The Ticker Quick Views on Politics, Economics and Finance
(Corrects and updates events at Emory University in the 16th paragraph of this article published March 7.)
Remember when the campus Culture Wars ended? It was about 15 years ago, sometime after we learned that Paul de Man was a Nazi and Bill Bennett had blown the equivalent of the gross domestic product of Belize at a Vegas Keno parlor. As I remember it, a pact was forged atop the smoldering ruins of the Deke house at Dartmouth College. The radicals were allowed to keep their Afrikana Studies programs and Neo-Pagan safe zones, the conservatives to restock the library shelves with the works of Allan Bloom and unexpurgated copies of "The Adventures of Huckleberry Finn," and the nation's elite universities went back to producing engineers and bankers rather than papers with titles such as "Aspects of Iconicity in Some Indiana Hydronyms."READ MORE
You might have heard some people talking about women recently. Sheryl Sandberg's "Lean In: Women, Work, and the Will to Lead," part manifesto, part female empowerment movement, will be published next week. And Sandberg couldn't have hired a better press agent than Marissa Mayer, whose Yahoo! Inc. employees were told two weeks ago to get out of their pajamas and come to the office.
Women who opine about their experiences in the workforce often include a series of disclaimers. I'm rich, they say. I'm powerful and well-educated. I have 13 nannies, four houses and a bionic husband. These qualifications highlight the contradiction underlying all this talk: The women whose voices attract attention do not represent the wide swaths of society they hope to help. Those women are too busy getting jobs in the first place or caring for kids as single mothers to write books and articles. They must rely on the imperfect voices of the rich and powerful lest they have no voices at all.READ MORE
Margaret Carlson and Ramesh Ponnuru are Bloomberg View columnists.
Margaret: I don't like everything Senator Rand Paul said in his amazing filibuster last night and this morning against the nomination of John Brennan to be CIA director. But I love to death that he said it.READ MORE
Margaret Carlson and Ramesh Ponnuru are discussing Republican politics and policy.
Margaret: Until Jeb Bush's new book and his round of muddled interviews, I had vowed not to talk about 2016. People rightly hate us for writing about the next election while they’re still counting votes from the last.READ MORE
Below is the most distressing slide I saw at this week's National Association for Business Economics Conference, courtesy of the National Association of State Budget Officers:
From fiscal year 2003 through fiscal year 2012, state general fund budgets increased 34 percent, almost exactly in line with population growth and inflation. But that growth wasn't evenly shared across program areas.READ MORE
It was hard, in the week before the sequestration took effect, to avoid the ceaseless warnings and doom-filled prophecies coming from the White House. From the president to the lowliest Cabinet secretary, federal officials claimed the U.S. would see immediate and severe disruption to government operations.
Well, they were wrong. The sequestration won't be devastating. It will be slow, boring, and local. That's the message sent by the flurry of reports from federal agencies as they detail their plans to cope with their budget cuts under sequestration.READ MORE
This week, I received a pitch for a new book: "Sand in the Gears: How Public Policy Has Crippled American Manufacturing," by Andrew O. Smith. The press release cites the catastrophic, two-decade decline in manufacturing, attributable not only to globalization and cheap labor overseas but also to "misguided policies."
Without knowing exactly what public-policy remedies the author is advocating, my initial reaction was: Stop the presses! U.S. manufacturing is well along in its self-help program and is retooling with impressive results.READ MORE
Jim Pethokoukis of the American Enterprise Institute says not to think about Republican Representative Paul Ryan's budget proposals as actual budget proposals:
"I view Ryan’s previous plans more, ultimately, as fiscal education modules than actual budget blueprints. They highlight good ideas, such a Medicaid block granting and Medicare premium support, and suggest how those ideas might affect budgeting.
