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It's official. President Obama has signed the order for sequester.
Here is the text of the statement he made today.
Memo to CBS News: You've been added to the do not read list for automatically playing videos when readers click on a link to your news articles.
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Apparently, we are hours away from a sequester. Obama is meeting with House leaders. No agreement is expected.
If the sequester kicks in, the New York Times says this is what will happen. What I learned from that article: Nothing. It seems nobody knows (which I guess was the point of the article.)
Are cuts coming to law enforcement? Will there be fewer arrests? Will the Bureau of Prisons budget be cut so that more prisoners have to be released? I'd bet not.
What do you think the cuts will mean?
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Update 12:10 am MT : The Senate passed the fiscal cliff bill. Sens. Rand Paul, Carper (D-DE), Tom Harkin, Michael Bennet, Rubio, Grassley, Shelby and Lee voted against it. The vote is 89 to 8. The House will not vote tonight. AP article here.
Interesting that Colorado Senator Mark Udall voted for it while Senator Michael Bennet voted against it -- both are Democrats. Here's why Tom Harkin opposed it.
One additional saving: Congress won't be getting a $900 pay raise scheduled to take effect this spring.
Update: 11:45 pm MT: The Senate is now voting. [More...]
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I know what your thinking - if Americans think the fiscal cliff is a crisis, why are they in favor of what the fiscal cliff does (increases taxes and cut spending?) Cuz the American electorate is not the sharpest pencil in the box and the American Media is well matched to that. Consider from CNN:
"Americans definitely feel that they have something at stake in the upcoming negotiations - 77% believe that their personal financial situation will be affected if the government goes off the fiscal cliff," said CNN Polling Director Keating Holland.
At issue in the negotiations is a disagreement between the two major political parties over how to best raise the federal government's revenues. The president and most congressional Democrats argue for tax rate increases on the wealthiest Americans in order to raise revenue, while most congressional Republicans call for the closing of loopholes and reform in the tax code. Both parties have indicated a willingness to implement spending cuts, although a decision over how much and where has yet to be made.
So what does the public think? Two thirds of those questioned in the poll say that any agreement should include a mix of spending cuts and tax increases, with just under one in three saying a deal should only include spending cuts.
If the 'fiscal cliff' is a crisis, and it is not the right policy right now, imo, it is the TIMING that brings the urgency, not the specific policy mix. This is not the time to be cutting government spending. It is time to increase it in stimulative ways. But the Media either does not understand this, or instead chooses to ignore it. One last point - when did Republican agree to increase tax revenue? CNN is making that up.
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The startng point of the discussion is Neil Barofsky's criticisms of Geithner's refusal to consider measures that truly help homeowners and consumers if such measures in any way are opposed by the banks.
Using Ezra Klein's interview of Barofsky, Yglesias writes:
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In the year since I stepped down as the special inspector general of the Troubled Asset Relief Program, the sadly predictable consequences of the government’s disparate treatment of Wall Street and Main Street have only become worse. As the banks amass size and power, Main Street continues to get pummeled.
Part of the current economic malaise can be traced directly to Treasury’s betrayal of its promise to use TARP to “preserve homeownership.” The Home Affordable Modification Program has brought little meaningful improvement, with fewer than 800,000 ongoing permanent modifications as of March 31, 2012, a number that is growing at the glacial pace of just 12,000 per month.
What Barofsky said. Tim Geithner is a corrupt incompetent. If Obama loses, Geithner will be one of the main reasons why.
Speaking for me only
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The U.S. recovery is hobbled by an economic divide that separates Americans not by income or wealth but by their access to credit. The housing bust left behind millions of people with credit records damaged by plunging home prices, lost jobs, past overspending or bad luck. Many are now walled off from the low interest rates engineered by the Federal Reserve to spur the economy and remedy the aftereffects of the borrowing boom.
Shrunken access among credit have-nots is triggering more than personal plight. It has weakened the influence of the Fed—one of the best hopes for spurring stronger economic growth—and raised doubts within the central bank about whether it is doing much to reduce unemployment.
The credit divide factors into their thinking. Fed officials have been frustrated in the past year that low interest rate policies haven't reached enough Americans to spur stronger growth, the way economics textbooks say low rates should.
It never factored into the VSP's thinking about the housing and homeowner crisis. This is the failure of Tim Geithner especially, who blocked real help for homeowners while choosing to give free money to the banks.
The banks are fine now. The country is not.
Geithner remains a corrupt incompetent who, if Obama loses, will be the cause of the loss.
Speaking for me only
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In a column arguing for short term stimulus, Peter Orzag writes:
When policy makers put in place measures carefully designed to reduce the federal deficit in the future, most of them happen. This is a good thing, since enacting more stimulus today and more deficit reduction to take effect later is exactly what the U.S. needs. It’s also what makes the ongoing jobs-versus-austerity debate so frustrating. What we really need is to be bolder on both jobs and austerity, by pursuing a combination policy.
