James Pethokoukis

Politics and policy from inside Washington

The Obama Misery Index

Apr 29, 2011 19:45 UTC

The Misery Index (inflation plus unemployment) through March was 11.48 percent (2.68 percent, 8.8 percent). By comparison, it was 10.52 percent in 1992 when Bill Clinton handily beat George Bush.  (It was nearly 21 percent in 1980 when Ronald Reagan crushed Jimmy Carter.) In fact, it has not been double digits for an entire year since Bush I’s first term. This goes along way in explaining why trust in Obama’s handling of the economy has collapsed. And a new Gallup Poll finds that Americans prefer the GOP budget approach to that of Democrats by 48 percent to 36 percent.

Also keep in mind how rising gas and food prices are eating into incomes. Real disposable income (personal income after taxes and adjusted for inflation) increased only 0.1% after being flat in February.






The Misery Index (inflation plus unemployment) through March was 11.48 percent (2.68 percent, 8.8 percent). By comparison, it was 10.52 percent in 1992 when Bill Clinton handily beat George Bush.


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Obama’s approval ratings on economy are plunging

Apr 28, 2011 16:37 UTC

This new Marist poll has to rings some alarm bells in the White House (and  keep in mind this tracks registered voters):


Minus 17! The sooner Obama is gone evidently the better. But who’ll replace him? The GOP better get crackin’.

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Bernanke’s star turn may not win over Fed critics

Apr 27, 2011 20:33 UTC

By James Pethokoukis
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

WASHINGTON — The curtain finally went up on Ben Bernanke’s one-man show, “Banker-Man: Turn Off the Snark.” It was full of high drama. Just one flubbed line by the embattled star could have sent markets heading for the exits. And although the performance was impressive, Bernanke will need a long-running hit to make taking to the stage pay off.

Such theatrics are common in Europe, but the hour-long televised press conference by the central bank chief was a first for America. The press corps was so eager and twitchy before showtime that a cup of water placed on the lectern triggered the furious firing of camera shutters.

Bernanke entered stage left — costumed in a red-patterned tie — promptly at 2:15 p.m. and took a seat center stage. Act One pretty much stuck to the script, reiterating the day’s statement from the Federal Open Market Committee with some added economic projections.

But Act Two, the audience participation part of the show, was a little more entertaining. Bernanke was pushed to talk about the dollar’s level, reluctant territory for the world’s foremost economic actor. And attendees pressed him on the Fed’s role in higher commodity prices. Bernanke’s improvisational skills were limited. He pointed to the classics of supply and demand. But he provided some helpful notes on Fed statement phraseology, including explanations of how they are sometimes “purposely vague.”

In the end, it was a bit like “Waiting for Godot.” The excitement never arrived. Though he made QE3 seem less likely, Bernanke neither rattled nor reassured investors. But he also left Washington’s political status quo in place.

His denial of guilt in rising headline inflation is sure to further infuriate Republican critics, while Democratic ones will continue to believe he places far too high a priority on controlling prices rather than creating jobs. Indeed, Bernanke artfully dodged a question about just what he considered to be strong employment growth. Will the public now view the Fed as more open? Probably, but phrases like “mandate-consistent levels” won’t play well in the cheap seats.

Most shows need previews to work out the kinks. Wednesday’s debut will be a good rehearsal for Bernanke’s soliloquy when the Fed finally decides to change its policy. That’s when the real reviews will come in.


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Why liberals owe Reagan a huge apology

Apr 27, 2011 02:29 UTC

It’s the ur-talking point for modern liberals: The 30-year, free-market tilt of U.S. economic policy has been a failure. Tax cuts failed. Deregulation failed. Free trade failed. President Ronald Reagan failed.

Their so-called evidence: U.S. incomes and the American standard of living have been flat for a generation. The rich got richer, the poor got poorer.

Except they didn’t. The rich did richer, but so did everyone else, it seems. That moldy, left-wing talking point is based on a very narrow estimate of income – one that does not take into account household size, taxes or benefits. When you make that adjustment, a very different picture emerges. This chart displays the findings of economists Dr. Richard V. Burkhauser of Cornell University, Dr. Jeff Larrimore of the Joint Committee on Taxation and Dr. Kosali Simon of Indiana University:


Instead of the income of the average American being flat (+3.2 percent) from 1979-2007, it actually rose 37 percent. And all quintiles scored gains. Here’s what one of the economists told The Daily Caller:

The bottom line is [conventional wisdom] asks what’s been happening to private personal income over time and they are right if you look at that for tax units, things do not look very good for the middle class. … But if you take other things into account, the reason the country has not gotten in a civil war is because things are not that bad. In fact everybody has done better. … This isn’t a zero sum game, where one group wins at the expense of others. The growth in productivity of Americans in the top twenty percent of tax units increased the size of the economic pie sufficiently to register major gains across the entire distribution of after-tax income.