"The Ryan plans also quietly highlight challenges: Slow economic growth + (roughly) historical levels of tax revenues + a promise to spare retirees and near-retirees from Medicare changes = a long-road road to debt reduction + severe Medicaid cuts + severe discretionary spending cuts. My conclusion is that a) tax revenues and spending levels will in the future probably need to be above historical levels and the levels Ryan targets, b) we cannot settle for the level of GDP growth CBO forecasts, c) entitlement reform ASAP. Ryan has the right ideas — and certainly knows the need for faster growth — but implementation poses major political challenges."
This is roughly, circa 2011, how I used to write about Ryan's proposals. It's not how I write about them anymore, even though the substantive nature of my objections to his plans hasn't changed very much.
After helping keep the U.S. banking system afloat, is the Federal Reserve about to lose a fortune on its own bond purchases?
If you listen to opponents of Fed policy, you might think that the large expansion of its balance sheet -- from assets of less than $1 trillion in 2007 to more than $3 trillion today -- will result in it hemorrhaging money, draining the Treasury and disrupting monetary policy. Calm down: While the Fed may have to book a loss, catastrophe will not follow. Such an accounting item would be a small price to pay for the Fed's vital stimulative efforts.READ MORE
Two recent events underscore why the U.S. has a deficit problem and why it's unlikely to be solved without deep concessions by both parties and most Americans.
The first is Representative Paul Ryan's budget proposal, which is expected to be unveiled next week. Ryan, a Wisconsin Republican, is expected to balance the budget within 10 years -- without raising any additional taxes beyond those agreed to earlier this year. To make this math work, Ryan needs to cut costs and was reportedly considering raising the age cutoff for his Medicare premium-support plan to 56. While details haven't been released, such a move could shave the health program's near-term costs, since fewer people would be eligible for traditional Medicare within the 10-year budget window.READ MORE
A trial in Africa has failed to prove the effectiveness of using HIV medicine to prevent HIV infection in women, but it did show one thing: People, especially the young, are pretty reckless when it comes to sex.
The study, called Vaginal and Oral Interventions to Control the Epidemic, tested three ways of delivering a daily dose of antiretroviral drug to the body: via a tablet of Truvada, a tablet of tenofovir and a vaginal gel containing tenofovir. In previous trials, ARVs in pill and gel form have reduced HIV infections, so one might have expected the study volunteers -- sexually active women in Uganda, South Africa and Zimbabwe, half of whom were unmarried -- to have taken them.READ MORE
With the Dow Jones Industrial Average having breached its October 2007 pre-crisis record, a bit of perspective is in order by way of a then-versus-now comparison. Here are a few data points:
Unemployment rate: Then, 4.7 percent; now, 7.9 percent.
Total unemployed: Then, 7.23 million; now, 12.33 million.
Labor force participation: Then, 65.8 percent; now, 63.6 percent.
Gross domestic product growth: Then, 2.2 percent; now, 1.6 percent.
Total public debt to GDP: Then, 36.3 percent; now, 74.2 percent.
Total public debt: Then, $9 trillion; now, $16.7 trillion.
Federal budget deficit: Then, $162 billion; now, $1.09 trillion.
Consumer confidence: Then, 95.2; now, 69.6.
Total household debt: Then, $13.7 trillion; now, $12.87 trillion
30-year mortgage rate: Then, 6.4 percent; now, 3.51 percent.
Median existing home price: Then, $206,700; now, $173,600.
Median household income: Then, $54,489; now, $50,054.
U.S. corporate profits: Then, $1.46; now, $1.97 trillion.
Dollar versus major currencies: Then, 78.5; now, 82.1.
Crude oil per barrel: Then, $80.26; now, $90.87.
Regular gasoline per gallon: Then, $2.77; now, $3.74.
Federal funds rate: Then, 4.75 percent; now, 0.25 percent.
Federal Reserve assets: Then, $890 billion; now, $3.1 trillion.
30-Year Treasury yield: Then, 4.86 percent; now, 3.1 percent.
Inflation rate: Then, 3.5 percent; now, 1.6 percent.
Misery index: Then, 7.5; now, 9.5.
