the driving force behind tea party economics – a dangerous belief in an era when the government’s failure to act could lead to the collapse of entire sectors of the economy and prolonged periods of worldwide economic depression. At least there were guiding principles, albeit questionable ones, behind Reaganomics. It seems that leaders in today’s GOP, though, limit their analysis to little more than ideology and demagoguery.
While the high-profile fight between the banking and retail sectors over debit card swipe fees finally seems to be settled with new restrictions that limit the size of such fees slated to go into effect this summer, the rhetoric that spurred the policy change remains as misleading as ever. At issue are the so-called “interchange fees” that banks charge retailers each time a customer uses a debit card. Retailers argue that the fees, which average about 44¢ per transaction, eat away at already-minimal profit margins and lead them to charge higher prices to consumers. At a time when public sentiment against the banking industry remains high, retailers were able to convince Congress to include a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that directs the Federal Reserve to limit the per-transaction fees that banks can charge to retailers. In December, the Federal Reserve announced a proposed rule slated to go into effect in July that would limit debit card swipe fees to 12¢ per transaction. Retailers have portrayed this rule as a significant victory for Main Street that will benefit consumers by enabling stores to charge lower prices. Despite its political resonance, though, this conclusion is economically baseless; indeed, the rule change merely amounts to a welfare transfer from banks to retailers and consumers will likely gain nothing at all.
Banks earn roughly $16 billion on interchange fees annually – a significant sum of money for any industry. Many retailers have portrayed the interchange fees as an example of profiteering on Wall Street at the expense of everyday Americans. These retailers, however, overlook the benefits that Americans receive from these earnings, such as free checking accounts and debit card rewards programs. In fact, many banks have made it clear that they will be unable to continue offering such services without charging hefty new fees to their customers. Simply put, banks will continue to make money and consumers will continue to pay – the only change will be whether it is through a hidden fee on a price tag in a store or through a monthly deduction from a formerly free checking account.
Unfortunately, though, the new rule will go further than a simple surplus transfer from banks to retailers and instead create a lose-lose situation for American consumers. After all, it is well known that prices are “sticky” and it is difficult to imagine America’s retail industry slashing prices by a couple of cents across the board in a great act of post-rule change benevolence. A more likely outcome is that consumers will pay the same prices they have always paid at the cash register, retailers will see a decrease in costs, consumers will face new fees for financial services, and banks will continue to make significant profits.
While the failure of the proposal by Senator Jon Tester (D-MT) to delay the proposed rule indicates that the rule will likely go into effect as planned, it is worth remembering that it is not a great victory for Main Street, as many retailers have argued; rather, it is successful rent-seeking ploy by retailers that merely reallocates society’s resources, but neither raises the country’s economic pie nor creates a more equitable economic order.
Perhaps more simply: there is no such thing as a free lunch.
The obligatory disclaimer: The opinions expressed herein reflect only the views of the author and don’t represent the opinions of any organization with “D” in it. Be thankful, organizations with “D”, you are guaranteed to be much more witty than I could ever muster.
-President Obama delivered his State of the Union address last night and gave a very centrist speech, with a few bones to progressives (high speed rail, DREAM act) and the right (spending freeze, regulation reform). Meanwhile, Charles Bogren was listening to a different speech, and when asked his thoughts he responded with a drooling word salad of “liberals liberals liberals Communism evil aliens.”
-WolvPAC wants the University to start an Israel program since apparently the students have the option of studying abroad in every other country ever, except Israel. Because the University has always been keen on sending its undergraduates to the lands of Fidel Castro and Kim Jong-il.
-The Michigan Daily Editorial: Banish the smoking ban!! Have cigarette smoke fill the University forevermore! Huzzah!
-Lighting is causing all the crime in Ann Arbor. Too bad Michele Bachmann just started leading a crusade in her State of the Union rebuttal against lightbulbs.
-Yay for Sundance short films coming to Michigan! The pinnacle of cinematography, the festival includes “Mr. Okra,” a story about a man who sells fruits and vegetables from his truth in New Orleans, singing about his vegetables. Finally, a movie geared to the small, but vibrant druggie culture in Ann Arbor.
-Rich Rod is joining CBS as a guest analyst. Funny, I had seen him working at the Bursley Dining Hall on occasion the past few weeks. Looks like he’s moving on up.
-According to the Random Pointless Student Interview, North Campus sucks. Kudos to the Michigan Daily esteemed newspaper for day in, day out, telling us things we knew the first day of setting foot on Ann Arbor soil.
For all who read through the whole thing, thank you.