Those who are most concerned about the weak labor market should be most willing to do whatever it takes -- including combining delayed budget cuts with stimulus -- to get the most stimulus passed. And those who favor a combined approach shouldn’t be characterized (as I have been) as pro-austerity and anti-stimulus.[...] [Emphasis supplied.]
Someone hurt Peter Orzag's fee fees. A couple of points: Orzag is arguing for "maximum stimulus now." Where was he in January 2009? Second, his statement about spending cuts in the social safety net is true. But tax increases for deficit reduction NEVER survive. It's funny how to Orzag, the Clinton tax increase of 1993, the most important deficit reduction measure of the last 25 years, is not even worth a mention. Of course we know why, it undermines his argument. THAT deficit reduction measure did not hold. Taxes were cut twice during the Bush Administration. So Orzag says we should agree with him to cut spending in the future for more spending now. But what about the Bush tax cuts?
Sorry Mt. Orzag, you are pro-austerity and pro cutting the social safety net. It's what you don't write about that proves it to me - tax policy.
Speaking for me only
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The United States economy gained momentum in January, adding 243,000 jobs, the second straight month of better-than-expected gains. The unemployment rate fell to 8.3 percent, giving a cause for optimism as the economy shapes up as the central issue in the presidential election. The Labor Department’s monthly snapshot of the job market uses a different survey, of households rather than employers, to calculate the unemployment rate.
Both the unemployment rate and the number of jobless — which fell to 12.7 million — were the strongest since February 2009, President Obama’s first full month in office.
The job growth numbers really do not match the economic growth numbers so, to me at least, this is a little perplexing. Call it recovery-less job growth. But good news is good news. And this is unreservedly good news. Not just for President Obama, who will assuredly win reelection if this trend holds up (over 200,000 jobs were created in December.)
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[I]n the battle of Treasury vs the banks, the banks — predictably — have won.
Ridiculous from Salmon - Geithner's Treasury has protected the banks from Day One (before Day One in Geithner's case, considering his outrageous actions on behalf of the banks as president of the New York Fed.)
Tim Geithner is a disgrace, and a disgrace that reflects on Barack Obama. If he loses reelection, what would most make his loss deserved is his acceptance of the malfeasance and incompetence of Tim Geithner. Obama has been unforgivable on that.
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The Labor Department said Friday that the nation’s employers added 120,000 jobs last month, after adding 100,000 jobs in October. The unemployment rate fell to 8.6 percent, after having been mired around 9 percent for most of 2011.
November’s jobless rate was the lowest recorded since March 2009. The rate fell partly because more workers got jobs, but also because about 315,000 workers dropped out of the labor force, and the jobless rate counts only people who are actively looking for work.
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The Federal Reserve moved Wednesday with other major central banks to buttress the financial system by increasing the availability of dollars outside the United States, reflecting growing concern about the fallout of the European debt crisis.
The banks announced that they would reduce by roughly half the cost of an existing program under which banks in foreign countries can borrow dollars from their own central banks, which in turn get those dollars from the Fed.
I support this policy, but think that spreading the free money around to the "little people" is just as important. Also too, fiscal stimulus.
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A few years ago Gauti Eggertsson published a a persuasive analysis (pdf) of the big economic recovery of 1933-37; he argued that it had a lot to do with changed expectations of future monetary policy. Specifically, by taking America off the gold standard — a shocking move at the time — and explicitly calling for a return to pre-Depression price levels, FDR created an expectation of rising prices that had a salutary effect on demand.
The paper explains that FDR did more than that:
What ended the Great Depression in the United States? This paper suggests that the recovery was driven by a shift in expectations. This shift was triggered by President Franklin Delano Roosevelt’s (FDR) policy actions. On the monetary policy side, Roosevelt abolished the gold standard and announced an explicit policy objective of inflating the price level to pre-Depression levels. On the fiscal policy side, Roosevelt expanded real and deficit spending which helped make his policy objective credible. The key to the recovery was the successful management of expectations about future policy. [MORE . . .]
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Q: What do you think the goals of Occupy Are?
A: To help wake America up to the fact that the country can't go on focused on the needs of the few over the needs of the many.
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To halt the fall in house prices, the government should reduce mortgage principal when it exceeds 110 percent of the home value. About 11 million of the nearly 15 million homes that are “underwater” are in this category. If everyone eligible participated, the one-time cost would be under $350 billion. Here’s how such a policy might work:
If the bank or other mortgage holder agrees, the value of the mortgage would be reduced to 110 percent of the home value, with the government absorbing half of the cost of the reduction and the bank absorbing the other half. For the millions of underwater mortgages that are held by Fannie Mae and Freddie Mac, the government would just be paying itself. And in exchange for this reduction in principal, the borrower would have to accept that the new mortgage had full recourse — in other words, the government could go after the borrower’s other assets if he defaulted on the home. This would all be voluntary.
This won't work. The reason is the banks can not recognize these losses. The lack of clothing for the emperor would become apparent. Without a stick, the banks won't do it. There were sticks available in early 2009, but Geithner protected his Wall Street buddies. In any event, why not HOLC?
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