Robert Reich
Europe’s austerity revolt
The message from France and Greece this weekend was clear. Will President Obama and Republicans listen?
Socialist Party candidate for the presidential election Francois Hollande delivers a speech during a meeting in Lorient, western France, Monday, April 23, 2012. (Credit: AP/David Vincent) Who’s an economy for? Voters in France and Greece have made it clear it’s not for the bond traders.
Referring to his own electoral woes, Prime Minister David Cameron wrote Monday in an article in the conservative Daily Telegraph: “When people think about the economy they don’t see it through the dry numbers of the deficit figures, trade balances or inflation forecasts — but instead the things that make the difference between a life that’s worth living and a daily grind that drags them down.”
Cameron, whose own economic policies have worsened the daily grind dragging down most Brits, may be sobered by what happened over the weekend in France and Greece – as well as his own poll numbers. Britain’s conservatives have been taking a beating.
In truth, the choice isn’t simply between budget-cutting austerity, on the one hand, and growth and jobs on the other.
It’s really a question of timing. And it’s the same issue on this side of the pond. If government slices spending too early, when unemployment is high and growth is slowing, it makes the debt situation far worse.
That’s because public spending is a critical component of total demand. If demand is already lagging, spending cuts further slow the economy – and thereby increase the size of the public debt relative to the size of the overall economy.
You end up with the worst of both worlds – a growing ratio of debt to the gross domestic product, coupled with high unemployment and a public that’s furious about losing safety nets when they’re most needed.
The proper sequence is for government to keep spending until jobs and growth are restored, and only then to take out the budget axe.
If Hollande’s new government pushes Angela Merkel in this direction, he’ll end up saving the euro and, ironically, the jobs of many conservative leaders throughout Europe – including Merkel and Cameron.
But he also has an important audience in the United States, where Republicans are trying to sell a toxic blend of trickle-down supply-side economics (tax cuts on the rich and on corporations) and austerity for everyone else (government spending cuts). That’s exactly the opposite of what’s needed now.
Yes, America has a long-term budget deficit that’s scary. So does Europe. But the first priority in America and in Europe must be growth and jobs. That means rejecting austerity economics for now, while at the same time demanding that corporations and the rich pay their fair share of the cost of keeping everyone else afloat.
President Obama and the Democrats should set a clear trigger — say, 6 percent unemployment and two quarters of growth greater than 3 percent — before whacking the budget deficit.
And they should set that trigger now, during the election, so the public can give them a mandate on Election Day to delay the “sequestration” cuts (now scheduled to begin next year) until that trigger is met.
Obama’s recovery challenge
The dismal jobs report proves the economy has stalled. The president needs to push back against GOP austerity
President Barack Obama turns as he finishes speaking at a celebration of Cinco de Mayo in the Rose Garden of the White House in Washington, Thursday, May 3, 2012. (AP Photo/Carolyn Kaster) (Credit: AP) The economy has stalled.
Friday’s jobs report for April was even more disappointing than March. Employers added only 115,000 new jobs, down from March’s number (the Bureau of Labor Statistics revised the March number upward to 154,000, but that’s still abysmal relative to what’s needed). We need well over 250,000 new jobs per month in order to begin to whittle down the vast number of jobs lost in the Great Recession. At least 125,000 new jobs are necessary each month just to keep up with an expanding population of working-age people.
Continue Reading CloseBehind our stalled recovery
The GOP's austerity obsession is responsible for the nation's economic slowdown
Rep. Paul Ryan, R-Wis.(Credit: AP Photo/Charles Dharapak) We’ll know more on Friday when the jobs report is announced, but Thursday’s report on America’s massive service sector – which make up about 90 percent of the economy – is sobering to say the least.
The Institute of Supply Management’s non-manufacturing index fell to a four-month low in April (53.5, down from 56 in March – still positive territory but just barely). New orders dropped to their lowest level in six months.
That doesn’t bode well, especially when combined with other recent data. The Commerce Department reports that the economy as a whole has slowed from the last quarter of 2011 when it was expanding at an annual rate of 3 percent, to 2.2 percent for the first quarter of this year. And last month’s unemployment report showing only 120,000 new jobs in March was downright alarming.
Continue Reading CloseA big day for the 1%
America's wealthiest made a killing on Wall Street today -- at the expense of the nation's under-employed workforce
Traders work on the floor of the New York Stock Exchange Tuesday, Feb. 28, 2012. World stock markets fell Thursday March 29, 2012 as signs of weakness in the world's two biggest economies kept investors at bay. (AP Photo/Richard Drew) (Credit: AP Photo/Richard Drew) The Dow Jones Industrial Average hit 13,338 Tuesday, it’s highest since December, 2007. The S&P 500 added 16 points. Wall Street will remember May 1 as a great day.
But most of these gains are going to the richest 10 percent of Americans who own 90 percent of the shares traded on Wall Street. And the lion’s share of the gains are going to the wealthiest 1 percent.
Shares are up because corporate profits are up, and profits are up largely because companies have figured out how to do more with less.
Continue Reading CloseDemographic suicide
Why Republicans can't stop alienating Hispanics, women and young people
In this April 10, 2012 photo, Republican presidential candidate, former Massachusetts Gov. Mitt Romney speaks in Wilmington, Del.(Credit: AP Photo/Evan Vucci) What are the three demographic groups whose electoral impact is growing fastest? Hispanics, women and young people. Who are Republicans pissing off the most? Latinos, women, and young people.
It’s almost as if the GOP can’t help itself.
Start with Hispanic voters, whose electoral heft keeps growing as they comprise an ever-larger portion of the electorate. Hispanics now favor President Obama over Romney by more than two to one, according to a recent Pew poll.
Continue Reading CloseEurope’s austerity recession
Budget cuts have plunged the EU economy back into crisis, and America should pay attention
German Chancellor Angela Merkel(Credit: AP Photo/Markus Schreiber) Europe is in recession.
Britain’s Office for National Statistics confirmed on Wednesday that in the first quarter of this year Britain’s economy shrank .2 percent, after having contracted .3 percent in the fourth quarter of 2011. (Officially, two quarters of shrinkage equal a recession.) On Monday, Spain officially fell into recession for the second time in three years. Portugal, Italy and Greece are already basket cases, and it seems highly likely France and Germany are also contracting.
Why should we care? Because a recession in the world’s third-largest economy (Britain), combined with the current slowdown in the world’s second-largest (China), spells trouble for the world’s largest.
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