I have been bemused for many years by the peculiar mindset represented by DC centrism. I have written about it a number of times over the years, in my book The Progressive Revolution: How The Best In America Came To Be, and in many of my blog posts. DC Centrism embraces what the political establishment, especially including the big special interests who tend to control this town, thinks is right, even when the vast majority of Americans are opposed to it.
For example, cutting Social Security, something 80% of Americans oppose, is a classic example of DC centrism. Another example is focusing obsessively about the deficit while ignoring new measures to create jobs, which is the reverse of what voters want the government to focus on. Bailing out, and now subsidizing, the Too Big To Fail banks is yet another example. And these three examples really just scratch the surface- there are so many ways that DC Centrism is different from what the centrist position of real voters is.
I was thinking about all this again over the last week while I was out in my home state of Nebraska, where the Senate and Governor races are wide open. While traveling around the state talking politics with folks, I was also doing email conversations with friends about the South Dakota, Montana, Iowa, Minnesota, and Oregon Senate races. In all of these cases, the political situation goes against DC conventional wisdom, as candidates and potential candidates scramble the usual political labels and dynamics. Let’s look at the situation in all of these races.
On January 7, 200--two weeks before Barack Obama took the oath of office--the Congressional Budget Office forecast the federal budget deficit for fiscal year 2009 at $1.2 trillion. Now, the CBO is projecting the deficit will be only $642 billion for FY 2013, $200 billion less than the nonpartisan budget scorekeeper estimated as recently as February.
For policymakers in Washington, the implications couldn't be clearer. For starters, the counterproductive Beltway fixation on immediate debt reduction, which economists have warned is slowing U.S. economic growth and costing millions of jobs, should be jettisoned ASAP. And to be sure, the Republicans' next round of debt ceiling hostage-taking should be condemned as the economic sabotage it is.
The CBO explained why the U.S. fiscal picture is improving so dramatically:
If the current laws that govern federal taxes and spending do not change, the budget deficit will shrink this year to $642 billion, CBO estimates, the smallest shortfall since 2008. Relative to the size of the economy, the deficit this year--at 4.0 percent of gross domestic product (GDP)--will be less than half as large as the shortfall in 2009, which was 10.1 percent of GDP...
CBO's estimate of the deficit for this year is about $200 billion below the estimate that it produced in February 2013, mostly as a result of higher-than-expected revenues and an increase in payments to the Treasury by Fannie Mae and Freddie Mac. For the 2014-2023 period, CBO now projects a cumulative deficit that is $618 billion less than it projected in February. That reduction results mostly from lower projections of spending for Social Security, Medicare, Medicaid, and interest on the public debt.
By 2015, the annual deficit is now projected to just 2.1 percent of U.S. gross domestic product, well below the 40-year historical average of 3.1 percent. The gap is expected to grow to 3.5 percent by 2023, "because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt."
The new CBO numbers are just the latest confirmation of House Speaker John Boehner's admission that "we have no immediate debt crisis." Coming on the heels of an analysis by the Hamilton Project estimating that austerity at the federal, state and local level has cost up to 2.2 million American jobs, the CBO report should help put to lie that more budget cutting is needed in Washington. As the New York Times explained just last week:
What does it mean to be an American? What does it mean to be an American corporation? An article in the Wall Street Journal the other day should trigger questions like these.
Multinational companies based in the U.S. boosted their global work forces in 2011 almost entirely by hiring workers overseas, underscoring the slow growth in the U.S. job market.
... The paltry hiring at home reflects where multinational companies are focusing their attention. Stronger economic growth in overseas markets in Asia and Latin America is driving their expansion, reinforcing their shift toward cheaper labor or closer access to customers.
The U.S. parents of multinational firms account for about one-fifth of total private U.S. employment. Since 1999, employment by U.S. multinationals is down by 1.1 million inside the U.S., while it is up by 3.8 million overseas.
