Economy

Pearlstein on Regulation, Innovation, and the Bogus Business Uncertainty Meme

If you read one thing today, read Steven Pearlstein's piece on the meme the business community has been pushing about the "uncertainty" caused by the Obama agenda. 

The big complaint from the business lobby these days concerns a "lack of clarity" about federal regulation that prevents companies from using all that cash piling up on balance sheets to hire workers and make major investments.

Then, without missing a beat, those very same business groups declare themselves unalterably opposed to any climate-change legislation that sets plant-specific targets for carbon reductions, puts a floor and a ceiling on the price of carbon, tells utilities exactly how much of their power should come from low-carbon sources or sets specific standards for the energy efficiency of cars and appliances.

Apparently the Chamber of Commerce types think Americans are so gullible that we won't notice their blatant and self-serving hypocrisy. In reality, it's only a certain kind of regulatory clarity they seek -- the clarity of knowing that old regulations won't be enforced and new ones will be dictated by industry lobbyists.

And here I was thinking how much progress had been made in getting past the stale political bromides.

The whole piece is here, and is worth a read. Paul Krugman has also looked at the economic data that might support the uncertainty argument (it doesn't). At the end of the day, this regime uncertainty meme is questionable, polemical anecdote attempting to influence economic policymaking, which it shouldn't.

US Ambassador to the OECD Karen Kornbluh on Jobs for the Future

On July 27, NDN hosted the United States' Ambassador to the Organization for Economic Cooperation and Development (OECD), Karen Kornbluh. Ambassador Kornbluh, who previously served as Senator Barack Obama's Policy Director and as Deputy Chief of Staff at the Treasury Department, discussed a wide range of issues in creating "Growth and Jobs for the Future," from youth unemployment, to innovation, to U.S. engagement at the OECD. Watch the video to see her great presentation:

 

Location

NDN Event Space
729 15th Street NW First Floor
Washington, DC 20005
United States

July 27 @ NDN - Ambassador Karen Kornbluh on Jobs for the Future

On July 27, NDN will host the United States' Ambassador to the Organization for Economic Cooperation and Development (OECD), Karen Kornbluh. Ambassador Kornbluh, who previously served as Senator Barack Obama's Policy Director and as Deputy Chief of Staff at the Treasury Department, will discuss recent research on youth unemployment and what the US is doing at the OECD to address the high levels of youth unemployment brought on by the Great Recession.

Karen KornbluhAcross the vast majority of advanced industrialized economies, youth unemployment is far higher than unemployment in the general population. The OECD reports that in 2009 youth employment dropped more than employment for low-skilled workers, and, according to a Pew study released in February, 37% of the American millennial generation, those 18-29 years old, are unemployed or out of the workforce, "the highest share among this age group in more than three decades."

Extended unemployment following college graduation can have long-lasting career and life implications. Additionally, there exists great uncertainty as to how the advanced industrialized economies will create the jobs of the 21st century that can deliver prosperity to this emerging generation.

Ambassador Kornbluh will be joined by Dr. Robert Shapiro, Chair of NDN's Globalization Initiative and former Under Secretary of Commerce for Economic Affairs.

Ambassador Karen Kornbluh on "Jobs for the Future"
Tuesday, July 27 @ 12pm
NDN - 729 15th St NW, First Floor
RSVP  |  A live webcast will begin at 12:15pm

I hope you will join us for this important discussion.

 

False Choices in Polling on the Economy: Unemployment Benefits vs. Deficits

A few weeks ago, I took a look at an Economist/YouGov poll and pointed out that, contrary to conventional wisdom, the American people generally see budget deficits as a less important issue than the economy as a whole. Now the Arthur Delaney at the Huffington Post rounds up some of the latest polling data, which says something similar on the specific issue of unemployment benefits:

Two national polls released Tuesday revealed that registered voters think it's more important to help the unemployed than to reduce the deficit.

Voters are generally wary of government spending to boost the economy, but they nevertheless told ABC News and CBS News that the deficit is no reason not to help the unemployed.

Fifty-two percent of voters told CBS that Congress should extend unemployment benefits "even if it means increasing the budget deficit," including 35 percent of Republicans. Sixty-two percent of registered voters told ABC Congress should extend benefits despite concerns that doing so "adds too much to the federal budget deficit."

In a Bloomberg survey, 70 percent of voters said reducing unemployment is more important than reducing the deficit. But only 47 percent said Congress should reauthorize extended benefits, which in some states provided the unemployed with up to 99 weeks of checks.

A poll commissioned by the National Employment Law Project in June found that 74 percent of voters think helping the unemployed is more important than reducing the deficit.

