Opinion

The Great Debate

It’s not the economy, stupid!

Tonight’s debate could be the most negative presidential debate ever. That’s because the best thing each candidate has going for him is negative opinion of the other guy.

This election was supposed to be a referendum on President Barack Obama. That’s what usually happens when an incumbent is running for re-election. Sometimes the incumbent is popular enough to win re-election (Ronald Reagan in 1984, Bill Clinton in 1996). Sometimes he’s not (Jimmy Carter in 1980, George H.W. Bush in 1992).

The biggest single factor determining the incumbent’s popularity is the economy: good in 1984 and 1996, terrible in 1980 and 1992. By that standard, Obama should be in deep trouble. That’s the big surprise this year. He’s not.

If Obama were running against himself this year, he would lose. But he’s running against Mitt Romney – and that is a race he can win.

He can win because Democrats have managed to frame the election as a choice – not a referendum. It’s not just “keep Obama or fire him”. It’s “keep Obama or hire Romney”. And the simple fact is, most voters don’t want to hire Romney.

This economy could be as good as it gets

A familiar refrain that was popular in the early 1990s is making a comeback during the great recession of 2008-2009, which has rocked the economy and labor market for more than five years: Is it possible that the children of this generation will not be as well-off as their parents? The labor market has been hobbled. The duration of unemployment has reached unprecedented levels, and it is now the case that unemployed workers in certain age groups face the prospect of never being employed again. If all of this sounds grim (and it is), consider the possibility that this may be as good as it gets.

It is true that the depth of the recession and the current sluggish recovery are much different than anything we have seen since the Great Depression. But rather than look at the current recession in comparison with previous U.S. recessions, consider its comparison with Europe. The events in Europe that sent crippling shockwaves through much of the world might be of such a magnitude that the current speed of the recovery is fast enough. The current downturn is unusual because it was triggered by a large common shock, rather than the idiosyncratic components that usually put individual countries into a recession. We don’t have a lot of experience with such shocks, so it may be useful to look across countries to see how others have fared.

The U.S. economy accounts for about 22 percent of world GDP; the European Union is about 25 percent. The figure below from Europeansnapshot.com compares the 2008 recession and recovery in the U.S. with those in the major economies of Europe. First note that the size of the contraction was much steeper in Germany, the UK and Italy, whose economies fell roughly 6 percent from their peak. In the U.S. it was more like 4 percent. But note as well that the recovery in the U.S. has been steady compared with these countries. All except Germany appear to be headed back into recession.

from Lawrence Summers:

Time nears for an American tax overhaul

However the U.S. presidential election turns out, the trifecta of the Bush tax cut expiration, the debt limit ceiling on the horizon once again, and the Congressionally mandated sequesters – cuts in domestic spending – will force the president and Congress to wrestle with fiscal issues either in a lame duck session after the election or in early 2013. The decisions they make will have profound impacts on America’s fiscal future.

For many observers, the central question on the table is about entitlement programs: What will be done with them? Growth in entitlement spending associated with our aging population and its rising health care costs is the major factor in overall federal spending growth. But the capacity of near-term policy changes to have large impacts on that spending is less than many would suppose. The rising ratio of retirees to workers means that Social Security benefits at current levels will not be sustainable without some kind of tax increase. Sooner or later, revenue will have to rise or else outlays will have to be curtailed. While it is surely better to act sooner, the reality is that, out of necessity, action on entitlements is inevitable.

While almost everyone agrees on the desirability of containing federal health care spending, this is likely to be more difficult than we'd like to believe. Certainly beneficiaries can bear more of the cost of their government insurance than others, and there are steps like malpractice reform and the further encouragement of preventive medicine that should be taken. Yet without intrusions into the private health care system that are unlikely to be politically acceptable, there are severe limits on what can be done. Otherwise the result will be unacceptable cuts in the availability of care for the clients of federal programs. Given all the uncertainties associated with new technologies, changing lifestyles, and ongoing changes in the private system, health care reform will and should be a continuing project.

from Africa News blog:

100 years and going strong; But has the ANC-led government done enough for its people?

By Isaac Esipisu

Although the role of political parties in Africa has changed dramatically since the sweeping reintroduction of multi-party politics in the early 1990s, Africa’s political parties remain deficient in many ways, particularly their organizational capacity, programmatic profiles and inner-party democracy.

The third wave of democratization that hit the shores of Africa 20 years ago has undoubtedly produced mixed results as regards to the democratic quality of the over 48 countries south of the Sahara. However, one finding can hardly be denied: the role of political parties has evidently changed dramatically.

Notwithstanding few exceptions such as Eritrea , Swaziland and Somalia , in almost all sub-Saharan countries, governments legally allow multi-party politics. This is in stark contrast to the single-party regimes and military oligarchies that prevailed before 1990.

The real cost of those Black Friday deals

By Caitlin Kelly
The opinions expressed are her own.

Americans shop. It’s what we do. It’s who we are. We’re still an economy powered by consumer spending – 70 percent of it, in fact. It’s an article of faith, for some, that annual Thanksgiving celebrations not only include turkey, stuffing and cranberry sauce, but lining up in the cold and dark at their favorite store to snag a Black Friday bargain.