The hiring by American companies is not happening in the U.S. At the same time these companies are holding $1.7 trillion of profits outside of the country, away from their own shareholders and our economy to avoid their taxes, while pushing to dramatically lower the taxes they pay us – and even to get out of paying any taxes at all on money they make outside of the country!
Why Do We Have Corporations?
Why do We the People even have laws that allow corporations and give them special benefits? The answer obviously is for our common benefit -- why else would we do it? The corporate form of a business enables the company to easily obtain capital from investors, in order to accomplish large-scale projects that benefit us. To encourage this we give these entities special privileges. For example, we limit liability which means the investors are not held liable for the actions of the company – they won't lose more than their investment if the company gets sued for some reason. We provide a system that helps them obtain financing, insurance, market liquidity and all kinds of things to help those investors get a good return on their money.
Benefit: We the People want railroads, but it takes a lot of money to build and operate a railroad. And our system wants private companies to do the work of building and operating railroads instead us just doing it ourselves. So we set up a way for a private company to gather investment from lots of people.
Why Do We Want "American" Corporations?
Why don't we just contract with any old corporation that comes along to get things done for us? Who cares what country these entities are from? Why should we as a country want to encourage and support our American corporations? Because American corporations make money for us. That is the whole point.
Other countries see themselves as countries, and compete with us as a country, for their benefit and the benefit of their people. As much as some of us might want a world in which we all cooperate and share and have "free trade" and other ideals and dreams, the fact is that other countries understand themselves as countries. Companies and industries located in other countries are operated to benefit their people. Their governments give them special benefits to help them compete with our companies. And then they are taxed so their country can have good schools and infrastructure and all the rest of the benefits of the modern world, for them.
And if we do not respond in kind, then their people end up better off at the expense of our people.
As long as other countries operate for the benefit of their people, it is our job to keep up our end of the bargain as it exists and operate as a country for the benefit of our people. This means that we support our companies, and expect them to bring the money they make back here, and share the returns with us.
We The People Used To Understand Who Is The Boss
We the People (used to) understand that these companies exist for our common benefit and (used to) expect certain things back from these corporations. We (used to) expect them to provide high-quality products and services and not engage in fraud and trickery. We (used to) expect them to provide a safe and fair work environment with good wages and benefits. We (used to) expect them to be good citizens that benefit the communities where they operate. And our laws and enforcement (used to) make sure they operated that way – for our common benefit.
Not that we didn't already know this in our guts, but now they've done a study to prove it. The Atlantic reports that employers intentionally screen out the long-term unemployed even if their resumé has the same work experience as someone unemployed for less than six months.
But just how bad is it for the long-term unemployed? Ghayad ran a follow-up field experiment to find out. In a new working paper, he sent out 4800 fictitious resumes to 600 job openings, with 3600 of them for fake unemployed people. Among those 3600, he varied how long they'd been out of work, how often they'd switched jobs, and whether they had any industry experience. Everything else was kept constant. The mocked-up resumes were all male, all had randomly-selected (and racially ambiguous) names, and all had similar education backgrounds. The question was which of them would get callbacks.
It turns out long-term unemployment is much scarier than you could possibly imagine.
The results are equal parts unsurprising and terrifying. Employers prefer applicants who haven't been out of work for very long, applicants who have industry experience, and applicants who haven't moved between jobs that much. But how long you've been out of work trumps those other factors. As you can see in the chart below from Ghayad's paper, people with relevant experience (red) who had been out of work for six months or longer got called back less than people without relevant experience (blue) who'd been out of work shorter.
Look at that again. As long as you've been out of work for less than six months, you can get called back even if you don't have experience. But after you've been out of work for six months, it doesn't matter what experience you have. Quite literally. There's only a 2.12 percentage point difference in callback rates for the long-term unemployed with or without industry experience. That's compared to a 7.13 and 8.95 percentage point difference for the short-and-medium-term unemployed. This is what screening out the long-term unemployed looks like. In other words, the first thing employers look at is how long you've been out of work, and that's the only thing they look at if it's been six months or longer.