Also, let me refer to something I wrote awhile back:

From another vantage point, a study by the Federal Reserve Bank of Minneapolis finds that wages for the median worker went up by 20 percent between 1975 and 2005. What’s more, critics of the economy tend to ignore benefits when figuring how well or poorly workers are being paid. By that measure, according to the Fed bank, total compensation has gone up by 28 percent. Apparently up is the new flat.

If the standard of living of the average American really had not improved for more than three decades, wouldn’t there have been a tremendous political backlash by now? Wouldn’t the Democratic Party have fully mutated into a full-scale social democratic party—nationalized healthcare, a return to superhigh tax rates—rather than moving right over the past three decades? Would centrist or right-wing candidates have won six of the past seven elections? I think not.

I wonder if this new study were to be recalculated with better inflation estimates, what the numbers might be.

And consider this: Back in 1979, American elites from Wall Street to Washington to Hollywood were convinced America’s best days were behind it and the start of a long decline was in full swing. If they had been shown this new data, they would have thought it described a fantastically optimistic scenario. Keep that in mind when you hear predictions that the 21st Century will be something other than the American Century. With the right free-market policies that enable entrepreneurial capitalism, America can continue to have the Indispensable Economy.


Posted by juboy111 :

1) Huh?

2) Did you even read this article?

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Downside risks to a Ryan presidential run

Apr 26, 2011 18:17 UTC

Some excellent points by AllahPundit:

Would he be a unifying, consensus figure? He voted for TARP, the tax on AIG bonuses, and the auto bailout. Some would forgive him for that given his leadership on the 2012 budget, but some — like the libertarian wing — wouldn’t. Meanwhile, Democrats are planning to use his budget proposal to drive a wedge within the party by forcing a vote in the Senate and making centrist Republicans choke on the Medicare and tax provisions. Collins has already said she opposes his program; doubtless there are others. Imagine a presidential campaign where the candidate’s signature piece of legislation is hit with attack ads showcasing opposition from the moderates in his own party.

Like it or not, he’d be a huge risk with seniors given the left’s nascent “Mediscare” campaign against him. In 18 months, for many low-information voters, he’ll be the grinch who wants to take away grandma’s heart medicine to save a few pennies. In fact, Democrats are so giddy about their demagogic opportunities that they think they might be able to target his House seat, never mind a presidential bid. Ryan could and would undo some of that damage on the stump simply through argumentation and personal charm, but he wouldn’t undo all of it. I think the appeal of him running lies mainly in the fact that, given how closely identified he is already with entitlement reform, if he were viable as a potential nominee then that would necessarily mean the public is open to serious action on deficit reduction — which is a glorious thought. Are they? Maybe a little, but how about after another year and a half of bareknuckle scare tactics?

As a gloss on this, read Robert Samuelson’s indictment of the “adult in the room”who somehow never manages to act in a remotely adult fashion when it comes to the country’s long-term fiscal challenges. That’s actually the best argument for a Ryan run — although he’d be a longshot to win, it’d give him six solid months in the general election to expose Obama as a fraud on deficit reduction and hopefully pressure him into ass-saving fiscal action.



At any rate, whoever wins the actual presidential office will find that they will be the last supreme leader of the world. According to the IMF, America will drop to #2
in 2016.

http://www.marketwatch.com/story/imf-bom bshell-age-of-america-about-to-end-2011- 04-25?link=MW_home_latest_news
April 25, 2011
IMF bombshell: Age of America Nears End
Commentary: China’s economy will surpass the U.S. in 2016
By Brett Arends, MarketWatch

“China’s economy will be the world’s largest within five years or so.

“(Most people are)miscounting. They’re only comparing the gross domestic products of the two countries using current exchange rates. That’s a largely meaningless comparison in real terms.

In addition to comparing the two countries based on exchange rates, the IMF analysis (as posted on their web site) …looked to the true, real-terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.

Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.

Just 10 years ago, the U.S. economy was three times the size of China’s.

The actual date when China surpasses the U.S. might come even earlier than the IMF predicts, or somewhat later. If the great Chinese juggernaut blows a tire, as a growing number fear it might, it could even delay things by several years. But the outcome is scarcely in doubt. “

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Why Paul Ryan could enter the 2012 presidential race

Apr 26, 2011 16:43 UTC

It’s not just Bill Kristol, gang. There’s desire at the highest ranks of the Republican Party, according to my reporting and sources, to see House Budget Chairman Paul Ryan seek the 2012 presidential nomination. Here’s why:

1) Since Democrats are determined to hang Ryan’s bold “Path to Prosperity” budget plan around the neck of every Republican running for office in 2012,  why not have its author and best salesman advocate for it directly vs. President Obama?

