John Cassidy
Daily Deadline: Did Kasich Pull a Coakley?
Next Tuesday’s ballot measure in Ohio hasn’t gotten the attention that the attack on public employee unions in Wisconsin did. In fact, if it hadn’t caused Mitt Romney so much grief last week, I suspect much of Washington would be ignoring it right now. But it's still an important story -- and I noticed that its supporters are having some communications problems. First there was the statement, by pollster Neil Newhouse, criticizing a survey that showed the ballot measure to be unpopular. Newhouse's complaint?
Keynes Is Dead, Just When We Need Him
Just days after Congress averted a much-discussed debt limit crisis that some feared would produce a market crash and an economic catastrophe, older fears of a “double-dip” recession have quickly reemerged. So what, if anything, can our gridlocked political system, already ensnared in the complex deficit-reduction doomsday machine created by the August 1 deal, do to head off or mitigate another crisis? Some observers are predicting that an aroused public or chastened politicians will suddenly rediscover the merits of good old-fashioned Keynesian fiscal stimulus measures.
Stop Blaming Wall Street
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Stop Blaming Wall Street
As the U.S. economy fails to recover, there is a growing fear that the United States has entered a phase of long-term decline. Conservatives blame “big government” for throttling entrepreneurship; liberals tend to take aim at Wall Street. Rolling Stone writer Matt Taibbi memorably described Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Among less inventive critics, the term in vogue is “financialization.” According to author Kevin Phillips, who popularized this notion, financialization is “a process whereby financial services, broadly construed, take over the dominant economic, cultural and political role in a national economy.”Elements of this thesis can be found in scores of books, articles, and blog posts on the state of the U.S. economy. Phillips blames financialization not just for the “Great Recession,” but for “excessive debt, great disparity between rich and poor, and unfolding economic decline.” In their book, 13 Bankers, former International Monetary Fund (IMF) chief economist Simon Johnson and James Kwak blame financial factors for the “anemic growth” in the overall economy prior to the crash. And, in an influential essay—titled “WHAT GOOD IS WALL STREET?”—The New Yorker economics writer John Cassidy pointedly contrasts the period when regulators restrained the growth of the finance sector (when wages, investment, and productivity grew, lifting “tens of millions of working Americans into the middle class”) with the period of growth experienced by the finance sector since the early ’80s (when “financial blowups have proliferated and living standards have stagnated”). One thing is clear: Financialization, in some form, has taken place. In 1947, manufacturing accounted for 25.6 percent of GDP, while finance (including insurance and real estate) made up only 10.4 percent. By 2009, manufacturing accounted for 11.2 percent and finance had risen to 21.5 percent—an almost exact reversal, which was reflected in a rise in financial-sector employment and a drop in manufacturing jobs. It is also clear that high-risk speculation and fraud in the financial sector contributed to the depth of the Great Recession. But Phillips, Johnson, and the others go one step further: They claim that financialization is the overriding cause of the recent slump and a deeper economic decline. This notion is as oversimplified, and almost as misleading, as the conservative attack on the evils of big government.
Hedging America
Is Cost Control a Joke?
For all of the crazy arguments against health care reform, a few of them are entirely sensible--and worth taking seriously. As I write in my latest Kaiser Health News column, which appeared on TNR’s home page yesterday, one of those is the worry that Congress won’t follow through with promises to raise the revenue--or find the savings--necessary to finance expansions of health insurance. In other words, Congress may pass a law calling for reductions in Medicare expenditures or raising an assortment of new taxes.
Free Larry Summers
On a typical day, Larry Summers, the top White House economic adviser, sits in his office overlooking the Rose Garden and receives a near-endless succession of aides working on a stunning variety of issues. In a single, several-hour bloc, Summers might have meetings on housing, the auto industry, health care, technology policy, and the financial crisis, all of which he’s exploring in subatomic detail.
