The current economic downturn has been called a housing crisis, a financial crisis and a debt crisis, but the simplifying logic of the political season has settled on what is really more a result than a cause. We are now, according to nearly everyone running for office, in a jobs crisis. Every politician currently has a “jobs plan,” very often a list of vague proposals filled with serious-sounding phrases like “budget framework” and “regulatory cap” that are designed, for the most part, to mean both everything and nothing at all.RTWT.
BONUS: Eswar Prasad, at The Daily Beast, "Crisis Kills G-20 Progress."
Boeing reported a $1.1 billion quarterly profit on Wednesday that beat expectations because of strong growth in its defense business.Photo: "Long Beach Boeing C-17 Tour."
The company's passenger jet profit grew more slowly and manufacturing problems have forced it to cut its forecast for deliveries of its two newest jets.
A large share of Boeing's defense work is done in Long Beach and surrounding communities, including production of the C-17 Globemaster cargo jet, satellite research and development in Seal Beach, and engineering and other work in Huntington Beach.
Boeing also maintains a large defense workforce in El Segundo, where crews operate the world's largest satellite manufacturing facility, said Paula Shawa, Boeing's regional spokesperson.
It took only a dozen years for humanity to add another billion people to the planet, reaching the milestone of 7 billion Monday — give or take a few months.That's so ominous sounding, "they" had to pick Halloween for the date, or something.
Demographers at the United Nations Population Division set Oct. 31, 2011, as the "symbolic" date for hitting 7 billion, while acknowledging that it's impossible to know for sure the specific time or day. Using slightly different calculations, the U.S. Census Bureau estimates the 7-billion threshold will not be reached until March.
Under any methodology, demographers agree that humanity remains on a steep growth curve, which is likely to keep climbing through the rest of this century. The U.N.'s best estimate is that population will march past 9.3 billion by 2050 and exceed 10.1 billion by the end of the century. It could be far more, if birthrates do not continue to drop as they have in the last half-century.
Nearly all the projected growth this century is expected to occur in developing countries in Asia, Africa and Latin America, while the combined populations in Europe, North America and other wealthy industrialized nations will remain relatively flat. Some countries, such as Germany, Russia and Japan, are poised to edge downward, their loss made up mostly by ongoing growth in the United States, which is bolstered by waves of immigrants.
Spain's jobless rate, hovering above 20% since early 2010, reached its highest rate in 15 years in the third quarter, the government reported Friday, at 21.5%—driven up in part by public-sector cuts. The number of households without any income also hit record levels, rising to 559,900, or 3.2% of Spain's families, the government said.That's the crisis of the European welfare-state model right there, and right here at home protesters at Occupy Wall Street are campaigning for the exact same fiscal bankruptcy and welfare state nightmare.
One reason: Three years into the economic crisis, more and more jobless Spaniards are seeing their unemployment benefits expire. The Spanish social safety net for the long-term unemployed runs out more quickly than in many Western European countries, and its unemployment rate is the highest in the European Union.
Most wage-replacement benefits in Spain—which top out at about €1,400 ($2,000) monthly for workers with two children—run out or significantly decline by 24 months, compared with three to five years in some countries, including Belgium and Denmark. Mr. Tuesta's benefits expired late last year.
The government on Friday announced plans to spend an additional €24 billion ($34 billion) on job development from 2012 through 2014. Those expenses could require cuts elsewhere. The euro zone, trying to contain a debt crisis, wants Madrid to slash its budget deficit to 3% of gross domestic product by 2013, from more than 9% last year.
Even as it has frozen pensions and cut public-sector salaries, Spain's government has been loath to trim assistance for the jobless. Still, in August, 71% of Spain's jobless collected unemployment benefits, compared with more than 79% in the summer of 2010, according to the Spanish Labor Ministry.
Reporting from Sacramento -- Gov. Jerry Brown proposed a sweeping overhaul of California pensions that would require public employees to pay more for their retirement and cut benefits for those hired in the future, setting the stage for a fierce battle with fellow Democrats and some of his main political supporters: unions representing government workers.
Brown's 12-point plan, announced Thursday, would require that all public workers have at least half the cost of their pensions deducted from their paychecks. Most state employees already make that contribution, but many in cities, counties and school districts across the state pitch in far less.
The governor also wants future employees to receive up to a third of their retirement income from a 401(k)-style plan rather than a traditional guaranteed pension. And he urged that the retirement age for most new public workers be raised from 55 to 67.
"I try to protect working people whenever I can," said Brown, 73, "but I'm also responsible to the taxpayer and making sure we have a solvent state government."
