“Focus Should Be On Jobs”: Ben Bernanke Clearly Explained What’s Still Wrong With The Economy
In recent congressional testimony, Federal Reserve Chairman Ben Bernanke clearly explained what’s still wrong with the economy, outlined the Fed’s thinking on monetary policy and strongly implied that fiscal policy is still off base. His account and policy recommendations reflect mainstream economic thinking – and, thus, run counter to much of the economic doctrine that’s driving Republican budget policies.
Here’s how Bernanke sees the economy: though payroll employment has expanded by about 6 million jobs since its low point and unemployment has dropped by about 2.5 percentage points from its peak, the job market remains weak overall. I couldn’t agree more.
Bernanke points to the same indicators I would. The unemployment rate is still too high, too many of the unemployed have been looking for work for more than six months, too many people have stopped looking at all while job prospects remain dim, and nearly 8 million people are working part time even though they’d prefer full-time work. I’m glad to see him emphasize how “extraordinarily costly” this situation is:
Not only do [high levels of unemployment and underemployment] impose hardships on the affected individuals and their families, they also damage the productive potential of the economy as a whole by eroding workers’ skills and – particularly relevant during this commencement season – by preventing many young people from gaining workplace skills and experience in the first place. The loss of output and earnings associated with high unemployment also reduces government revenues and increases spending on income-support programs, thereby leading to larger budget deficits and higher levels of public debt than would otherwise occur.
While unemployment is still a major concern, inflation isn’t. Therefore, the Fed is appropriately interpreting its “dual mandate” to foster both “maximum employment” and “price stability” as requiring “a highly accommodative monetary policy.” That means keeping its short-term interest rate target as low as possible until unemployment falls closer to normal long-term levels and monitoring its program of purchasing longer-term assets – as long as inflationary expectations remain low. As the Fed notes, this policy carries some risks, but the risks and costs of continuing high unemployment are far greater.
Republicans, in contrast, want to remove “maximum employment” from the Fed’s policy concerns. They seem to see our most pressing problem as the possibility of future inflation, not the reality of current high unemployment. The Republican chairman of the Joint Economic Committee, where Bernanke testified, wants to replace the dual mandate with a single mandate for long-term price stability. Even some conservatives recognize that, during major recessions, that’s a recipe for disaster. An even more extreme policy – a return to a gold standard – made it into the 2012 Republican platform.
On fiscal policy, Bernanke recognizes that recent policy decisions have tilted too far toward short-term budget austerity, while largely ignoring longer-term budget challenges. He neither shared Republicans’ disdain for stimulus policies nor endorsed their flirtation with “expansionary austerity” arguments.
Federal fiscal policy, taking into account both discretionary actions and so-called automatic stabilizers, was, on net, quite expansionary [emphasis added] during the recession and early in the recovery. However, a substantial part of this impetus was offset by spending cuts and tax increases by state and local governments, most of which are subject to balanced-budget requirements, and by subsequent fiscal tightening at the federal level.
While too much fiscal restraint has hampered the economic recovery, policymakers have done little to address longer run fiscal challenges that will begin to reappear later in the decade. Bernanke’s counsel:
Importantly, the objectives of effectively addressing longer-term fiscal imbalances and of minimizing the near-term fiscal headwinds facing the economic recovery are not incompatible. To achieve both goals simultaneously, the Congress and the Administration could consider replacing some of the near-term fiscal restraint now in law with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run.
By contrast, the House Republican budget goes full bore on deficit reduction, starting immediately – jobs be damned.
