Time's Halperin sees something missing on the economy

Time's Mark Halperin writes that something is missing when the three presidential candidates talk about the economy. He argues that the candidates need to get a lot better at talking about the American economy and outlines 17 points that the candidates lack in their rhetoric. Here are some highlights:

3. A grand overarching narrative that frames/makes sense of the changes whipping through the American and the global economies.

4. A firm grip on BOTH the promise AND the perils of the transformations whipping through the 21st century economy like a Bengali typhoon.

7. Ideas on how to address everything plaguing the economy-from unemployment to outsourcing to the weak dollar - ideas that don't sound like they're recycled from the file cabinets of Arthur Laffer/Jack Kemp/Bob Rubin/Gene Sperling (in other words: new ideas).

8. A compelling explanation of where the jobs of the future are going to come from.

17. Really big policy ideas that could serve as data points or ways to animate whatever their big idea vision would be - and a capacity to drive an economic idea on an ongoing basis for a week or so.

NDN's Globalization Initiative has been discussing these economic changes for years. We have produced innovative proposals that both call for a comprehensive economic strategy to make globalization work for all Americans and include specific policy recommendations on how to do so. Rob Shapiro, Chair of the Globalization Initiative, recently laid out these arguments in his paper: The New Landscape of Globalization. Simon has also recently blogged on these issues, illustrating the disastrous policies of the Bush Administration and pointing to NDN's creative fixes.

At NDN, we agree with Mark Halperin that America needs to address this new period of economic development, and we are pleased to see the national media discussing globalization in this manner. The presidential candidates would be wise to acknowledge that globalization is here to stay. And, while John McCain has admitted to not having a fantastic grasp of economics, Barack Obama and Hillary Clinton have a unique opportunity to lay out a governing agenda on the top issue in the minds of American voters and to speak honestly about the direction of the global economy in which we live. Both are slated to give major addresses on the economy tomorrow; we will be watching closely.





The economic news worsens, Bear Stearns and a failed conservative era

Coming up from the morning read of the papers it is hard not to feel more than a little worried about the country these days.

We are five years into Iraq, trillions spent, tens of thousands of casualities, the region is more troubled than before and there is no clear and easy end in sight. Warnings about the impact of climate change are growing more urgent, and scary. Oil and gas prices are breaking all sorts of records, and there is no prospect of these price gains being substantially reversed. Global prosperity is driving up commodity and food prices across the world, making the task of moving struggling societies and people into a better place ever more difficult. Important Olympic athletes announce they are skipping the Beijing Olympics due to the dangerous levels of pollution there. More evidence comes to light each week it seems of systemic and almost unthinkable violations of the civil liberties of Americans in the Bush era. The President reaffirms for all the world to see his committment to rip apart the Geneva Conventions. A new and extraordinary Congressional GOP scandal explodes across Washington. The GOP returns to their failed, and racist, efforts to blame the nation's problems on Hispanic immigrants, and a terrible "enforcement-only" bill stumbles closer to passage in the House. The Administation announces they plan on bringing the Columbia Free Trade Agreement to a vote even though it will not pass, will damage the standing of one of our most important allies in Latin America and set back our efforts to rebuild a bi-partisan consensus on global economic policy. The career of a very promising young governor from New York ends spectacularly. The Republican Presidental candidate seems to have been transported into today's election from a bygone era of American politics. The Democrats can't make up their mind on who their next leader will be, and are not even sure how they are going to make up their mind.

Democrats are finding solace in that the nation's anger about the state of our union is being directed, properly, at the Republicans. From today's Post:


"It's no mystery," said Rep. Thomas M. Davis III (R-Va.). "You have a very unhappy electorate, which is no surprise, with oil at $108 a barrel, stocks down a few thousand points, a war in Iraq with no end in sight and a president who is still very, very unpopular. He's just killed the Republican brand."



As we've been writing for years now the governing failures of the Bush era have been historic, and have done grave damage to the "American brand." Few believe that in this last year in office this failed President, perhaps the worst in US history, has the capacity to lead and meet even simple challenges. But each passing day the ongoing revelations about the weakening of our financial system suggests we could be facing a crisis of historic porportions, one that will require far-sighted and sure-footed leadership from the President, the Administration and from Congress, from Republican and Democrat alike. A front-page article in the Times today raises serious questions about the Federal Reserves effectiveness in managing the growing crisis so far. And an editorial in the Times today about a speech the President gave on Friday should leave all of us very worried about the capacity of this President to even understand - let alone take appropriate action to deal with - our growing economic and financial challenges.

I am taking the unusual step of posting the whole editorial, for given the gravity of our emerging financial crisis, this excellent essay needs to be read and considered in its entirety:


President Bush admitted on Friday that times are tough. So much for the straight talk.