Of course, what these polls fail to note is that the choice laid out in the questions is a false one. Extending unemployment benefits will have virtually no long-term impact on the deficit. For example: the ABC News question raises the concern that extending unemployment insurance "adds too much to the federal budget deficit." 

Here’s how the questions in the ABC News poll was written:

Because of the economic downturn, Congress has extended the period in which people can receive unemployment benefits, and is considering doing so again. Supporters say this will help those who can’t find work. Opponents say this adds too much to the federal budget deficit. Do you think Congress should or should not approve another extension of unemployment benefits?

I wonder what would happen if, you know, facts were included in the question:

Because of the economic downturn, during which there is currently one job opening for every five unemployed workers, Congress has extended the period in which people can receive unemployment benefits, and is considering doing so again. Supporters say this will help those who can’t find work, is one of the most efficient ways to spur the economy, and that not doing so could imperil economic recovery. Opponents say this adds too much to the federal budget deficit. Virtually all economists believe that these benefits should be extended and that doing so will not add too much to the federal budget deficit. Do you think Congress should or should not approve another extension of unemployment benefits?

Actually, I don’t wonder at all.

The Economy is Slowing Down – Alas, Much as We Expected

Recent polls have left most Democrats discouraged, even if their loss of public confidence reflects economic weaknesses largely beyond their control. Life in politics is often unfair, and today Americans seem to both blame President Obama for economic developments that were not his doing and discount his real accomplishments in other areas. The White House’s misstep here, however, has been its persistent short-term optimism about the economy, since the basic shape and force of the current economic undertow were entirely predictable – and actually predicted by a number of us.  

This is not a case of the partisan hooey bandied about, that the President’s stimulus “failed.” Regardless of what he might have done in early 2009, the U.S. economy could not have avoided a long, deep recession – nor, without heroic action could we have escaped the slow recovery now disappointing many Americans. What we got is the basic shape of recessions triggered by financial meltdowns and the recoveries that eventually follow them. Yes, the crisis grew out of years of regulatory and economic-policy neglect, mainly by the Bush crew. But once it arrived, there was never a realistic prospect that $800 billion of new spending and tax cuts over two years would produce a big, V-shaped bounce back, as it might have if this were just part of a normal business cycle. But all of that fiscal stimulus, on top of even more powerful easy Fed policies, did stop the slide into a Depression and finally pushed us into a slow recovery.  

We also know why the stimulus couldn’t do more than that – or, more precisely, why it’s in the nature of a financial crisis to take years for an economy to recover fully. To begin, financial meltdowns leave most households markedly poorer in ways that ordinary business cycles don’t – what’s your house worth today? – and that makes most people less eager to spend for years. So, as the stimulus has wound down, retail sales have stumbled in both of the last two months – in fact, the only people spending like most Americans used to are the very wealthy, who still have more money than they know what to do with. And most others, even if they are inclined to spend, have a hard time getting credit because a financial meltdown also leaves lenders much weaker. It also shouldn’t surprise anyone that this reluctance to lend extends to most businesses, keeping investment weak.  

Moreover, these developments are unfolding in an economy that had serious problems before the meltdown and everything that followed. The recession has drawn people’s attention to a decade-long problem: American business’ capacity to create new jobs, even when growth is strong, has weakened markedly. In the Bush expansion of 2001-2007, we produced less than half as many new jobs as we did during comparable periods of the 1982-1989 expansion and the 1992-2000 expansion. And when the economy turns down these days, it also sheds jobs at a prodigious rate. More than 3 million jobs were lost in the 2001 recession and its aftermath, which was six times the job losses, relative to the decline in the GDP, seen in previous recessions. Much of the same happened this time, as the recent recession cost nearly 8 million jobs. In fact, the jobs losses have been so large and so persistent that they’ve put independent downward pressure on the economy, eating away further at investment and consumer spending.  

On top of all this, the potential for a second financial crisis, or a second round, is out there. The problem this time begins in Europe, where governments struggling with unproductive economies and large and fast-mounting deficits are having trouble finding global investors to finance their new bonds. It started in Greece and is spreading to Portugal, Spain and perhaps beyond; and while the EU says it will bail them out if the worst comes, the markets continue to bid down the value of their debt. The rub here is that nearly all of that debt is held by financial institutions still weakened from the last crisis, especially French and German banks which, for example, hold $630 billion just in Spanish government bonds. Even if those bonds, along with Greece’s and Portugal’s, skirt a formal default , their declining value is driving some major European banks to the edge – much as the plummeting value of mortgage-backed securities two years ago destroyed Lehman Brothers, Bear Stearns, Merrill Lynch and AIG. And if large European institutions fall, their counterparties on Wall Street will be left holding tens of billions of dollars in obligations no longer worth much. This scenario is still far from likely, but it remains quite possible that we could find ourselves back where we were in late 2008.

