The Edmund L. Andrews Archives
So Ben Bernanke, the Fed chairman, today explicitly justified the logic for another round of quantitative easing (or "QE2") to salvage our sputtering economic recovery.
On one level, what's striking about Bernanke's speech at a conference of the Boston Fed is how textured, detailed and unambiguous it is in trying to explain a decision the Fed won't officially make until at least Nov. 3. Bernanke acknowledges that consumer spending has been inhibited by a "painfully slow'' recovery, that job growth is too slow to make any real dent in unemployment through the end of next year and that inflation is actually running unemployment is coming down too slowly and that inflation is "too low" for the Fed's comfort. Then Bernanke spells out the implications for monetary policy, with the bottom line being that the time is right for QE2.
What do Republicans have in common with China's communist leadership? They'd probably both like to make the Nobel Prize people disappear from the face of the earth.
On Friday, the scandalous Scandinavians infuriated the Chinese leadership by awarding the Nobel Peace Prize to Liu Xiaobo, the imprisoned literary critic and political dissenter. The Chinese, who had publicly warned the Nobel committee against honoring Liu, then denounced the award as blasphemous, banned celebrations, arrested some of his supporters and called the Norwegien ambassador in for a tongue-lashing,
I've been off-line for much longer than I wanted, and I apologize. But as you can read in this press release, I'm about to take on a new job that I just couldn't pass up. Starting October 18, I will take up residence at the National Journal as managing editor for economics.
As many of you know, National Journal has long been one of the most respected (and expensive) publications to cover government. It's now launching a big expansion, especially on the web, and it has recruited a spectacular roster of journalists, starting with Ron Fournier as editor in chief and Ron Brownstein as editorial director.
Peter Orszag, who stepped down just as White House budget director just a month ago, appears to have just floated an important trial balloon on a potential Democratic strategy for the Bush tax cuts. It comes in the form of Orszag's debut column for the New York Times op-ed page, but it's probably a good indicator of where the White House would like to go.
I just posted on this for the Fiscal Times:
Orszag proposes two departures from the current White House orthodoxy:
1) Extend all the Bush tax cuts for two years, even for the top 2 percent of earners – i.e., households with annual incomes above $250,000.
2) Let all the Bush tax cuts expire, including those for middle-income households, starting in 2013.
Kevin Hasset and Alan Viard took another run at arguing that small business will be crippled if the Bush tax cuts expire for individuals earning above $200,000 and families with incomes above $250,000.
I've looked into this before, as have others, and the argument is thin. Hassett re-launches the Republican factoid that about half of all business income reported on individual returns goes to people in the top tax brackets. The counter-factoid is that 97 percent of people who report business on their personal returns don't make enough money to be affected by the higher rates.
As Andrew Samwick says, today's job numbers are more of the same -- stagnant job growth that was too weak to to prevent the unemployment rate from edging up a tenth of a point to 9.6 percent.
More depressing is the stagnation on the political front. Even though the Obama White House is rushing to come up with a package of tax cut and spending proposals, the chances of passing anything substantive are somewhere between zero and zero point zero. In fact, the odds are pretty low that Congress won't even agree on extending any of the Bush tax cuts before they expire at the end of this year.
The Republicans have absolutely no reason for engaging. Obstructionism has been a winning strategy so far, and Republicans know they they will rack up more House and Senate seats in November. If you listen to political handicappers like Charlie Cook, the GOP is poised to take back the House.
Politics is a tough business, so I don't want to sound like a crybaby about the Republican strategy of blocking every possible Democratic bill in Congress. But the GOP hypocrisy toward small business is so transparent that I can't resist writing about this again.
Both parties talk about small business as if it were mom and apple pie. President Obama actually used the apple-pie cliche at a small-business event last month. But Obama is pushing a bill that might actually help small businesses, which have laid off a disproportionately large share of workers during this recession and are bouncing back much more slowly than big companies. Senate Republicans, meanwhile, have been blocking the bill for a month now.
Have we gotten to the point where the Federal Reserve ought to start targeting a higher rate of inflation?
As someone who came of age during the Great Inflation of the 1970s and was looking for my first job just as Paul Volcker was trying to exorcise the demons, I never thought I’d ever say anything like that.
For politicians, being "for'' is like being for mom and apple pie. That's why President Obama invited two restaurant owners named Pancake and Wheat to the White House in June to promote a bill to increase small-business lending, and why he recently visited with local business owners at the Tastee Shop Shop in Edison, N.J.
So it was probably inevitable that small busines would end up at the center of the war over extending the Bush tax cuts for the top 2 percent of households with incomes above $250,000. Republicans claim this would be a disaster for small business owners, because "50 percent'' of small business income would be "captured" by the higher tax rates. Democrats say that's baloney, because only 3 percent of small business owners make enough money to be in the top bracket.
The deficit battles in Congress are reaching a level of absurdity that makes your head spin. Every day brings new confirmation that the economic recovery is sputtering. GDP growth plunged in the 2nd quarter; consumer spending is anemic; the housing market has slumped; private-sector job growth has been well below 100,000 per month since May. Meanwhile, state and local governments are poised to cut another 300,000 jobs over the next year to deal with their acute budget shortfalls -- that's on top of about 200,000 jobs they have cut already.