Don't get me started on how people who are out of work, female, and over age 50 do with trying to get a job anywhere. My data is purely anecdotal, of course, but it's even worse than what this study proves. After all, why should employers hire expensive employees when they can find young people lined up at the door to fill the jobs?
Here's a report from 2011. Nearly two years later the economy is recovering for everyone but the long-term unemployed, especially if they're over 50.
On the day when House Republicans once again pass a budget that kills Medicare and Social Security, perhaps it's worth taking a look at what real people are going through.
Yes, Republicans, it's about far more than White House tours. Employees losing the equivalent of a months' pay, losing their jobs, services being cut and more.
Meanwhile, I'll bet no one is reporting on the Progressive Caucus budget, which actually did create jobs while saving Medicare and Social Security.
Florida Senator Marco Rubio gave a "Republican Response" to the President's State of the Union address. He said that taxes cause employers to reduce hours or lay people off. Others say that raising the minimum wage will mean layoffs. Let's take a closer look at that.
One line of Rubio’s stands out: “Because more government raises taxes on employers who then pass the costs on to their employees through fewer hours, lower pay and even layoffs.”
With this Rubio is trying to scare people who are worried about jobs. Business taxes are on profits. Good businesses employ the right number of people, so a company that is making profits isn’t going to reduce staff or hours. That is simply preposterous to anyone who has ever run a business.
I was in a local CVS store today. There weren't enough employees in the store, and there was a long line of people waiting to pay for items at the only checkout register. There was also a long line of people in line at the pharmacy. I saw a one person give up, leave their nearly-full carrier on a shelf, and just leave the store. I saw another person come in the door, take one look at the line and leave. I left without buying anything and went to a different store -- not a CVS, for what I was looking for.
Was this CVS "saving money" by employing fewer people? Or were they being "penny-wise and pound-foolish" and costing themselves business today as well as in the future?
How many times have you seen this happen at a business that is not employing enough people to "save money?? You are at a business, they don't have enough people working, and people give up and take their business somewhere else?
While elites assume the fiscal cliff is about deficit reduction and avoiding a contraction in the economy, voters want progress to create jobs over the next five years. Voters want growth, not austerity, and above all, do not see ‘entitlements’ as on the table.
· Two-thirds give an intense positive response to a “plan to invest in new industries and rebuild the country and create jobs over the next five years.” That is 5 points higher than “a plan to dramatically reduce the deficit to allow the economy to grow over next five years.”
· By 67 to 26 percent, voters say the priority should be growth rather deficit reduction.
There is no evidence that voters have any interest in the contours of Simpson-Bowles approach to the budget.
· Over 60 percent rule out cuts in Medicare and Social Security as part of a deficit reduction package.
· Almost three-quarters find acceptable in any such plan creating a new higher rate for those earning over a million dollars.
By putting Paul Ryan on the budget, Republicans decided to put social insurance for seniors on the table, but the Obama’s biggest advantage over Romney was on whom voters trust to deal with Medicare: 51 to 38 percent, a 13-point advantage.
If you've been listening, President Obama has been saying all along that he intends to get his debt deal with the Republicans -- and so have his surrogates. Pay attention, because now they'll be ramping up the Grand Bargain. We don't know yet if they will attempt to push it through in the lame-duck session, or whether they kick it down the road until after the next session of Congress. But it will happen, so be prepared to fight.
This morning, the much anticipated "Jobs Report" for October... the last Jobs Report before the election next Tuesday... was released as scheduled, revealing that 171,000 jobs were created last month, a strong jump from the "114,000 jobs" reported last September. The September number was also revised upwards to "148,000". The Unemployment Rate also rose to 7.9% as many long-term unemployed, encouraged by recent job growth, reentered the labor market once again searching for work.
Businesses picked up their pace of hiring in October and the unemployment rose as more people started looking for work, according to new government data that offer a glimmer of optimism for the long-ailing job market on the eve of the presidential election.
Employers reported adding 171,000 jobs in October, beating both analysts’ expectations (125,000 jobs added) and September’s rate of job creation (a revised 148,000).
