Brad DeLong and FireDogLake are both highlighting an exchange between Robert Kuttner and President Obama yesterday that is worth echoing far and wide... but only if you are interested in a thoughtful and nuanced look at the economic policy challenges faced by the United States right now.
ROBERT KUTTNER: You know, most of the things that have been proposed today cost money, and there is this concern about the federal deficit. I hope that your administration will recognize, as I know you will, that it's possible, first of all, to reduce the deficit over time and sometimes in the short run realize that you need to increase the deficit. And I hope the concern about the deficit in the long run doesn't crowd out the need for additional spending in the short run. And I also think that some of these programs that increase jobs and increase GDP are probably the fastest way to get the economy back on a track that will reduce the deficit over time. It's certainly a better way to reduce the deficit than putting ourselves into a -- into a debtor's prison and assume we can deflate our way to recovery.
BARACK OBAMA: Well, I think this is an important point. You know, we've been talking a lot about specific initiatives. There is a macroeconomic element to this whole thing. And so let me just amplify what was just said.
We have a structural deficit that is real and growing, apart from the financial crisis. We inherited it. We're spending about 23 percent of GDP and we take in 18 percent of GDP and that gap is growing because health care costs, Medicare and Medicaid in particular, are growing. And we've got to do something about that.
You then layer on top of that the huge loss of tax revenue as a consequence of the financial crisis and the greater demands for unemployment insurance and so forth. That's another layer. Probably the smallest layer is actually what we did in terms of the Recovery Act. I mean, I think there's a misperception out there that somehow the Recovery Act caused these deficits.
No, I mean, we had -- we've got a 9-point-something trillion-dollar deficit, maybe a trillion dollars of it can be attributed to both the Recovery Act as well as the cleanup work that we had to do in terms of the banks. In turns out actually TARP, as wildly unpopular as it has been, has been much cheaper than any of us anticipated.
So that's not what's contributing to the deficit. We've got a long-term structural deficit that is primarily being driven by health care costs, and our long-term entitlement programs. All right? So that's the baseline.
Now, if we can't grow our economy, then it is going to be that much harder for us to reduce the deficit. The single most important thing we could do right now for deficit reduction is to spark strong economic growth, which means that people who've got jobs are paying taxes and businesses that are making profits have taxes -- are paying taxes. That's the most important thing we can do.
We understand that in this administration. That's not always the dialogue that's going on out there in public and we're going to have to do a better job of educating the public on that.
The last thing we would want to do in the midst of what is a weak recovery is us to essentially take more money out of the system either by raising taxes or by drastically slashing spending. And frankly, because state and local governments generally don't have the capacity to engage in deficit spending, some of that obligation falls on the federal government.
Having said that, what is also true is that unless businesses and global capital markets have some sense that we've got a plan, medium and long term, to get the deficit down, it's hard for us to be credible, and that also could be counterproductive. So we've got about as difficult a economic play as is possible, which is to press the accelerator in terms of job growth, but then know when to apply the brakes in the out-years and do that credibly. And you know, we are trying to strike that balance, but we're going to need help from all of you who oftentimes are more credible than politicians in delivering that message.
Because we want to leverage whatever public dollars are spent, and we are under no illusion that somehow the federal government can spend its way out of this recession. But it is absolutely true that any of the ideas that have been -- been mentioned here are still going to require some public dollars, and those are actually good investments to make right now.
Like many Salon readers, I feel a great deal of anxiety about where the U.S. is headed, and there have been many disappointments in this first year of the Obama presidency. But I really can't think of anything I'd rather have confronting our challenges than the guy who spoke the words above yesterday.
A tweet from Mark Horowitz links to a New York Times story about the implications of the Comcast NBC deal for the future of online TV with a dismissive comment: "Anyone who still owns a TV or pays for cable is either an idiot... or is over 30."
Readers who recall my rant about Heidi Klum, Victoria's Secret, and the Black-Eyed Peas yesterday will understand that I am somewhat sympathetic to this view. But Mr. Horowitz seems to have only digested the beginning of the Times story, with its amusing anecdote about the daughter of a Disney exec questioning the necessity of having a TV in her college dorm room.
As she prepared her daughter for college, Anne Sweeney insisted that a television be among the dorm room accessories.
"Mom, you don't understand. I don't need it," her 19-year-old responded, saying she could watch whatever she wanted on her computer, at no charge.
That flustered Ms. Sweeney, who happens to be the president of the Disney-ABC Television Group.
"You're going to have a television if I have to nail it to your wall," she told her daughter, according to comments she made at a Reuters event this week. "You have to have one."
As evidence of a generational clash between old media mores and new, the anecdote is perfect. But the bulk of Brian Stelter's excellent Times article concerns how Comcast is determined to prevent the watch-whatever-you-want-free future. And unlike newspapers that are powerless to stop the proliferation of news on the Internet, massive cable companies that control broadband access to the Net for millions of Americans actually can affect the variety of options available to entertainment consumers.
Comcast and other operators are busy creating so-called authentication systems that will allow subscribers to stream a buffet of shows -- but will lock out people who do not pay for cable.