There is no question our Commander in Chief is quite happy right now. First, of course, he’s going to Hawaii. That would make pretty much everyone elated, especially those dealing with the freezing cold up here in Michigan. The biggie, however, is the massive amount of legislative victories and ability to reach across the aisle to those difficult-to-compromise-with Republicans over the past few weeks. Normally, the lame duck session, or the session following a Congressional election but preceding the formation of a new Congress, is quite uneventful. Rachel Maddow said on her 92Y special last night on MSNBC that pundits were expecting perhaps “a few post offices to be renamed.” But this could not be further from the truth, as we have seen this White House finally come out and fight hard for common-sense policy items that are heavily favored by the American people. Let’s go down the list, shall we?
New START Treaty ratified by the Senate. A treaty requires 67 votes to be ratified, or made law, in the US Senate. The New START treaty was one of the items on the lame duck agenda that Washington heavily pushed. All six living Republican secretaries of state supported it, as did the joint chiefs of staff, and Republican members of the Senate Foreign Relations Committee. Still, however, Republican leaders in the Senate headed by Jon Kyl, minority whip, asked for more time and more funding for “infrastructure”. In the end, this was pushed to a vote and made it in just three days before Christmas, ratified 71-26. Now, we don’t have to worry about a Second Cold War breaking out and all of humanity perishing as we know it. Yay!
Don’t Ask Don’t Tell Repealed. A major progressive victory no matter how you look at it, the House and Senate passed the repeal of Don’t Ask Don’t Tell and its full implementation across the board will only take a matter of months, according to Obama himself. Better late than never, as we were the second to last NATO country to allow homosexuals in, but no matter what all of Obama’s critics on the left have to admit this was a fantastic legislative accomplishment.
Food Safety Act passed. Anyone who has read Schlosser’s Fast Food Nation knows how loose FDA regulations are. This bill will help make America’s food safer across the board by imposing stricter regulations.
The 9/11 First Responder Health Care Bill passed (unanimously!) Despite Tea Party Republicans’ best attempts to stifle a bill giving health care to those who bravely risked their lives on September the 11th, a scathing indictment over the past week by Jon Stewart and others prompted the Senate into action. The bill passed without objection.
Pell Grants, Unemployed benefits Extended. The tax cut compromise proposed by Obama two weeks ago was roundly criticized by liberals, but within it were some golden nuggets that will really help those who need the help most- students and the unemployed. Pell Grants will continue to be funded at the current amount, and God knows for me that’s essentially the only way I can attend U of M. Also, for millions of Americans who are unemployed and were worried the Congress would play politics with their benefits, they can enjoy a nice meal for Christmas and rest a bit easier. Paul Krugman, one of the leading economists in the world, points to unemployment benefits as the best economic stimulus, as the impoverished need to spend the money on goods to keep going- stimulating business, ushering in new jobs, all that good stuff.
Sure, some post offices were probably renamed too, but you’d be hard pressed to find a time in Congressional history since the days of Franklin Delano Roosevelt where this much has been accomplished. The tax cut compromise allowed a temporary extension of tax cuts for the wealthy, and in exchange all this has been accomplished in a matter of days. According to a CNN poll released on December 22, voters approve of Obama’s handling of the lame duck session 56-41, while voters disapprove of Republicans’ handling 53-42. Similarly, on the issue of compromise, the tax cut decision went well with voters as 59-37 percent believe Obama has done enough to reach across the aisle, whereas 68% thought Republicans weren’t doing enough in return. This poll highlights what happens when Obama fights for the extremely popular policies that he championed when running for office. Now, for the next few days, Obama can rest easy, eat lots of food, and participate in those wonderful Hawaiian luaus and know that he has really proven himself as the leader of this nation. Merry Christmas to my fellow Dems, Happy Kwanzaa if you are so inclined, and Happy New Year. Huzzah.
Obama: handing out tax cuts or possibly back massages.
I have spent over ten hours (in a horrible 2 hour commute every day) this week listening to NPR be entirely transfixed by the emerging deal made by President Obama, his beleaguered Democratic forces, and the empowered, minority Republican Party over the future of “The Bush Tax Cuts.” When the deal was announced earlier this week Republicans cheered while Democrats cried out with a million voices in pain.
HuffPo plashed apocryphal headlines across its page, FireDogLake breathed fire, and Bernie Sanders started threatening a filibuster. All the while the Democratic Party opinion leaders missed something important - most Democrats (especially those that supported the President) support the Tax Deal. It seems we are once again ceding fact to the hot heads at the edge of both the Republican and Democratic Parties.
In the end this deal is a good deal. (Read Here For Details) The hyperbole surrounding its conception and its contents are over blown and I want to explain why.