Maybe not this year.

Spurred perhaps by the growing national strength of the Occupy Wall Street movement, two emboldened Target workers, Anthony Hardwick, of Omaha, NE and Seth Coleman, a dockworker from Northfield, MN have collected 180,000 signatures protesting their employer’s unprecedented decision to open their stores to shoppers at midnight. Coleman delivered a bag of signatures gathered on-line to Target headquarters in Minneapolis earlier this week.

Coleman will be working at the Target store in Northfield on Thanksgiving Day, from 4 a.m. to 10:45 a.m. Then he’ll return 12 hours later, to make sure the shelves are stocked for the company’s first ever midnight opening for the Christmas rush, reported Minnesota Public Radio.

The deludedly optimistic youth of America

By Chadwick Matlin
The opinions expressed are his own.

Friday was a slightly-better bad day to be a young person in America. The morning’s unemployment said 14 percent of Americans 20-24 years old are now unemployed, down 0.7 points from September. Teenagers’ rate was similarly down, dropping 0.5 points to 24.1 overall.

But still—14 and 24.1 percent! Well above the national average of 9 percent, which isn’t exactly something the Millennials can look forward to.

And yet young people remain stubbornly optimistic. In a comprehensive new survey of 842 young people that Demos, a New York think tank, released this week, almost 69 percent of Americans 18-34 years old “believe the American dream is still achievable.” In other news, the average student debt for new graduates is now $25,250, larger than ever. (To be fair, this isn’t entirely recession-related. My debt was around $100,000 when I graduated, and that was a year and a half before Lehman went belly-up.)

Washington’s long con

By Maureen Tkacik
The opinions expressed are her own.

There’s a scene in Ray Nagin’s Hurricane Katrina memoir from the Monday night after the storm in which twenty or thirty mysterious security guards, toting three guns apiece, suddenly descend upon the bombed out Hyatt city officials are using as a command center and commence measuring perimeters, laying down wires and barking orders. “We’re here to protect the mayor!” their apparent leader proclaims. “Everyone else leave!”

Nagin watches, “hallucination-like”, as his two preposterously outmanned bodyguards give the guards their best “Oh, hell no” glares, then politely asks the guards: “Who are you guys, and who sent you?” He has well-founded suspicions they are Blackwater mercenaries hired by the local business community, but the leader won’t divulge anything, so he and his staffers just keep asking the same questions of every guard they can corner, until the entire team suddenly vanishes en masse, “Ninja-like, as quickly and quietly as they arrived.”

Of the unnervingly frequent Bush Administration flashbacks I suffered reading Ron Suskind’s Confidence Men: Wall Street, Washington and the Education of a President, Nagin’s staredown of the elite hired guns is the one Obama never manages to repeat.

from Reuters Money:

Fury brewing at ratings agencies as markets gyrate

Carnival revellers are silhouetted as they carry a burning wooden wagon in Liestal, near Basel, February 21, 2010.  REUTERS/Michael BuholzerSo let me get this straight.

Ratings agencies helped spark the financial meltdown of 2008-9, when they deemed that steaming piles of mortgage junk were brimming with triple-A goodness. They were wrong – and epically so.

Now S&P downgrades the debt of the entire country, further threatens to do so another notch, teams with fellow ratings agencies to bring Europe to its knees with each new appraisal and gets an assist for wiping trillions in wealth from investors’ portfolios in just a few days.

Anyone else think the ratings agencies need a time out?

“If you had asked me a couple of years ago if they could do anything more destructive than the mortgage debacle, I would have said never,” says Roger Kirby, Of Counsel for New York City law firm Kirby McInerney, who is involved in a class action against Moody’s on behalf of shareholders. “But it seems they’re managing to do it again, right now. In order to restore their damaged reputations, they’re interjecting themselves unsolicited into sovereign markets.

from Reuters Money:

Retirement investors suffer as economy catches up to Wall Street

Retirement investors have struggled with a Jekyll and Hyde economy these past two years, where Dr. Jekyll lives very well on Wall Street while Mr. Hyde runs roughshod over a terrified Main Street.

On Main Street, the jobless rate tops 9 percent and 14 million residential mortgages are underwater – a figure Deutsche Bank thinks will hit 25 million, or 48 percent of all home loans, before the housing bust ends.

On Main Street, the economy hasn't respond to ultra-accommodative monetary policy. Near-zero interest rates don't matter because because there's so little demand for credit to hire people or to buy post-bubble real estate.

from James Saft:

Icelandic mulishness wins the day

Iceland's remarkable return to growth shows once again that in this crisis the best policy is often the one that will make international partners most angry.

Having been reviled and chastised when it refused to make good the outsize debts of its banks, Iceland this week capped a striking turnaround when it announced that its economy expanded by 1.2 percent in real terms in the most recent quarter, its first such rise in two years.

This is in stark contrast to Ireland, whose pliability and inability as a member of the euro zone to act unilaterally leaves it with a still crashing economy which must service ever more debt by making ever deeper cuts to public spending.

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