California's public pension system has been strained by ballooning obligations to current and future retirees. Brown, who says he does not draw a pension, has called the system unaffordable and unsustainable. He wants to cut the state's long-term pension needs in half.
His plan would have to pass the Legislature, which is dominated by Democrats whose close political allies include labor unions. Brown would need the approval of two-thirds of state lawmakers to place key parts of it on the November 2012 ballot for voters to consider.
Those who heaped high praise on Keynesian policies have grown silent as government spending has failed to bring an economic recovery. Except for a few diehards who want still more government spending, and those who make the unverifiable claim that the economy would have collapsed without it, most now recognize that more than a trillion dollars of spending by the Bush and Obama administrations has left the economy in a slump and unemployment hovering above 9%.RTWT.
Why is the economic response to increased government spending so different from the response predicted by Keynesian models? What is missing from the models that makes their forecasts so inaccurate? Those should be the questions asked by both proponents and opponents of more government spending. Allow me to suggest four major omissions from Keynesian models...
With Election Day just over a year away, a deep sense of economic anxiety and doubt about the future hangs over the nation, according to the latest New York Times/CBS News poll, with Americans’ distrust of government at its highest level ever.Also:
The combustible climate helps explain the volatility of the presidential race and has provided an opening for protest movements like Occupy Wall Street, to highlight grievances about banks, income inequality and a sense that the poor and middle class have been disenfranchised.
Almost half of the public thinks the sentiment at the root of the Occupy movement generally reflects the views of most Americans.
With nearly all Americans remaining fearful that the economy is stagnating or deteriorating further, two-thirds of the public said that wealth should be distributed more evenly in the country. Seven in 10 Americans think the policies of Congressional Republicans favor the rich. Two-thirds object to tax cuts for corporations and a similar number prefer increasing income taxes on millionaires.
On Tuesday, the Congressional Budget Office released a new study concluding that income distribution had become much more uneven in the last three decades, a report that could figure prominently in the battle over how to revive the economy and rein in the federal debt.
The poll findings underscore a dissatisfaction and restlessness heading into the election season that has been highlighted through competing voices from the Occupy Wall Street and Tea Party movements, a broad anti-Washington sentiment and the crosscurrents inside both parties about the best way forward.
Not only do 89 percent of Americans say they distrust government to do the right thing, but 74 percent say the country is on the wrong track and 84 percent disapprove of Congress — warnings for Democrats and Republicans alike.
Nearly 9 in 10 Democrats, two-thirds of independents and just over one-third of all Republicans say that the distribution of wealth in the country should be more equitable...Hey, that Obama-Pelosis class warfare really works!
President Barack Obama on Monday went where his Republican White House rivals have so far refused to go. He asserted that Washington should help Americans refinance their mortgages at lower rates.Well, yeah. Bailing out over-leveraged homeowners? Still not popular.
The president's move to expand an existing, little-used program underscored his administration's belief that government has a role to play in restoring the health of the nation's broken housing market. In contrast, Republican presidential hopefuls have been loath to address the housing issue at all, in part because they blame government for causing the financial crisis and housing mess.
In 2008, Republican presidential candidate John McCain proposed that the government buy up home mortgages that exceeded the value of houses, then re-issue them at market value. "He got killed," said Douglas Holtz-Eakin, the economic adviser who had urged Mr. McCain to make the proposal.
Months later, the tea-party movement took off after CNBC analyst Rick Santelli's on-air tirade in February 2009 after the new Obama administration suggested it would try to aid homeowners. "How many of you people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills?" he asked.
Ever since, politicians from both parties have feared aggressive action that would smack of welfare for McMansion dwellers.
Few places have been as devastated by the Great Recession as the Inland Empire, a region of 4 million people encompassing Riverside and San Bernardino counties. Unemployment has tripled since 2006. Home values have plunged 56% in Riverside County and 60% in San Bernardino County. Nearly 12,500 foreclosure notices were filed in the three months that ended Sept. 30.Well, praise be Obama! (Or Jerry Brown — our local Democrat messiah!)
Yet amid the stillborn subdivisions, abandoned storefronts and crowded unemployment offices, there are early stirrings of recovery.
BRUSSELS — European leaders took their first steps toward a new plan to stem the euro crisis, admitting that their last grand plan, agreed to only three months ago, has failed.Continue reading at that link.
The new effort, which leaders hope to finalize at another summit on Wednesday, involves a sweeping recapitalization of European banks, a substantial restructuring of Greece's debts, a bigger bailout fund, and even possibly fresh efforts to entice sovereign-wealth funds in China and elsewhere to come to Europe's aid.