Mr. Bush went on to paint a false picture of the economy. He dismissed virtually every proposal Congress is working on to alleviate the mortgage crisis, sticking to his administration's inadequate ideas. And despite the rush of serious problems - frozen credit markets, millions of impending mortgage defaults, solvency issues at banks, a plunging dollar - he said that a major source of uncertainty today is whether his tax cuts, scheduled to expire in 2010, would be extended.

This was too far afield of reality to be dismissed as simple cheerleading. It points to the pressing need for a coherent plan to steer through what some economists are now predicting could be a severe downturn. Mr. Bush's denial of the economic truth underscores the need for Congress to push forward with solutions to the mortgage crisis - especially bankruptcy reform to help defaulting homeowners. Lawmakers also must prepare to execute, in case it is needed, a government rescue of people whose homes are now worth less than they borrowed to buy them.

Mr. Bush said he was optimistic because the economy's "foundation is solid" as measured by employment, wages, productivity, exports and the federal deficit. He was wrong on every count. On some, he has been wrong for quite a while.

Mr. Bush boasted about 52 consecutive months of job growth during his presidency. What matters is the magnitude of growth, not ticks on a calendar. The economic expansion under Mr. Bush - which it is safe to assume is now over - produced job growth of 4.2 percent. That is the worst performance over a business cycle since the government started keeping track in 1945.

Mr. Bush also talked approvingly of the recent unemployment rate of 4.8 percent. A low rate is good news when it indicates a robust job market. The unemployment rate ticked down last month because hundreds of thousands of people dropped out of the work force altogether. Worse, long-term unemployment, of six months or more, hit 17.5 percent. We'd expect that in the depths of a recession. It is unprecedented at the onset of one.

Mr. Bush was wrong to say wages are rising. On Friday morning, the day he spoke, the government reported that wages failed to outpace inflation in February, for the fifth straight month. Productivity growth has also weakened markedly in the past two years, a harbinger of a lower overall standard of living for Americans.

Exports have surged of late, but largely on the back of a falling dollar. The weaker dollar makes American exports cheaper, but it also pushes up oil prices. Potentially far more serious, a weakening dollar also reduces the Federal Reserve's flexibility to steady the economy.

Finally, Mr. Bush's focus on the size of the federal budget deficit ignores that annual government borrowing comes on top of existing debt. Publicly held federal debt will be up by a stunning 76 percent by the end of his presidency. Paying back the money means less to spend on everything else for a very long time.

The fiscal stimulus passed by Congress, and touted by Mr. Bush on Friday, could juice growth for a quarter or two later this year. But the economy's fundamental weaknesses indicate that Americans are ill-prepared for hard times. That makes the need for clear-eyed policies all the more urgent. We need them from the president, Congress and the contenders for the White House.


Meeting the deep array of daunting challenges the nation faces today will require bold, resolute and visionary leadership from all quarters in the years ahead. My hope is that the President will attempt to do more than prepare for his disgraced retirement in his remaining days in office. And at the very least if he cannot and will not lead, he should do everything he can to get out of the way of those who want to help our great nation clean up the incredible mess he is leaving behind. Democrats may be delighting in the collapse of their opposition but with Congress in their control and the Presidency likely to be in their hands next year, these problems will very soon become theirs to solve.

Sunday night update: The NYTimes lede on its site tells it all: Federal Reserve Acts to Rescue U.S. Financial Markets

For two years we've been wondering out loud if Bush was this century's Hoover. In the past few days I worry that this analogy has become truer than we should all desire.

Pigou and Climate Change

When you dislike something, it makes sense to tax it right? Taxing bads or undesirable goods is as old as recorded history. The abstemious Roman, Cato, the Elder, imposed a ten fold tax on goods costing more than 1500 drachmas, Plutarch tell us, to discourage luxury spending. Over the centuries, people have taxed luxuries (sumptuary taxes), alcohol and tobacco (sin taxes) and, recently, pollution.

Modern economic theory calls those taxes Pigovian after the British economist Arthur Pigou who formalized their study. However, to survey taxation today is to find that more often than not government taxes not bad things but good ones! Government taxes income, communications, housing and even jobs through payroll taxes. Since jobs are something we ought to subsidize, the obvious question is why tax them? The answer is that there are rarely enough bad things to go around so government ends up taxing things that are good.

With the realization that CO2 in the atmosphere creates a greenhouse effect that threatens life on the planet, it is now clear that CO2 in the air can be a bad thing. In 1993, this led Al Gore to propose a BTU tax-an indirect tax on carbon--that ended up dying on the congressional budget room floor, replaced with a small increase in the gas tax. More recently, however, it has led to serious efforts to explore the merits of a carbon tax. Indeed in his Nobel Prize acceptance speech last year, Vice President Gore called for just such a tax to put a price on carbon

The benefits of a carbon tax are obvious. The major challenge that a carbon tax is, after all, a tax and therefore would raise the price of energy at the expense of business and consumers. But what if the revenue from the tax were used to offset taxes on a good thing-for example, jobs? The result would be a revenue neutral shift from taxing good things to bad things and a net gain in social welfare.