By: Chad Stone, U. S. News and World Report, May 24, 2013
“Republican Rebranding”: Recent History Tells Us That Victory Isn’t Born Of Subtle Ideological Repositioning
The Republican “rebranding” effort may be on temporary hiatus as all the party’s factions come together in the vain hope that they may finally have something to impeach Barack Obama over, but as soon as these various non-scandals, faux-scandals, and mini-scandals fade, the GOP will surely get back to bickering over how it can pull itself out of its electoral doldrums. In wondering where they might go, The Atlantic‘s Molly Ball does the logical thing and seeks out some veterans of a prior party rebranding, the Democratic effort of the late 1980s and early 1990s, centered around the Democratic Leadership Council. Their take isn’t too surprising—they think what the GOP needs now is to do what they did then. But I think there’s an important point missing from this discussion and the way we talk about this history. The story everyone tells is that there are two paths to take, one of which leads to failure and one to success, and the argument is over which is which. Should the party be more true to its philosophy and sell that philosophy better, or should it reorient itself to respond to changing times? Here’s how Ball’s article closes:
Watching the GOP’s struggles, former DLCers say they recognize all the old symptoms—the alibis, the search for a procedural panacea, the party committee dominated by diehards. But on the question of whether the Republican Party has just been through its version of 1988, they’re not so sure. As Will Marshall put it: “They know they have a political problem—that’s obvious. But I don’t think they’ve come to grips with the fundamental issue, which is their governing philosophy. I think they’re going to have to lose one more.”
Sounds reasonable enough. But I think the degree to which political success comes from the public agreeing with you on issues is being dramatically overstated. If you look at the ups and downs of the parties over the last 20 years, a couple of other factors—timing, and what your opponents do—matter a whole lot more.
Let’s quickly run over this history, starting with the Democrats’ first revival, with the election of Bill Clinton in 1992. Was it important that Clinton was a centrist Democrat who sought to neutralize the party’s electoral problems on being seen by white voters as too solicitous of black people and too soft on crime?1 Sure. But had the country not been in a recession in 1992, that wouldn’t have been enough. And if that was a Democratic revival that went beyond one guy getting elected, it didn’t last very long; two years later, Republicans took over both houses of Congress.
That brings us to the opposition factor. After the Gingrich Revolution, voters got to see the new version of the Republican party, and they were completely turned off. In 1996, Clinton ran one ad after another featuring pictures of Bob Dole and Newt Gingrich together to taint Dole with the stain of the unpopular House Speaker. But what got him re-elected, more than anything else, was the humming economy. We could argue about how much credit he deserved for it, but the importance it had was undeniable, and it wasn’t a judgment voters were making about his New Democrat philosophy that got him a second term.
Then four years later, despite all that New Democrat repositioning, George W. Bush gets elected and the Democratic Party is back in the toilet. And what brought them back? Was it yet another repositioning? Nope. It was George W. Bush. The abysmal failure of his presidency was what allowed Democrats to win back both houses of Congress in 2006. Then in 2008, Barack Obama got elected because of both a continued rejection of Bush and the economic meltdown.
My point is, all of this back-and-forth happened despite any ideological movement that was going on within each party. Right now the Republicans are indeed grossly out of step with the public on issues. But they were just as out of step in 2010, when they won a huge victory in the midterm elections. It isn’t that issues don’t matter, but a lot of the ideological judgments voters make are relative. The Democratic party is benefiting from the fact that Republicans look like (and are!) a bunch of reckless, irresponsible extremists. Could they benefit from becoming more sane? Sure. But given the right circumstances, they can win even if they get no less crazy than they are right now. If you’re in the opposition and the president’s policies fail, you’ll be rewarded; if they succeed, you’ll be in trouble (which, of course, is why Republicans have worked so hard to make sure Obama’s policies fail). Nobody is going to be hailed as a brilliant party strategist for saying, “We just need to wait for things to turn in our favor, and everything will be OK.” But that’s probably the truth.
1If you’re too young to remember the 1992 campaign, Google “Ricky Ray Rector” and “Sister Souljah” to see what I’m talking about.