2) Ryan — to borrow a favorite Simon Cowell phrase — is “current.” He’s smack in the middle of budgetary and ideological clash between Democrats and Republicans and would immediately energize conservative and Tea Party activists.

3) Ryan is a strong national defense conservative, as well as pro-life.

4) Ryan is from a battleground state, Wisconsin, and a battleground region, the upper Great Lakes.

5) Ryan’s youth, vigor, likability and Jimmy Stewart persona — well, a wonky version of George Bailey — would be an immediate shorthand signal to voters that he’s a different kind of Republican. He also has a compelling life story to tell.

6) Obama suddenly and unexpectedly to Washington insiders looks beatable — by the right candidate.

The counter-argument here, of course, is that Ryan a) has repeatedly ruled out a 2012 run for family reasons (small kids) and b) may instead run for U.S. Senate in 2012. He also just turned 41 and may not want to go all in so quickly, especially against an incumbent president expected to try and raise $1 billion for re-election. But if Mitt Romney, Tim Pawlenty, Newt Gingrich — maybe Mitch Daniels, too — fail to catch fire, expect the pressure on Ryan to run to rise.


Well, if the economy continues to tank, the GOP could put up a farmyard animal and still win. But assuming it’s competitive, Paul Ryan would be a really bad candidate. I happen to agree with him on most things, and I think he knows lots of good stuff about how to cut the budget. But having seen him on TV a few times, he needs at least five years and a lot of media training to be ready for prime time. Among his most obvious faults are – he talks too fast, he explains complicated issues in long complicated sentences – ie he doesn’t have the gift of explaining complicated things in a simple way, he tries to answer the question rather than get his own talking points across making him a gift for a hostile interviewer (which will be about 98% of them), he gets distracted onto side issues, he distracts himself with subclauses. His manner is eager and puppyish and he totally lacks gravitas. Obama is in reality an empty suit, but he can play a man with gravitas quite well (though the act is beginning to grate pretty badly.) In short, Ryan would look like a clever eager likeable kid against Obama and would be eaten for breakfast. He should stay where he is, sort out the budget process, which certainly requires his cleverness and wonkishness, and come back and stand for President in his fifties when he’s acquired some gravitas. In the meantime, I suggest that the GOP doesn’t put up a farmyard animal just in case it is competitive. I don’t agree with Romney as much as I agree with Ryan (or Perry) but with a GOP Senate and House (which is what there will be if there’s a GOP President) Romney will do just fine. He’ll blow with the wind, and the wind will be coming from Ryan’s direction.

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Why the GOP shouldn’t cave on taxes

Apr 25, 2011 17:42 UTC

Let me start off by saying I have no doubt that Sen. Tom Coburn wants smaller government — much smaller government. But is giving more money to government — and hoping against precedent that Washington just doesn’t spend the new cash –  the best way of doing it? Here is a bit from his Meet the Press interview yesterday:

GREGORY: Let me stick with you on the point of contention, particularly with senators like you, Republicans, conservatives, and outside groups having to do with taxes. Could you support a deal here out of this Gang of Six on the budget that includes tax increases?

COBURN: Well, we’re not talking about it. I think if you go back and look at the commission’s report, what we were talking about is getting significant dynamic effects by taking away tax credits, lowering the tax rate and having an economic increase that will actually increase the revenues to the federal government. We’re not talking about raising tax rates at all. … So if there is a net effect of tax revenue, that would be fine with me. I experienced that during Reagan’s period in 1986.

Except that we’re not just talking about more revenue from economic growth. Coburn’s Gang of Six would reduce various tax breaks and loopholes so that taxpayers would be supplying more revenue to Washington.  Apparently Coburn believes this is a price that must be paid to get a debt reduction agreement with Democrats.

But what exactly would spending hawks get in return? Are Democrats offering to dump Obamacare or agree to a revamp of Medicare like the one proposed by Paul Ryan. Highly unlikely. If that were the case, Coburn would have a much stronger arguement. If not,  a better compromise might be lower defense spending in exchange for other cuts discretionary or mandatory spending.

And remember the context: The reason America is on an unsustainable fiscal track is that spending, not revenue, is moving away from the historical average.



Your evidence:

http://www.deptofnumbers.com/blog/2010/0 8/tax-revenue-as-a-fraction-of-gdp/

Tax rates and tax revenues are different animals.

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Station Identification: Who is James Pethokoukis?

Apr 22, 2011 17:41 UTC


What’s my story? I am the Money & Politics columnist for Reuters Breakingviews, the newish commentary wing of Reuters. I’m also an official CNBC Contributor, where they call me “Jimmy P.”