There's been an enormous amount of media commentary in recent days on President Obama's slipping popularity and what he woulda coulda shoulda done differently. One day after Obama scored his latest big accomplishment -- passage of the huge financial reform bill-- the NYT puzzles over why Obama's star is falling and says he hasn't been able to "change the partisan tone in the capital." In Politico, editors John Harris and Jim Vandehei say Obama "has shown himself to be a Big Government liberal,'' which is "killing him with independent-minded voters."
I'm skeptical about journalistic second-guessing about political tactics and messaging. When unemployment remains stuck above 9 percent, with a huge share of those people jobless more than six months, nobody is going to be popular.
That said, two new pieces today -- one in Salon and one in the Fiscal Times -- offer specific examples of tone-deafness at the White House.
The Wall Street Journal sank to a new low in political hackery today with a front page story entitled "Financial Overhaul Hits Farmers."
The story purports to document how the sweeping financial reform bill, which Senate Democrats hope to finally pass this week despite relentless opposition from Wall Street, is already disrupting heartland farmers in Nebraska who use derivatives to hedge against crop prices. According to another headline, the bill is casting a "long shadow over the Plains."
But the doesn't come within a country mile of delivering the goods. The story offers not one example of anybody who has been "hit'' by the new legislation. It glosses over basic information about the bill that contradicts the thesis. It includes "worries" that have nothing to do with farmers, like those of a pay-day lender who frets about consumer regulations. (He probably should be worried; payday lenders charge rates that routinely top 100 percent. But that's far afield from farmers.)
Naturally, I am deeply disappointed that President Obama did not choose our own Stan Collender as the next White House budget director. If you read the Wall Street Journal or the Hill, you might have noticed Stan's name pop up as a person under consideration. Sure, he might have been a dark horse -- a very dark horse. But he spent years on the House and Senate budget committees, wrote a book on the budget process and has been better than relentless at ripping through the nonsense used to justify endless tax cuts and soaring deficits.
Besides, he's my friend and colleague. Loyalty counts.
Politicians love to invoke "the American people'' to justify their votes, but a new poll out today by Pew Research and National Journal provides further evidence that The People aren't likely to provide meaningful guidance on tough fiscal issues.
As I noted in the Fiscal Times, the poll suggests that Americans strongly favor "none of the above'' when it comes to dealing with the acute fiscal crises that most states are now battling. An overwhelming majority doesn't want Washington to ride to the states' rescue -- good news for Senate Republicans, led by Mitch McConnell, who blocked a watered-down Democratic bill last week that would have provided states with extra money for Medicaid and a few other things. But lopsided majorities also opposed all of the other main options for balancing state budgets as well.
It took until 5:08 AM this morning, but House and Senate conferees reached final agreement on the Dodd-Frank bill to reform financial regulation.
Despite countless compromises, the final bill will be a big improvement over what we have now if, as seems certain, it wins final passage in the House and Senate.
it's impossible to dissect all the last-minute deals right now in the big fights. But my quick take is that the reformers held up amazingly well in the face of massive lobbying from banks, non-banks, Wall Street, hedge funds and the rest of the financial services industry.
We’re in the final stretch of the House-Senate conference on financial regulation, still waiting to assess the final compromises on the big ticket issues of reining in derivatives and proprietary trading by banks.
But while we wait, we already know that the House capitulated to automobile dealers.
House Dems got the conference to agree on excluding car dealers from regulation by the new Consumer Financial Products Bureau.
Do we care? Only if you think that subprime mortgages had catastrophic consequences for civilization as we knew it.
Car loans are the second biggest financial obligation for most families, and the single biggest for most people who don’t have a mortgage. Eighty percent of car loans are originated by dealers, and subprime lending is a lucrative part of that market.
My colleague at The Fiscal Times, John M. Berry, has just published a must-read piece about the amazingly wrong things that Alan Simpson, co-chair of President Obama’s deficit commission, said last week in a video interview about Social Security.
Brad Delong says I still have a bad habit from my years at the New York Times -- “balance,’’ or striving for a fictional objectivity by giving equal weight to two opposing viewpoints. Delong is steamed about my post yesterday, which criticized dueling op-ed pieces by both Alan Greenspan and Paul Krugman on how to deal with soaring deficits. He can’t understand why I criticize Krugman for being too glib about deficits, when I seem to agree with him about
Paul Krugman and Alan Greenspan came out with dueling op-eds Friday about budget deficits gone wild. Krugman: we're slitting our wrists by trying to slash our deficits now. Greenspan: cut spending now, right now, and don't worry your pretty little head about a double-dip recession.
Neither was convincing, and there's a reason: the fiscal debate has become so polarized that combatants on both sides are glossing over what they don't know. I would argue that we ought to be doing the opposite: the unknowables right now are huge, and we ought to talk about them. Put another way: we need insurance. Against our next mistake.
(T)he fears of budget contraction inducing a renewed decline of economic activity are misplaced. The current spending momentum is so pressing that it is highly unlikely that any politically feasible fiscal constraint will unleash new deflationary forces.