The Wall Street Journal has a curious article about Citigroup Inc. and its new chief executive officer, Michael Corbat. It says he is "putting his stamp on the company with a simple formula: You can't manage what you can't measure."
Readers learn he spoke to a gathering of 300 executives at a New Jersey hotel last month where he "proposed a slate of new, more-rigorous ways to track both the performance of individual executives and the third-largest U.S. bank as a whole." Score cards will rate top managers in five categories: capital, clients, costs, culture and controls. (The Five C's!)READ MORE
Sequestration, the arbitrary budget cuts that supposedly no one wanted, began taking effect last week, and it's hard not to notice that Republican leaders seem pleased with themselves.
Speaker of the House John Boehner professes little interest in a deal to mitigate the cuts; he has more or less vowed to tie himself to the Statue of Freedom atop the Capitol before he'll accede to any additional tax revenue -- including the sort of loophole closing that Republicans of a previous era (circa 2012) claimed they desired. Meanwhile, conservative troops are cheering.READ MORE
If you think the politics of sequestration were bad, just wait until the political economists weigh in on the results.
Whether austerity -- the $85 billion of across-the-board discretionary spending cuts, about half of which will be implemented in fiscal 2013 -- hurts or helps the economy will be in the eye, and the political disposition, of the beholder.READ MORE
Sequestration is by no means a welcome event, but it may serve at least one useful purpose: testing Republicans' theory that cutting government spending will jump-start economic growth.
Republicans have long insisted that Washington's "spending problem" is what stands in the way of a more robust economy and that winnowing outlays will open the economic spigot. Representative Kevin Brady, a Texas Republican and the Joint Economic Committee chairman, wrote recently: "Time and time again, economic studies have shown that countries that reduce their government deficits through spending cuts -- rather than tax increases -- can boost economic growth and job creation even in the short term."READ MORE
This morning, Professors John Taylor and Laura Tyson presented competing visions for the future of fiscal policy at the National Association for Business Economics Economic Policy Conference. And Taylor’s presentation exemplified how conservatives mistreat the ratio of federal spending to GDP. The spending-to-GDP ratio is a reflection of our policy priorities, but conservatives act as if it should be a driver of them.
Taylor made arguments that are extremely familiar among conservative economists. Federal spending has risen well above historical averages and will remain above them for decades to come; revenues dipped in the recession but should soon be back in line with or a bit above historical averages. With spending above normal and revenue soon to be about normal, Taylor says it is “common sense” to bring spending back in line. He added (perhaps trying to get me to slam my head through a wall) that this is what a household or corporation would do in a similar situation.READ MORE
There's a scandal brewing at the American Securitization Forum -- and sure to be a lot of schadenfreude to follow.
The trade association "fell into turmoil last week when most of the board resigned in a dispute with the group's executive director over governance and bonuses," Bloomberg News reported today, citing six unnamed people familiar with the matter. Members that quit include Bank of America Corp., JPMorgan Chase & Co., Deutsche Bank AG and Citigroup Inc.READ MORE
Haruhiko Kuroda, the Japanese government's nominee to become head of the Bank of Japan, mostly told financial markets what they wanted when he appeared at a parliamentary confirmation hearing today. If he gets the job, monetary policy will change: The "scale and scope" of BOJ asset purchases will increase, he said.
Up to now the central bank has concentrated its version of quantitative easing on short-term government debt. Since this is a close substitute for cash, the policy has amounted to swapping one kind of money for another and hasn't accomplished much.READ MORE
Switzerland, a bastion of moderation and discretion, doesn't often go for radical change, especially where corporations are concerned. Yet Swiss voters on Sunday overwhelmingly approved a referendum that will shackle boards and executives and, above all, limit CEO pay.
The Swiss government, lawmakers and chief executive officers say the changes are so severe that companies may be forced to decamp beyond Swiss borders. Jobs will be lost and economic growth will falter, they warn.READ MORE