Congress's Joint Select Committee on Deficit Reduction is struggling to find $1.5 trillion in cuts over the next 10 years. This is a unique opportunity to use tax reform to reduce future budget deficits while lowering individual tax rates.RTWT.
The Tax Reform Act of 1986, enacted 25 years ago last Friday, showed how a tax reform that includes lower rates can change incentives in a way that grows the tax base and produces extra revenue. The 1986 agreement between President Ronald Reagan and House Speaker Tip O'Neill reduced the top marginal tax rate to 28% from 50%. A conservative Republican and a liberal Democrat could agree to a dramatic reduction in top rates because the legislation also eliminated a wide variety of tax loopholes.
A traditional "static" analysis that ignores the response of taxpayers to lower tax rates indicated that those combined tax changes would leave total revenue unchanged at each income level. But the actual experience after 1986 showed an enormous rise in the taxes paid, particularly by those who experienced the greatest reductions in marginal tax rates.
During the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S., according to research from economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University. When the economy grows, their incomes grow up to three times faster than the rest of the country's. When the economy falls, their incomes fall two or three times as much.
The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40% between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50%—far greater than the less than 2% drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures.
... based on the number of toxic loans in the system in 2008, the government was responsible for not just a simple majority, but more than two-thirds. It's quantifiable — 71% to be exact (see chart). And the remaining 29% of private-label junk was mostly attributable to Countrywide Financial, which was under the heel of HUD and its "fair-lending" edicts.
Via Memeorandum and Verum Serum.
PHOTO CREDIT: That Mr. G Guy.
The champions of the European Union once touted it as a “bold new experiment in living” and “the best hope in an insecure age.” But these days “fear is coursing through the corridors of Brussels,” as the B.B.C. reported in September. Such fear is justified, for the nations of Europe are struggling with fiscal problems that challenge the integrity of the whole E.U.-topian ideal. Greece teetering on the brink of default on its debts, E.U. nations squabbling about how to deal with the crisis, debt levels approaching 100 percent of GDP even in economic-powerhouse countries like Germany and France, and European banks exposed to depreciating government bonds are some of the signposts on the road to decline.Continue reading.
A monetary union comprising independent states, each with its own peculiar economic and political interests, histories, cultural norms, laws, and fiscal systems, was bound to end up in the current crisis. All that borrowed money, however, was necessary for funding the lavish social welfare entitlements and employment benefits that once impressed champions of the “European Dream.” Yet, despite the greater fiscal integration created by the E.U., sluggish, over-regulated, over-taxed economies could not generate enough money to pay for such amenities. Now, the president of the European Council, Herman Van Rompuy, admits, “We can’t finance our social model.”
This financial crisis means the government-financed dolce vita lifestyle once brandished as a reproach to work-obsessed America is facing cutbacks and austerity programs immensely unpopular among Europeans otherwise used to amenities like France’s 35-hour work week, or Greece’s two extra months of pay, or England’s generous housing subsidies that cost $34.4 billion a year. No surprise, then, that from Athens’ Syntagma Square to Madrid’s Puerta del Sol, austerity measures attempting to scale back government spending have been met with strikes, demonstrations, boycotts, and protests, some violent, on the part of citizens for whom such government entitlements have become human rights. In fact, such transfers of wealth have been formalized as rights in Articles 34 and 35 of the E.U.’s Charter of Fundamental Human Rights.
It used to be that the sole purpose of the tax code was to raise the necessary funds to run government. But in today's world the tax mandate has many more facets. These include income redistribution, encouraging favored industries, and discouraging unfavorable behavior.Continue reading.
To make matters worse there are millions and millions of taxpayers who are highly motivated to reduce their tax liabilities. And, as those taxpayers finagle and connive to find ways around the tax code, government responds by propagating new rules, new interpretations of the code, and new taxes in a never-ending chase. In the process, we create ever-more arcane tax codes that do a poor job of achieving any of their mandates.
Republican presidential candidate Herman Cain's now famous "9-9-9" plan is his explicit proposal to right the wrongs of our federal tax code. He proposes a 9% flat-rate personal income tax with no deductions except for donations to charity; a 9% flat-rate tax on net business profits; and a new 9% national tax on retail sales.
Mr. Cain's 9-9-9 plan was designed to be what economists call "static revenue neutral," which means that if people didn't change what they do under his plan, total tax revenues would be the same as they are under our current tax code. I believe his plan would indeed be static revenue neutral, and with the boost it would give to economic growth it would bring in even more revenue than expected.
