The Ticker Quick Views on Politics, Economics and Finance
The Cypriot confiscation of insured deposits should teach the euro area a lesson: European Union-wide deposit insurance ultimately backed by the European Central Bank can't come too soon.
Cyprus, a small island nation in the Eastern Mediterranean that had become an offshore banking haven, is imposing a one-time levy on bank depositors to defray the cost of a coordinated European bailout. The details aren't settled and are still being negotiated by the Cypriot parliament. The initial plan was that all deposits of less than 100,000 euros ($129,330) would be hit with a 6.75 percent levy. Deposits above that would face a 9.9 percent cut. Depositors were to be given equity in banks and natural-gas bonds as compensation.READ MORE
In his pro-gay marriage op-ed last week, Republican Senator Rob Portman of Ohio repeated a common argument against the idea that the Supreme Court should find a constitutional right to gay marriage: "An expansive court ruling would run the risk of deepening divisions rather than resolving them."
This is exactly wrong. An expansive court ruling would settle the gay-marriage issue for good, eliminating the need for 20 years of state legislative fights that will be painful for gays and hugely politically damaging to the Republican Party.READ MORE
Newspapers, blogs and government agencies offer theories and explanations -- cold weather and something called the porcine circovirus are the leading candidates -- but so far no official has pointed with certainty to the village or villages, farm or farms, where thousands of pigs died.READ MORE
The Republicans get it. Or at least the members of the Republican National Committee team that produced the 100-page "Growth & Opportunity Project" do. The first quarter of the analysis, described in press reports as an "autopsy" of the party's failings in 2012, is devoted to the demographic tidal wave on the horizon. (The rest is largely concerned with campaign and political tactics.)
"America Looks Different" is the chapter head on Page 9. And the news bulletin, if a few years tardy, at least is not sugar-coated. "The nation's demographic changes add to the urgency of recognizing how precarious our position has become," the report states.READ MORE
Amid the global outrage over the European Union's plan to save Cyprus from bankruptcy by igniting a run on its banks (and perhaps, in the not-too-distant future, the banks of other European countries), it's worth taking a moment to reflect on what a horrible idea it was for Cyprus to join the euro area, and just how recent the move was.
Cyprus, long a bastion for money laundering and other offshore-banking abuses, switched its currency to the euro from the Cyprus pound in January 2008. A little more than five years later, the country already is taking a bailout. Cyprus has been an EU member since 2004.READ MORE
Richard Socarides frames his story about Republican Ohio Senator Rob Portman’s shift on same-sex marriage in terms of the senator’s "brave, gay son." It's fine to praise Will Portman for coming out to his father when he was 19, but I think it's more correct to congratulate him for fulfilling his obligation to do so.
My uncle, Francis Schwarze, also came out to his parents when he was 19, in -- this is still astounding to me -- 1963. He was a freshman at the University of Southern California, still living at home. He wasn’t caught, but came out of his own volition. As my mother put it to me, "He had become involved with someone and needed space to be gay."READ MORE
"Tax: A fee levied by a government on income, a product or an activity....The purpose of taxation is to finance government expenditure."READ MORE
Staging a performance of Shakespeare's "Henry IV, Part II" takes a lot of people and a lot of time. There are dozens of roles to fill. You need theater support staff. You need rehearsals. And performing the play takes, well, as long as it takes.
What struck two Princeton economists, William J. Baumol and William G. Bowen, was not that performing "Henry IV, Part II" requires all that time and effort, but that it has always been that way. Nearly a half-century ago, Baumol and Bowen observed that Shakespearean theater hasn't grown much more productive since the Bard of Avon directed operations himself.READ MORE
In my column this week, I point out that any meaningful reform of the U.S. tax system will require taking a hard look at the special benefits benefitting specific groups. If these so-called tax expenditures were counted as spending each year, they would exceed the cost of Medicare, or Social Security, or defense or all the discretionary domestic spending programs.
There are about $1.1 trillion of tax preferences, according to the latest figures compiled by the Congressional Committee on Taxation, with the most generous benefits going to investors. The lower rates on capital gains and dividends are worth $160.8 billion a year and the exclusion of capital gains taxes at death amounts to $42.8 billion.READ MORE
Senator Rob Portman of Ohio now supports same-sex marriage, saying his personal views were affected by his son’s coming out two years ago.
First of all, good for Rob Portman. If he’d reacted negatively when his son came out to him, he certainly would not have been the first opponent of gay rights to do so. It feels weird to compliment Portman for treating his own child with decency, but many parents of gays and lesbians fail on this front. Portman didn’t, and for that he deserves credit.READ MORE
Senator Rob Portman of Ohio, one of the most respected and comparatively moderate Republicans in Congress, has had a change of heart on same-sex marriage. The reason for Portman's change of heart is that his son is gay, and he wants his son to be happy. And happiness means the ability to get married, as straight couples can.
This is all to the good. But how many Republican elected officials will have to discover they have gay children for the party to relent on its unyielding position against same-sex marriage?READ MORE
Matthew C. Klein
What banks do -- sell short-term debt (like deposits) to fund long-term loans -- is inherently risky. In theory, shareholders bear this risk. In practice, much of it is dumped on citizens, even though they've no claim on the returns associated with the risk-taking.