By: Paul Waldman, Contributing Editor, The American Prospect, May 24, 2013
“What Packing The Court Means”: Chuck Grassley Has No Idea What He’s Talking About
The D.C. Circuit Court of Appeals, the nation’s second highest federal bench, has 11 seats. For the last five years, four of those seats have been vacant, which has not only put a strain on the court, but left Republican appointees as the clear majority, pushing the bench to the right.
And so, yesterday offered something of a breakthrough when the Senate unanimously approved Sri Srinivasan, President Obama’s first confirmed judge to the D.C. Circuit. That leaves three vacancies on the bench, and the White House intends to send nominees for those slots to the Senate soon.
For Sen. Chuck Grassley (R-Iowa), that’s a problem. Indeed, Dylan Matthews noted yesterday that Grassley believes rascally Democrats and the Obama administration are trying to “pack the court” through a “court-packing” scheme. Grassley was reading carefully from a prepared text, suggesting the Iowa Republican was quite serious about the argument — he repeated it five times.
It fell to Sen. Sheldon Whitehouse (D-R.I.), Grassley’s colleague on the Senate Judiciary Committee, to gently explain that Grassley has no idea what he’s talking about. “Court packing” was an FDR-era idea in which the executive branch would expand the number of seats on a bench in order to tilt the judiciary in the president’s favor. The idea was floated in the 1930s, but not seriously pursued.
What we’re talking about in 2013 is very different. There’s a vacancy on the federal bench; the president chooses a nominee to fill that vacancy; the Senate Judiciary Committee scrutinizes that nominee and sends him or her to the floor; and then the Senate’s full membership has an opportunity to vote “yea” or “nay” on confirmation.
Chuck Grassley sees this as some kind of underhanded Democratic scheme. The rest of us should consider it basic American governance.
Postscript: I should note that if Senate Republicans reclaim the majority after the 2014 midterms, Grassley would become chairman of the Senate Judiciary Committee, despite his apparent confusion on these issues.
By: Steve Benen, The Maddow Blog, May 24, 2013
“Reverse Sticker Shock”: Reality-Based Evidence On Obamacare In California Amidst All The GOP Hysteria
For months now we’ve been told that the Affordable Care Act would produce a cataclysm of skyrocketing health insurance premiums, particularly in the individual insurance markets that the law most affects. Earlier this week alarms were raised particularly in California with the news that three major insurance companies had decided against participating in the health care exchanges that would offer Obamacare coverage.
So it’s a bit of a shock–sort of a reverse sticker shock–today to learn that preliminary assessments of the cost of the new, improved (because subject to new minimum coverage requirements) policies in California once the exchanges are up and running will in most cases be lower than what citizens of this high-cost state are accustomed to paying. TNR’s Jonathan Cohn summarizes the news:
Based on the premiums that insurers have submitted for final regulatory approval, the majority of Californians buying coverage on the state’s new insurance exchange will be paying less—in many cases, far less—than they would pay for equivalent coverage today. And while a minority will still end up writing bigger premium checks than they do now, even they won’t be paying outrageous amounts. Meanwhile, all of these consumers will have access to the kind of comprehensive benefits that are frequently unavailable today, at any price, because of the way insurers try to avoid the old and the sick.
Sarah Kliff of Wonkblog has more details:
Health insurers will charge 25-year-olds between $142 and $190 per month for a bare-bones health plan in Los Angeles.
A 40-year-old in San Francisco who wants a top-of-the-line plan would receive a bill between $451 and $525. Downgrade to a less robust option, and premiums fall as low as $221.
These premium rates, released Thursday, help answer one of the biggest questions about Obamacare: How much health insurance will cost. They do so in California, the state with 7.1 million uninsured residents, more than any other place in the country.
Multiple projections expected premiums to be relatively high.
The Congressional Budget Office predicted back in November 2009 that a medium-cost plan on the health exchange – known as a “silver plan” – would have an annual premium of $5,200. A separate report from actuarial firm Milliman projected that, in California, the average silver plan would have a $450 monthly premium.
Now we have California’s rates, and they appear to be significantly less expensive than what forecasters expected.