NDN's Rob Shapiro has been studying the carbon tax for some time. Last year, drawing on research by William Nordhaus at Yale, he found that a carbon tax would compare favorably with other policy options in limiting price volatility in the energy sector. Recently, Rob co-founded the U.S. Climate Task Force to explore climate issues together with former Clinton Administration official, Elaine Kamarck who will be speaking on this and other issues at NDN's March 12th Forum.

Can a carbon tax regime find global acceptance? Other approaches to cutting CO2 such as a cap and trade system have their advantages as well. But whatever the final mix of policy levers, it is clear that a carbon tax coupled with a payroll reduction is gaining traction. Stay tuned.

As the economy slows, keeping the focus on the struggle of every day people

Lots of stories today about the terrible jobs report, and what this means for the marcoeconomy. David Leonhardt from the Times does a terrific job today putting all this news in perspective, and reminds us that far too many Americans had not shared in the wealth created in the Bush era:

If history is a reliable guide, the recession of 2008 is now unavoidable.

The dismal jobs report released Friday showed overall employment to be lower than it was three months ago. Every time such a slump has occurred since the early 1970s, a recession has followed - or already been under way.

And if the good times have really ended, they were never that good to begin with. Most American households are still not earning as much annually as they did in 1999, once inflation is taken into account. Since the Census Bureau began keeping records in the 1960s, a prolonged expansion has never ended without household income having set a new record...

Recent recessions have inevitably brought inflation-adjusted income declines for most families, which would be particularly painful given what has happened over the last decade. For a variety of reasons that economists only partly understand - including technological change and global trade - many workers have received only modest raises in recent years, despite healthy economic growth.

The median household earned $48,201 in 2006, down from $49,244 in 1999, according to the Census Bureau. It now looks as if a full decade may pass before most Americans receive a raise.

What this all means for economic policy is that whatever set of policies are put into place to put the economy back on track they must be capable of addressing the struggle experienced by every day people prior to the current slowdown/recession. Offering up such a strategy has been at the heart of our economic work at NDN these past several years, and based on our recent major survey of American public opinion, is what Americans are desperately looking for. Looking back at the exit polls in 2006, there is even a very strong case that it was unhappiness with the economy that was the primary cause of the extraordinary GOP defeat in the fall elections.

Some highlights of what we've been advocating for:

A New Economic Strategy for America that makes globalization work for all Americans - In a recent paper Rob Shapiro argues that America needs a comprehensive new economic strategy, one that tackles rising health care and energy costs, accelerates innovation and makes significant investment in human capital and infrastructure.

A More Modern Approach to Trade Liberalization - In a major paper about the future of US trade policy, Rob Shapiro and I argue for a a continued commitment to global liberalization but only if coupled with a substantial new domestic approach to help those struggling with globalization prosper.

A New Committment to 21st Century Skills - In two papers, a Laptop in Every Backpack and Tapping the Resources of America's Community Colleges, NDN makes the case for a new national strategy to ensure that all Americans have the capacity to work in the much more IT-intensive work environment of the 21st century.

A Better Understanding of What is Driving Growth - In a new paper, The Idea-Based Economy and Globalization: The Real Foundations of American Prosperity in the 21st Century, Rob Shapiro describes how the American economy is undergoing an historic transformation from one built on hard physical assets to one built on intellectual property and intangibles - "ideas." The implications for policy makers here and abroad are only just being understood, and need to be if better understood in crafting future American policies to accelerate future growth.

The Need to Invest in our Aging Infrastructure - In a major new paper, NDN Fellow Michael Moynihan makes the case a major new commitment to investing in domestic infrastructure will help drive future growth and improve America's quality of life.

A 21st Century Immigration System -We need a much more modern approach to bring both high and low skilled workers into America, in ways that meet the needs of our modern economy and does so in a way consistent with our values. NDN has been one of the leading institutions championing a thoughtful approach to immigration reform, and certainly for those looking to relieve downward pressure on wages and benefits for American workers bringing the 5% of the workforce that is undocumented under the protection of American law, giving them access to the minimum wage and the ability to unionize would be a good place to start.

NDN also recently announced a major new initiative, tentatively titled the Green Project, which will be looking at ways to help transition our nation to a post-carbon economy while maintaining growth.

The economic path forward will not be easy, inexpensive or full of quick fixes. Globalization is bringing about structural changes in our economy that are not well understood, and helping make the American Dream a much more distant reality for too many. Whatever set of policies the nation pursues in the years ahead, it is critical we take a long-term view, and advance a comprehensive agenda that tackles the underlying structural challenges of what was already a very tough go of it in the age of Bush.

To talk more about all this be sure to come to our Forum this Wednesday, March 12th, in Washington, DC. Rob Shapiro, the Chair of our Globalization Initiative, will be speaking about these and other matters at 1:15pm.

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