Previously, I was the business editor and economics columnist for U.S. News & World Report. I’ve also written for The New York Times, The Weekly Standard, Commentary, USA Today, and Investor’s Business Daily. In addition, I have appeared numerous times on MSNBC, Fox News Channel, Fox Business Network, The McLaughlin Group, CNN, and Nightly Business Report on PBS. I am a graduate of Northwestern University and the Medill School of Journalism. In addition — twist my arm and I might give you some deets — I am a 2002 Jeopardy! champion. I can be reached james.pethokoukis@thomsonreuters.com. Also, follow me on Twiiter @JimPethokoukis

(And this great Reuters photo is of supporters listening to President Barack Obama speak at a fundraiser at Soundstage 30 at Sony Picture Studios in Los Angeles, California, April 21, 2011.  Shot by Jim Young.)

Budget group: New Obama budget plan would fail, could cause tax trigger to be pulled

Apr 21, 2011 16:55 UTC

The bipartisan Committee for a Responsible Federal Budget has taken a crack at deciphering President Barack Obama’s murky new budget plan, called the “Framework for Shared Prosperity and Shared Fiscal Responsibility.” And its findings are devastating:

Using CBO rather than OMB numbers, we estimate that the plan is unlikely to result in a declining debt-to-GDP ratio, and would thus rely on the proposed “Debt Failsafe” to achieve further savings.

And that could mean higher taxes or additional spending cuts. As it is, the Obama Framework would save 40 percent less than the Ryan “Path to Prosperity.”  More:

The President’s Framework falls short of both he Fiscal Commission recommendations and those from the House Budget Committee, both of which would reduce the deficit by over $4 trillion and reduce the debt to below 69 percent of GDP by the end of the 10-year period. … Measured against CBO assumptions, it does not appear that the $2.5 trillion of deficit reduction in the President’s Framework would be sufficient to reduce the deficit to 2.5 percent of GDP in 2015 or 2 percent in 2020, as claimed. Using reasonable phase-in assumptions, we estimate that unless the debt failsafe is employed (as it would be in this circumstance), deficits would remain at or above 3 percent of GDP throughout the decade. As a result, debt would continue to slowly increase as a share of the economy, reaching 77 percent of GDP by 2021.


And here are the various debt trajectory paths:


And here is how the various plans compare on the details:


Just like in my analysis here and here, the CRFB found that the Ryan Plan cuts more debt than the Obama Plan. Also note that while  the White House said its plan relied just 25 percent on higher taxes (33 percent if you exclude interest), the CFRB found that it actually relies 30 percent on higher tax revenue (40 percent if you exclude interest.) And since the debt trigger would be pulled, even higher taxes would be possible, as well additional spending cuts.

Committee for a Responsible Federal BudgetCommittee for a Responsible Federal Budget

How about clawing back the trillions given illegally to Wall Street, before killing citizens to pay the “debt” ?

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Should Congress raise the debt ceiling? And for what price?

Apr 21, 2011 16:06 UTC

Conservatives have many flavors of views on this, as can be seen at an online symposium over at National Review Online. Here are two of the more interesting takes:

1) Pass it quickly, with conditions. This is the Doug Holtz-Eakin plan:

Conservatives should attach to the debt limit annual caps on total spending for the next ten years equal to those in the House-passed budget. There are other viable contenders ranging from alternative spending limits (such as those proposed by Senator Corker) to a balanced-budget amendment that limits taxes and spending (such as that of Senators Hatch, Cornyn, and Toomey). But the House has already agreed to the levels in the budget. If it passes those caps quickly, the onus will be on the Senate to pass a debt-limit increase and on the president to sign it. If either balks, the battle shifts from raising the debt limit to whether there should be spending restraint.

2)  First, make sure default is not an option. From Phil Kerpen:

To win the debt-ceiling showdown, the Republican House leadership must first do what all 47 Senate Republicans did when they voted for the Toomey-Vitter amendment …   also known as the Full Faith and Credit Act and championed in the House by Tom McClintock (R., Calif.) and Scott Garrett (R., N.J.), would take away from the administration the discretion to default on Treasury bonds. It would require bondholders and Social Security recipients to be paid first in the event the debt ceiling is reached. There is more than enough revenue on a cash-flow basis to take any default risk off the table.

Passing this legislation in the House — even though the Democrats already have stopped it in the Senate — would help educate the public that default is not at stake. … By passing the Toomey-Vitter bill, the House can gain real leverage to demand that the administration make deep cuts in spending and fundamental reforms like the Medicaid block grants at the heart of the Ryan budget — or face the daunting prospect not of default, but of operating the government on a cash-flow basis.


This administration would never default, despite the rhetoric. They would lose prestige in the eyes of those they love best. Congressman with enough spine should simply refuse to fund this obese goverment. Just say no.

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