This special midweek TWiA is the last one that will be found on this blog. We here at TWiA World Headquarters hope it's not inconvenient for our loyal readers, and hope that you'll stick with us (at both sites), but TWiA is moving over to http://jeff_mariotte.typepad.com/this_week_in_america/ , as of Friday's post.
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This Week in the Economy
As we've noted here so many times regular readers are probably sick of it, conservative economic ideas are really about the ideas, not the economics. Conservatives tend to have strong opinions about the role of government in people's lives, which is all well and good. But they try to formulate their economic theories around those opinions, rather than around what works, and that's not good.
These days, they're anti-debt (even though many of their policies, like repealing the Affordable Care Act (ACA) would increase the deficit and the debt). And they're seizing on a new report by the Congressional Budget Office (CBO) as evidence that the national debt is a huge problem, so the only solution is to cut spending.
The trouble with this is that the part they're really in favor of is cutting spending, because that's the way to make government less involved in our lives. And cutting spending is the real problem, not the debt. In their business lives, theoretically, conservatives understand what "investment" means. When you want to improve the balance sheet, sometimes you need to spend some money. Cutting spending now, to the degree sought by congressional Republicans, is asking for trouble.
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Ever since President Obama took office in January 2009, Republicans have been blaming him for the state of the economy. Obviously, he had very little influence over the pre-2009 economy, but then, many blame him for the federal government's slow response to 2005's Hurricane Katrina, too, so there's that.
But after he took office and started, with the help of a Democratic Congress, to push through his policies, the economy began to improve. We were in a very deep hole, so it took a long time to dig out. And there were roadblocks in the way, especially after the House fell into Republican hands and every meaningful attempt to create jobs was blocked. Still, although recovery was slower than it should have been, it has happened, and continues to. And now that the overall economy is in pretty good shape and Republicans can no longer point to slow job growth as an attack against the president (who hit a 50% approval rating this week), they're suddenly becoming populists and attacking the very income inequality that their preferred policies create and increase. And they're blaming it on the president.
That, frankly, is crazy talk (and one of the worst offenders is Heritage Foundation chief economist Stephen Moore, who we discussed last week, and who doubled down on his brand of crazy over the weekend. He's still wrong).
Danny Vinik explains why in the New Republic:
"The recovery has been slow compared to past recoveries but not compared to past recoveries after a financial crisis. By the latter comparison, this recovery is slightly above average—and it’s the envy of the developed world. Moore’s inflation trutherism is flat out wrong (such arguments should be disqualifying for any economist). And Americans are becoming more optimistic about the economy. The CBO’s newest report, released Monday, shows that our debt will only grow marginally over the next 10 years. Young Americans have dropped out of the labor force to bolster their resumes during the weak recovery. And, anyways, the fall in the labor force participation rate isn’t Obama’s fault.
"Expect to hear many of these arguments over the next few years. But they are all easily disproven. Americans are finally beginning to look at Obama’s economic agenda as a success. Boehner's argument and Moore’s article show how little ammunition the right has to combat the Democrats’ message."
Fortunately for Steve Moore's personal economy, he's not paid for being right, but for semi-convincingly misleading the public. Without the policies pursued by this president, the economy would be in considerably worse shape, and the income inequality gap Republican politicians have suddenly discovered would be far larger.
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Speaking of the Great Recession, new research debunks the myth that it was largely caused by "irresponsible lending to poor people," who couldn't pay the mortgages they'd committed to. In fact, "Zip codes that had large house price increases experienced significant changes in the composition of buyers, i.e. home buyers (mortgage applicants) had increasingly higher income than the average residents in an area. Poorer areas saw an expansion of credit mostly through the extensive margin, i.e. a larger numbers of mortgages originated, but at DTI levels in line with borrower income. When we break out the volume of mortgage origination from 2002 to 2006 by income deciles across the US population, we see that the distribution of mortgage debt is concentrated in middle and high income borrowers, not the poor. Middle and high income borrowers also contributed most significantly to the increase in defaults after 2007."
On a related note, black Americans suffered greater economic losses than white ones during the recession, and have been much slower to recover. The Washington Post has just done a series of articles on why middle-class blacks were hit so hard by the housing market. Hint: much of it has to do with predatory lending--but not to the poor.
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To no one's great surprise, the rich continue to do very well. According to the New York Times, "The share of total income (excluding capital gains) going to the top 1 percent remains above one-sixth, at 17.5 percent. By this measure, the concentration of income among the richest Americans remains at levels last seen nearly a century ago. ... After adjusting for inflation, the average income for the richest 1 percent (excluding capital gains) has risen from $871,100 in 2009 to $968,000 over 2012 and 2013. By contrast, for the remaining 99 percent, average incomes fell by a few dollars from $44,000 to $43,900. That is, so far all of the gains of the recovery have gone to the top 1 percent."
Many economists think 2015 is the year that stops being true, and only the vast majority of the gains will go to the top 1 percent.
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Speaker of the House John Boehner (R/OH) doesn't understand how the minimum wage works. You'd think there would be a minimal intelligence requirement to be two heartbeats from the presidency, but that's apparently not the case.
Side Note: Boehner seems to have trouble distinguishing like-sounding words, too. When told that his job was to legislate, he confused that with litigate. Nor is history his strong point--no link, because it was on TV, but we heard him call Israel "our longest ally." Since he's presumably not talking about physical dimensions, and means "the ally we've had for the longest time," then he's forgetting that France helped us fight the Revolutionary War, Great Britain stood strong besides us during WWII, etc. We've had allies since long before there was an Israel, Mr. Speaker.
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Economics is complicated when you get down into the nitty-gritty, but in the broad strokes, it's not that hard. You look at what works, and what doesn't--and in a sane society, you lean toward what works. We're going to have two years (at least) of an insane Congress, and we'd better hope the executive branch can limit the damage.
(Keep reading for more on health care, White House security, campaign finance, bears, and a side trip to Naboo, below he fold.)