"Hollywood needs a toll collector," said Todd Dagres of the venture capital firm Spark Capital, and "Comcast can play the part because online video will erode traditional cable."
Sure, NBC's Hulu is awesome -- but now Comcast is set to own Hulu. And free television online is not part of Comcast's business model. And Comcast is how 16 million American households connect to the Internet.
As always, I am skeptical of efforts by entertainment companies and other owners of intellectual property to effectively control their content now that the Internet's Pandora's box has been opened. But if there is anyone who can make a go of it, it's the cable and telecom companies who own the communications infrastructure. There are only a handful of them, and they have real power.
Before the Bureau of Labor Statistics released the non-farm payroll report for November this morning, you didn't have to look hard to find headlines like "Jobs Report Has Market On Edge." In part this was due to a not very encouraging private sector labor report released on Wednesday, but the anxiety also had its roots in a mysterious comment made by White House Press Secretary Robert Gibbs on Thursday.
"One payroll estimate came out ... yesterday and it seemed to suggest that [the unemployment rate] might tick upward."
At Capital Gains and Games Pete Davis offered some context for this remark.
Every year or so, at the request of clients, I talk to Administration officials about when they receive advance economic data. The uniform answer is that the Fed Chair and the Chair of the Council of Economic Advisers receive the data at 5 p.m. the night before and that the CEA Chair writes a short memo to the President and a few senior officials, which is conveyed between 5:30 p.m. and 7 p.m. depending upon what else is going on. A few key congressional staff get briefed a few minutes ahead of the 8:30 a.m. release, but they are sequestered with no means of communication until then.
Gibbs is far too professional a communicator to make an off-hand comment like that without being prompted. My guess is that White House National Economic Council Director Larry Summers put him up to it with the President's assent and that this was done without knowing the unemployment number in advance. They suspect tomorrow morning's number will be higher, and they want to diminish the political impact. If they're wrong, it won't hurt them.
I'm not sure that I fully understand Davis' post. On the one hand he suggests the president had been given a heads up on the new numbers, but on the other he says that the directive to Gibbs was made "without knowing the unemployment number in advance." But whichever is true, the White House ended up seeming just as flat-footed as the consensus expectation of Wall Street analysts.
But back to the report. The top-line numbers, 10 percent unemployment, only 11,000 jobs lost, immediately goosed the stock market. But inside the numbers the news was also pretty good. The U-6 number, which measures workers who have stopped looking for work or are involuntarily part-time, dropped from 17.5 to 17.2 percent. Hours worked per week rose, suggesting that employers may soon feel pressure to hire new workers. Temp work took a big jump upward, another very positive sign suggesting economic recovery.
The main reason for caution? The monthly non-farm labor report is subject to extreme revisions in the months ahead. In this report, the BLS trimmed job losses for September and October by a significant margin: September's 263,000 number dropped to 139,000 and October's 190,000 fell to 111,000. So it is altogether possible that this month's 11,000 drop could turn out to be much worse later on.
Optimistic labor market analysts were predicting that the U.S. economy would shed at least another 100,000 jobs in November. The actual number, according to the Bureau of Labor statistics? A mere 11,000. The unemployment rate even fell, from 10.2 to 10 percent.
The numbers are a big surprise. As the BLS notes, "in the prior 3 months, payroll job losses had averaged 135,000 a month." But even such a negligible loss represents the 23 straight month in which the labor market contracted, which hasn't happened since the 1930s, so the champagne should stay in the fridge. I'll have much more analysis in a follow-up post. But for now, this is by far the best news on unemployment we've seen all year, and it raises the very real possibility that the economy could start to add jobs in December.
If all goes as planned, Comcast, the nation's largest cable network, will buy NBC Universal from GE. The new entity will be a bigger entertainment/distribution monster than Disney, News Corp. or Time Warner. That sound you hear is the final nail getting hammered into the coffin containing the corpse of the traditional broadcast network's cultural primacy.
And none too soon! A few months back, after noticing my children's primary interface with the media universe was through their computers, I canceled cable in a fit of puritanical economizing. But not too long afterwards, desperate to watch SEC football on CBS, I bought a cheap digital converter box so I could get over-the-air broadcasts.
Since then, I've felt like a time traveler/cultural anthropologist exploring the bizarre constraints of an artificially shrunken entertainment landscape. The world is a different, simpler place when there are only a handful of channels to choose from. For one thing, I suddenly encountered a stunning shortage of political pundits yapping with faux outrage over whatever's going on in Washington. This has been a balm and a blessing.
There's also much less stress, none of that "500 channels and nothing's on but I'm going to keep clicking until I find something" anxiety. Instead, on those rare occasions when I collapse back on the couch, I flip between the meager available options in just a few seconds and settle on the least objectionable affront to my sanity. I am reminded of being a child curled up in front of my Dad's brand new color TV on Friday nights 40 years ago, watching, along with another 30 or 40 million Americans, "The Brady Bunch" and "The Partridge Family." Hey! It's not as if we had a choice.