The deal is actually really good from a Democratic perspective. Both Jonathan Cohn and the NYT point out that this deal is LOADED with economy stimulating tax policies, unemployment insurance extensions, and other goodies. These economic stimulants will affect 156 million Americans and create/save 2.2 million jobs (thank you CAP) Go figure we spent all last week salivating for a deficit reduction plan and this week the Republican Party approved $450 billion dollars in additional spending. Only in America.
When deciding between the deal where everyone loses and I get a whole bunch of stuff (All I Want For Christmas Is Earned Income Tax Credits)… I usually pick the latter.
Yes, the high-end income tax cut extension and estate tax giveaways are ugly. Democrats should not like them and should be angry they exist. Get over it. On balance this deal affects more middle-to-low income Americans thank high-income Americans is a good deal for the economy.
This is also a deal that punts this issue to 2012. Usually I am all “PLEASE GOD DON’T” when Democrats punt issues down the line, but I trust the full force of the Obama Campaign to eradicate these tax cuts during an election season when the economy is on the mend and Democrats are not JUST coming off of a nasty midterm slaughter at the polls.
The NYT reported that this deal was forged between VP Joe Biden and Mitch McConnell in some tax deal bunker in the Capitol (Biden’s office). Liberals are angry that they were excluded from the table and did not have a say.
Yup, that is the whaaaaaaaaaaaambulance you hear.
In an era where the Republicans have just enough power to cause serious headaches this deal was completely necessary. It paves the way for lame duck legislating of DADT and the Dream Act, which would not have seen the light of day in the Senate without a Tax Cut Deal. Additionally, the tax cuts were not made permanent, which means there is still time to get their messaging right, which it hasn’t been for the last several months, and win this battle in 2012.
Importantly, this deal clarified for all involved (Democratic Party, Republican Party, the Media, bloggers, Sarah Palin, that caribou she shot) that the only thing the Republican Party really cares about are the rich. According to their spin they “won” because they got two policy priorities, the high-end tax cuts and estate-tax deal, that really only help people who own and have an intimate knowledge of monocles and/or top hats (not a reference to Mr. Peanut).
I have argued this before. Obama has always been and always will be a pragmatist. He ran on “hope” because we really needed it after eight years of Bush-grown, country-sized rot. Yet, nothing about his rather progressive (please… try to argue with that) agenda has said he is an idealist. He will compromise to get the win that creates the most good. In this tax deal his win brings good to millions of Americans, opens the door for Don’t Ask Don’t Tell repeal, provides time for the passage of the START treaty, and hopefully see the DREAM ACT passed.
All in all… I would say that is a pretty good deal.
I saw this picture (click to enlarge) over the summer during casual browsings of the internet. It frankly illustrates ‘a’ big root of the world’s current problems, and more accessibly, why our economy is having a little trouble getting kick started again.
This November, we need to sustain our Democratic majorities who are most inclined to push for alternative energy legislation, and policies that guide society into a more sustainable way of living, as there is no real permanent future with our current petroleum based way of life and economy (fuels cars, fertilizes industrially grown food, transports said food, there’s more).
So, get out there, and push for the Democrats, on the streets, in the phone banks, and if you cannot there (i.e. you’ve got critical work to do), the web is another place to push. Tweet, Facebook, blog, write editorials, etc. Whatever little helps, especially if canvassers knock on a door of or phone bankers call someone recently convinced online that they should vote Dem again, as it makes their job a lot easier and gives them time to call more people/knock more doors.
Best of luck to all Democratic candidates. Let’s do it again in 2010!
Our friendly neighbors to the northwest are trying hard to pass the Silver Line Millage on Tuesday. The millage is necessary to bring stimulus money to the Grand Rapids area, where they’re trying to build an incredible new bus line that’s fashioned more like a light rail system. Here’s how such a line would work:
But they need our help. For one thing, they are canvassing on Saturday, and if anyone is in the Grand Rapids area, or can make it there, they would love your help. For more information, head over to the RapidYES website.
Secondly, the opposition is doing well on jumping in on all online media posts with their message. Below is a list of media links that we should be going to. When you get there, search for “Silver Line”. At the end of each story, there is a comments area. Please talk up the millage – information you may need can also be found on the RapidYES website.
Thanks for all your help in getting this necessary millage passed!
At long last, allow me to present A Place To Stay: Combatting Michigan’s Brain Drain with Sustainable Communities. This short documentary was created entirely by Michigan students, in particular the Environmenal Committee of our very own organization. It presentsÂ one solutionÂ to the brain drain and suffering economy of Michigan, namely creating attractive communities where young educated people want to live, create, and consume. In it, we hear from experts on urban planning and tallent retention, as well as fellowÂ Michigan students. Perhaps you will recognize a face or two. So without any further ado, enjoy!