The good news is that if another crisis comes, the administration will have more tools to deal with it, as Congress is on the verge of passing some decent financial reforms. They might need those new powers, because congressional Republicans seem committed to blocking anything the President proposes, whatever the cost to the American economy. And whether or not the administration finds itself facing another economic crisis, or merely has to deal with a stagnant job market and meager wage gains, the luxury of large Democratic margins will soon be gone. In either case, President Obama will have to reclaim center stage and mobilize American opinion in ways that force his opponents to concede to sensible measures – much as Bill Clinton did after the Democrats’ 1994 setback and Ronald Reagan did after the big GOP losses in 1982. If the President can pull that off, he can still build a serious and successful economic legacy.

Obama Administration Moves Forward on International Economic Policy

 

NDN applauds last week’s announcement by the Obama Administration on its intent to renegotiate and push for Congressional approval of the Colombia and Panama Free Trade Agreements (FTAs). This announcement follows a similar one from June regarding an FTA with South Korea.

Taken together, these FTAs represent both a legacy of failure on the part of the Bush Administration to create a robust conversation and political consensus around America’s place in a changing global economy and the need for the Obama Administration to clear the decks on the trade agenda in order to move forward. 

Each agreement would expand American access to foreign markets in economically dynamic and geopolitically crucial regions. South Korea, the world’s 14th largest economy, has recently undergone a rapid and impressive economic transformation and is a market the U.S. has good reason to be strongly interested in gaining better access to. Panama and Colombia are both important allies in a region that remains economically significant but politically troubled. While individual, realistic concerns about each agreement exist, the Administration has declared its intention to address them, and, in virtually every case, the partner nation has taken steps to do so as well. 

Over the past two decades, the global economy has gone through a rapid transformation. New nations, businesses, and people are playing increasingly important roles, and American and global economic policy must adapt to these changes. A 21st century strategy for global economic engagement must be a cornerstone of America’s overall economic strategy – alongside healthcare, financial services, immigration, and energy reforms. We applaud the administration for its leadership in this area, as exemplified by both the National Export Initiative and the renewed emphasis on these agreements.

 

Simon Rosenberg on CNBC re Unemployment Benefits, Deficit Reduction, Job Growth

Simon went on CNBC this morning to talk with Larry Kudlow and company. The conversation revolved about Republican attempts to block unemployment benefits in the Senate, whether the talking-points about the deficit stand up to scrutiny, and how to achieve economic growth once again.

 

NDN’s Rob Shapiro Quoted in Washington Post Article on Global Economic Imbalances:

This morning, Rob Shapiro, Chair of the Globalization Initiative at NDN, had the closing quote in a front-page Washington Post article on imbalances in the global economy and the dangers they pose to an economically sustainable future:

"These imbalances weren't accidental," said Robert Shapiro, chairman of the economic advisory firm Sonecon and head of the globalization initiative at think tank NDN. "They solved large political and economic problems for a lot of countries and were the result of successful political arrangements. That's why they're so hard to untangle."

The article addressed the problem that much of the global economic recovery has been based on global imbalances, particularly Americans saving less while spending money they don’t have, while other countries overproduce and rely on Americans as “consumers of last resort.” It identified that while this may ease economic pains in the short run, such imbalances could undermine sustainability in the long run and even cause future economic crises.

June Jobs Report Indicates that US Economy Has Long Way to Go

Today's lackluster jobs numbers from June contribute the picture of a weak American economy, no longer falling off a cliff, but having a tremendously difficult time creating jobs and pulling itself out of the high unemployment that is sticking around after the recession has technically ended. The numbers do not really indicate a double-dip recession, (that's less likely, but could come as an aftermath of the European austerity push and stagnating growth in emerging markets) but they do indicate continued weakness in the largest economy in the world.

The meat of the jobs report is that we gained 100,000 non-census jobs, including 83,000 private sector jobs. That's an increase from last month, and jobs numbers tend to jump around from month to month, but it's clear that these numbers are not moving in the right direction at a sufficient rate. The unemployment rate went down, but mainly as a result of 652,000 workers leaving the labor force. 

The unfortunate thing about these reports is that they become part of the Washington horse-race. One monthly report cannot paint a clear picture of the direction of the economy. From the last few months and other data, however, it has become increasingly clear that bickering in the Senate over unemployment insurance and teachers' jobs looks silly in the face of this data. This is the worst recession since the Great Depression, and the simple truth is that more action must be taken to repair the economy and create jobs. 