On average, the most affordable “silver plan” – which covers 70 percent of the average subscriber’s medical costs – comes with a $276 monthly premium.
Such numbers, it is important to note, do not reflect the actual cost to the estimated 2.6 million Californians who will qualify for Obamacare tax subsidies (available to those with incomes up to 400% of the federal poverty rate).
One of the “horror stories” we’ve been hearing from Obamacare opponents for years now is that the whole scheme will collapse once healthy, low-income young people realize they’ll face large news costs for the kind of minimum high-deductible catastrophic coverage they actually need. They’ll bail, it has been suggested, not only from Obamacare (screwing up the broad-based risk pools that make affordable coverage for older and sicker people possible), but from Obama’s political coalition as well. So this comment from Kliff about the California numbers is worth noting:
For a less robust “bronze” plan, which covers 60 percent of the average beneficiary’s costs, the tax credit could actually cover the entire premium for low-income twenty-somethings.
None of this should really be that surprising; the idea that a broader pool plus competition and guaranteed benefits would provide a better bargain (plus vastly greater security) for consumers in the individual market was central to the entire Affordable Care Act architecture. But it’s taken a while for facts to catch up with all the negative agitprop. It won’t keep House Republicans from voting to repeal the entire law a 38th or 39th or 40th time before the bulk of the Affordable Care Act becomes effective next year. Still, it’s nice to see some reality-based evidence amidst all the hysteria.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, May 24, 2013
“Unmistakable Trend Lines”: Sequestration Can Be Bad For Your Political Health
Since it’s Furlough Friday, a day when by recent tradition conservatives get together to festively celebrate how little across-the-board budget cuts actually affect anyone who matters, some findings from last week’s WaPo/ABC poll, as explained by ABC’s Gary Langer, are perhaps in order:
The federal budget sequester may be dampening a rise in economic optimism: Nearly four in 10 Americans now say sequestration has hurt them personally, up substantially since it began in March – and they’re far less sanguine than others about the economy’s prospects overall.
Thirty-seven percent in the latest ABC News/Washington Post poll say they’ve been negatively impacted by the budget cuts, up from 25 percent in March. As previously, about half of those affected say the harm has been “major.”
And as the effects of the sequester spread, the trend lines are unmistakable and cut across partisan and ideological lines:
More Americans continue to disapprove than approve of sequestration, now by 56-35 percent – again, a view influenced by experience of the cuts. Eight in 10 of those who report serious harm oppose the cuts, as do about two-thirds of those slightly harmed. But the majority, which has felt no impacts, divides exactly evenly – 46 percent favor the cuts, vs. 46 percent opposed.
Further, this poll, produced for ABC by Langer Research Associates, finds that 39 percent overall “strongly” disapprove of the cuts – but that soars to 66 percent of those who say they’ve been harmed in a major way. (Just 16 percent overall strongly approve.) Experience of the cuts even trumps partisanship and ideology: Among Republicans, conservatives and Tea Party supporters who’ve been harmed by the cuts, most oppose them. Support is far higher among those in these groups who haven’t felt an impact of sequestration….
Ideology has an effect: Forty-seven percent of “very” conservative Americans approve of the cuts, as do 42 percent of those who call themselves “somewhat” conservative. It’s 36 percent among moderates and 24 percent among liberals. But again, impacts of the cuts are a bigger factor in views on the issue. Among conservatives hurt by the cuts, 65 percent disapprove of them; among those unhurt, just 34 percent disapprove.
This means, of course, that the strongest constituency for the sequester is “very conservative” voters who have not been personally affected by the cuts. If that sounds like the “conservative base” that exerts a particularly strong influence on Republican lawmakers, maybe we have an explanation for why so many of said lawmakers incautiously chortled about the whole thing being a nothingburger that proved government had plenty of excess fat to shed.
They might want to rethink that position.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, May 24, 2013
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