The unemployment rate rose to 7.9 percent, up from 7.8 percent, but the details of why point to improvement in the job market as well. Some 578,000 more Americans counted themselves as part of the labor force, and only 410,000 more people reported having a job. In one welcome sign, the proportion of the population reporting that they had a job ticked up a tenth of a percent to 58.8 percent.
Even the "bad news" graph shows that MORE people are working today than the day President Obama took office, and that the monthly job creation figures have been steadily increasing since September of 2010 (before Republican election gains in November of that year.)
This report is more good news for President Obama going into next Tuesday's election, though there is no question that the Romney campaign will cite the uptick in the unemployment rate as bad news. Last month, Republicans accused the Obama Administration of tweaking the Unemployment Rate as a political ploy prior to the election. This month, it will be interesting to see how quick those same Republicans are to accept the BLS figures and the uptick in the rate as accurate.
The truth will set you free. Unless, that is, you're a Republican and the subject is taxes. As the New York Times reported on Thursday, "The Congressional Research Service has withdrawn an economic report that found no correlation between top tax rates and economic growth, a central tenet of conservative economy theory, after Senate Republicans raised concerns about the paper's findings and wording."
Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%.
There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.
However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.
As the Times reported, Republicans claim to have been irked by the report's use of such terms as "Bush tax cuts" and "tax cuts for the rich." Their real problem, of course, is with the truth.
Now, Republicans have warned for decades that that increasing tax rates on so-called "job creators" will hurt employment and slow economic growth. As it turns out, the economy grew faster and produced more jobs when upper-income tax rates were higher--even much higher--than today.
That record prompted David Leonhardt of the New York Times to ask two years "Why should we believe that extending the Bush tax cuts will provide a big lift to growth?" His answer was unambiguous:
So Mitt Romney has decided to end his presidential campaign the same way he started it. That is, by lying. During what his aides touted as a "major address" in Iowa Friday, Governor Romney charged that while President Obama "inherited a troubled economy," he "made the problem worse." That's the same long-debunked myth Romney used in his June 2, 2011 speech formally announcing his candidacy when he declared Obama "When he took office, the economy was in recession, and he made it worse, and he made it last longer."
But while Romney was pummeled by fact checkers last year as soon as the words first left his lips (prompting Mitt to hilariously claim for 24 hours "I didn't say things are worse; what I said was the economy hasn't turned around"), the "Obama made it worse" fraud has remained the centerpiece of his campaign. Unfortunately for Romney, the facts and the overwhelming consensus of economists - including the nonpartisan Congressional Budget Office and John McCain's 2008 brain trust - flatly contradict Mitt's closing argument. Instead, the numbers show and the experts confirm that President Obama saved the American free-enterprise system from the abyss and averted Great Depression 2.0.
Sadly for Romney and his Republican allies, history did not begin on January 20, 2009. And the data show that President Obama didn't inherit a "troubled economy," but one literally on the brink of collapse. Obama entered office in 2009 as the Bush recession was in full swing. GDP had plummeted by a shocking 8.9 percent the previous quarter. 820,000 jobs were lost in January 2009 alone; all told 2.2 million evaporated in the three months before Obama's stimulus was passed that February. (That might explain why more than three years after he left office, Americans still blame George W. Bush for the economic calamity he bequeathed to Barack Obama.) Now, even with the difficult recovery, the U.S. has produced over 30 consecutive months of private sector job gains and a return to economic growth. And despite Romney's charge that President Obama's are "the most anti-investment, anti-business, anti-jobs series of polices in modern American history," the Dow Jones has jumped by 68 percent since January 20, 2009. Corporate profits are at record highs even as firms' tax burden continues to drop.
Nevertheless, Governor Romney charged in June that the President "slowed the recovery and harmed our economy," a result he called "a moral failure of tragic proportions." Sadly for his campaign's mythmaking, just 24 hours earlier, the director of the nonpartisan Congressional Budget Office blew Romney's bogus claim out of the water.