But the most obvious realization to be gained from this experiment is a visceral sense of how pathetic the fare offered by traditional broadcast media has become. Because nothing else could explain the one-hour Monday Night prime time special that I found myself returning to earlier this week, again and again, in awe at its sheer horrifying exploding car-crash awfulness: Heidi Klum presents the Victoria's Secret Fashion Show with the Black-Eyed Peas.
As the photographer introducing one of the models said happily: "And she's got REALLY BIG BREASTS!" I am not easily shocked -- but when I learned that CBS has been broadcasting this soft-core/advertorial for seven years I realized that I just hadn't been paying close enough attention to how the double whammy of cable television and the Internet had flat-out obliterated the gate-keeping primacy of the old broadcast networks. I mean, I knew this was true. But I didn't feel it in my gut, because I never stayed around long enough in the network ghetto before flipping away.
Which brings us back to Comcast. With delightfully oxymoronic phrasing, the Wall Street Journal tells us that analysts "hailed the agreement as a deal to form a new generation of media and entertainment conglomerate that can bolster its cable business and thrive amid the dizzying pace of technological change in communications wrought by the Internet, which has mired the industry in a painful slowdown."
Did you catch that part about the dizzying pace leading to a painful slowdown? If you aren't queasy yet, throw Heidi Klum, the Black-Eyed Peas, and a dozen scantily clad models into the mix. Please god, get me to the Internet ASAP, where I can escape this madness!
But there's the rub. Cable and the Internet have expanded options. The immediate downside: the flagship networks have been reduced to such dire gambles as running Jay Leno every night for an hour in primetime or turning themselves into ongoing lingerie ads. Still, that's OK, because we have somewhere else to go. But when a Comcast buys an NBC Universal, acting in defense against the proliferation of consumer choice, the clear signal is that somehow, some way, the new masters of the universe will be looking for a way to make us pay.
For all those people who nod off whenever someone says the words "net neutrality" -- Comcast's ambition to control both the transmission methods and the content is exactly why we don't want the providers of Internet access to be able to charge customers according to what kinds of online services they consume. In this new configuration, it would be all too easy for Comcast to say that everything we own is free, but we'll charge you to get to Disney or TimeWarner or iTunes.
And the day that someone tries to charge me a fee to see Victoria's Secret models dancing to Boom Boom Pow is the day that everything gets turned off.
If we know a man by the enemies he keeps, then who is Ben Bernanke? His foes range across the political spectrum from left to right, and during his confirmation hearings today, few senators offered anything more than a lukewarm endorsement.
Vermont Independent Bernie Sanders has announced he will put a hold on Bernanke's nomination to a second term as chairman of the Federal Reserve, forcing Democratic leaders to round up 60 votes to ensure confirmation. Both Chris Dodd, the Democratic chairman of the Senate Banking Committee, and Richard Shelby, the ranking Republican, offered up laundry lists of criticism and complaints about his tenure. He will probably end up getting confirmed anyway, but he's unlikely to emerge from the Senate hearing room unscarred.
No one managed a more devastating critique than Jim Bunning, R-Ky., who stared Bernanke in the eye and said, "In short, you are the definition of a moral hazard." Ben Bernanke's tenure as Fed chairman, in other words, is a guaranteed get-out-of-jail-free card for reckless financial institutions, no matter how apocalyptic their mistakes.
Fans of Jim Bunning and Bernie Sanders do not often find common ground. Bunning is fond of labeling anything he doesn't like as "socialist." Bernie Sanders is the closest thing the U.S. Senate has to an actual living breathing socialist. The moral of this story is that there is a definite hazard to being the Federal Reserve chairman during a great economic disaster. No matter what happens, some of the blame will stick to you.
And some of it is no doubt deserved. As the inheritor of the Alan Greenspan legacy, Ben Bernanke continued his predecessor's policies, made no moves to clamp down on an out-of-control mortgage lending sector, underestimated the dangers posed to the overall economy by the subprime implosion, and was an integral player in the age of the great Wall Street bailout.
On the flip side, the vast majority of economists believe that once the enormity of the crisis became inescapably manifest, Bernanke moved forcefully and innovatively to flood the financial system with liquidity by any means necessary, and helped prevent, for now, a second Great Depression. That's kind of a big deal. Bernanke's faults and flaws notwithstanding, it is entirely possible that the world is very, very lucky that one of the most acclaimed academic specialists in understanding the first Great Depression was in a position to do something meaningful when all hell broke loose.
But of course no one can prove that Ben Bernanke saved us from the Great Depression. For better or worse, we live in the now, and the now includes 10 percent unemployment while bankers return to their pre-crash plutocrat status quo. People are angry, and politicians are expert at channeling that anger.
All the Senate grandstanding would carry considerably more resonance, however, if the Senate could find the guts to follow through on all of its tough talk and pass financial reform legislation with teeth. Instead of picking on Ben Bernanke, how about some action on regulating derivatives, breaking up too-big-to-fail institutions, and strengthening the power and efficacy of existing regulatory bodies? While the House passes bills, the Senate specializes in squelching or eviscerating them.
Ben Bernanke might be the definition of moral hazard, but the Senate is the definition of government failure.
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