The problem is that banks have too little capital to absorb losses without going bust. Even the new, stronger Basel III rules mandate a bare minimum ratio of bank equity to bank assets of just 3 percent. This means that a bank that loses more than 3 percent of its portfolio becomes insolvent.READ MORE
I'm a little depressed having to write about Representative Paul Ryan's budget proposal because there is so little merit to it. Matt Yglesias provides the best summary, but the gist of the budget is to cut taxes on the rich and offset that by raising taxes on the middle class and deeply cutting programs that the poor and middle class depend on, such as Medicaid, Pell grants and (eventually) Medicare. It is a document that would make life more difficult for non-rich Americans and widen income inequality in America.
(I can already hear the wounded Republicans shouting that I'm lying because Ryan's plan is too vague to be called a middle-class tax increase. Call me out on it. I dare you.)READ MORE
Last week I wrote that Social Security is the healthiest component of the U.S.’s retirement saving system and should therefore be expanded. This isn’t a popular position; liberals tend to prefer defined-benefit pensions from employers and conservatives defined-contribution accounts, such as 401(k)s and individual retirement accounts. But the reason Social Security works so well is that it lacks a fundamental problem that undermines the effectiveness of these other retirement vehicles.
Both defined-benefit pensions and defined-contribution accounts are based on a shared and problematic premise: It is possible to set aside x percent of today’s gross domestic product for retirement and generate retirement income from those savings that exceeds x percent of future GDP. This is to be achieved by investing retirement savings in assets that typically grow at a faster rate than the economy as a whole.READ MORE
It's well known that the U.S. is turning gray. It's less well known that the workforce is turning gray as well. The percentage of Americans who are 65 and older will rise from 13 percent in 2010 to 20 percent by 2030 -- and, if the recent trend continues, a growing share of those elderly Americans will carry on working past the normal retirement age.
In 1990, 11.8 percent of those 65 and older worked. In 2010 the figure was 17.4 percent. By 2020, the Bureau of Labor Statistics expects it to be 22.6 percent. The numbers are even more surprising for Americans older than 75. Less than 5 percent of them worked in 1990. In 2010, it was 7.4 percent. By 2020, according to the BLS, 10 percent of them will still be toiling away.READ MORE
Now that Xi Jinping officially holds the reins in Beijing, the world is asking this question: Can China’s new leader revamp an economy that may become the world’s largest during his 10-year term? Here’s an even better one: Will Beijing let him?
Much is being made of how quickly Xi is replacing Hu Jintao in China’s fastest formal transfer of power in more than a generation. Although it took Hu almost two years to get all top three positions -- president, Communist Party head and chairman of the military commission -- Xi has them right out of the gate. The sense is that Xi has been empowered to rebalance an economy that’s producing a dangerous gap between rich and poor.READ MORE
The new pope has taken the name Francis, which is being interpreted as a sign that he's a bit of a 76-year-old rebel. In my personal experience as a Francis, the name has been less associated with Francis of Assisi than with, well, just plain sissy.
In fact, the first thing Francis needs to know about his new name is that a lot of people will think he's a girl -- and maybe a not-very-smart one. The female version of the name is Frances, with an "e," but the distinction escapes many. Years ago, after writing a short piece on the Louisville Slugger baseball bat for Harper's, a reader questioned how much, ultimately, a woman like me could possibly know about baseball. I've received variations on that question on a host of other topics, as well, making me a little more conscious of, and vigilant about, sexism. In some readers' minds, I lose IQ points for being Francis.READ MORE
John Podesta, one of the most influential policy advisers in the Democratic Party, has leveled a blistering attack on President Barack Obama for his refusal to provide the legal rationale for drone strikes. The criticism is sure to rattle the White House and congressional Democrats.
“In refusing to release to Congress the rules and justification governing a program that has conducted nearly 400 unmanned drone strikes and killed at least three Americans in the past four years, President Obama is ignoring the system of checks and balances that has governed our country from its earliest days,” Podesta writes in an op-ed in the Washington Post. “In keeping this information from the American people, he is undermining the nation’s ability to be a leader on the world stage and is acting in opposition to the democratic principles we hold most important.”READ MORE
With Pope Francis, we have someone completely new, if not completely different.
There are many firsts: Cardinal Jorge Mario Bergoglio, the former archbishop of Buenos Aires, is the first non-European in modern times to become the bishop of Rome, the first South American, the first Jesuit and the first to take the name Francis, after the sainted shepherd of the poor from Assisi.READ MORE
Prime Minister Viktor Orban of Hungary seems to have a predilection for periodic antics that leave his neighbors in the European Union slack-jawed -- and nervous.
His latest -- and most serious -- attention-getting stunt took the form of a vote in the Parliament this week that essentially does away with the separation of powers, a basic building block of democratic governance. Orban's nationalist Fidesz party, which holds a two-thirds majority in the legislature, pushed through changes to the constitution that chip away at fundamental checks and balances and further consolidate the prime minister's power.READ MORE