From The New York Times:

jobs

Update: An excerpt from President Obama delivered remarks this morning on the jobs report:

This morning, we received the June employment report.  It reflected the planned phase out of 225,000 temporary Census jobs.  But it also showed the sixth straight month of job growth in the private sector.  All told, our economy has created nearly 600,000 private sector jobs this year.  That’s a stark turnaround from the first six months of last year, when we lost 3.7 million jobs at the height of the recession.  

Now, make no mistake:  We are headed in the right direction.  But as I was reminded on a trip to Racine, Wisconsin, earlier this week, we’re not headed there fast enough for a lot of Americans.  We’re not headed there fast enough for me, either.  The recession dug us a hole of about 8 million jobs deep.  And we continue to fight headwinds from volatile global markets.  So we still have a great deal of work to do to repair the economy and get the American people back to work. 

That’s why we’re continuing a relentless effort across multiple fronts to keep this recovery moving.  And today, I’d like to make a quick announcement regarding new infrastructure investments under the Recovery Act -– investments that will create private sector jobs and make America more competitive.

Secretary Locke and Secretary Vilsack have joined me here today to announce that the Departments of Commerce and Agriculture will invest in 66 new projects across America that will finally bring reliable broadband Internet service to communities that currently have little or no access.

In the short term, we expect these projects to create about 5,000 construction and installation jobs around the country.  And once we emerge from the immediate crisis, the long-term economic gains to communities that have been left behind in the digital age will be immeasurable.

In sum: We're not falling off a cliff anymore, in large part because of Administration's actions; the stimulus continues to work - both right now and by investing in long-term prosperity; and there's much more to be done.

Doing the Same Thing Over and Over Again and Expecting Different Results

Insanity: Doing the same thing over and over again and expecting different results.

-Albert Einstein

In what is supposed to be well-understood history, policymakers in the late 1930's made an epic mistake. Before the world exited the Great Depression, they launched the Great Austerity, trying to balance budgets in the midst of a downturn. David Leonhardt in The New York Times yesterday writes about this mistake, and its parallels to the present day:

The world’s rich countries are now conducting a dangerous experiment. They are repeating an economic policy out of the 1930s — starting to cut spending and raise taxes before a recovery is assured — and hoping today’s situation is different enough to assure a different outcome.

In effect, policy makers are betting that the private sector can make up for the withdrawal of stimulus over the next couple of years. If they’re right, they will have made a head start on closing their enormous budget deficits. If they’re wrong, they may set off a vicious new cycle, in which public spending cuts weaken the world economy and beget new private spending cuts.

On Tuesday, pessimism seemed the better bet. Stocks fell around the world, over worries about economic growth.

...

The policy mistakes of the 1930s stemmed mostly from ignorance. John Maynard Keynes was still a practicing economist in those days, and his central insight about depressions — that governments need to spend when the private sector isn’t — was not widely understood. In the 1932 presidential campaign, Franklin D. Roosevelt vowed to outdo Herbert Hoover by balancing the budget. Much of Europe was also tightening at the time.

If anything, the initial stages of our own recent crisis were more severe than the Great Depression. Global trade, industrial production and stocks all dropped more in 2008-9 than in 1929-30, as a study by Barry Eichengreen and Kevin H. O’Rourke found.

Short version...we're supposed to know better than this. Indeed, here's what the President had to say yesterday about repeating economic mistakes yesterday:

Now, let’s be fair though.  The other party’s opposition is also rooted in some sincere beliefs about how they think the economy works.  They think that our economy will do better if we just let the banks or the oil companies or the insurance industry make their own rules.  They still believe that, even after the Wall Street crash, even after the BP oil well blew, that we should just keep a hands-off attitude.  They think we should keep doing what we did for most of the last decade leading up to the recession. 

So their prescription for every challenge is pretty much the same -- and I don’t think I’m exaggerating here -- basically cut taxes for the wealthy, cut rules for corporations, and cut working folks loose to fend for themselves.  Basically their attitude is, you’re on your own.

Now, here’s the problem.  And again, I don’t question that a lot of them sincerely subscribe to this view.  Here’s the problem:  We’ve already tried these ideas.  Remember, we tried them for eight years.  We tried them for a good part of the last decade.  We know where they led us. 

We do know where these ideas led us. We know what happened in 1937, when the Great Depression had a second dip; we know what happened over the last decade, as Americans saw their household incomes decline and wages stagnate; and we know what's happening right now - growth and job creation are weak. We can live in a fantasy land that makes economic policy of off perverse theology about deficits, or we can live in reality, in which it would be absolutely insane to repeat the mistakes of the past and shift to austerity while the global economy remains fragile.

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