The rumored grand bargain would cost the economy about half a million jobs in 2013
Are you ready for a grand bargain? A deficit hawk party! Yes? No? Maybe? (Is this John Boehner?).
With the deadline for the fiscal cliff -- which is really more of a slope -- looming, President Obama and House Republicans have reportedly come close on an agreement that would kick most of the fiscal can. Well, they did for a few hours at least. It didn't take long for Boehner to walk back his support for the plan, but that hardly means it's dead. If there is a grand-ish bargain to be had, it will probably look something like this latest iteration of a deal.
As Ezra Klein reported, the deal comes in three parts: revenue, cuts, and stimulus. Let's break it down, and then break down what it means for jobs in the coming year.
REVENUE. Let the Bush tax cuts expire for households with adjusted gross incomes of $400,000 or more, and limit the value of itemized deductions to 28 percent. In other words, set tax rates for the top 1 percent back to where they were under President Clinton, and stop richer households from taking bigger deductions than middle-class households. All told, it raises a little more than $1 trillion in revenue over the next decade relative to a world where all of the Bush tax cuts continue. As Paul Krugman points out, it's unclear whether this includes the higher taxes on capital gains and dividends scheduled to kick in on January 1, 2013 -- on top of the 3.8 percent Obamacare surtax on capital gains.
Taxes would also go up from switching to chained CPI. As my colleague Derek Thompson explained, chained CPI is an alternative (and perhaps more accurate) measure of inflation that assumes consumers substitute to similar, lower-priced goods when other prices rise. In other words, it says inflation is lower. Tax brackets are indexed to inflation, so a lower measure of inflation means they will rise less -- and more people will creep into these higher brackets. It adds up to about $60-90 billion over ten years.
CUTS. Say hello to chained CPI again. It's not just a tax hike. It's a Social Security cut too. Remember, Social Security benefits are indexed to inflation as well, so the logic of a lower measure of inflation kicks in here too -- benefits will rise slower than they otherwise would have, with the compounded effect hitting older retirees the worst. It's about a $100-200 billion cut over a ten-year window. Congress is supposed to negotiate on another $1 trillion or so of cuts, and if they cannot agree on them there will be -- wait for it! -- a new sequester in the future. Because the last one worked so well.
STIMULUS. Extend unemployment insurance and the refundable tax credits from the stimulus, but not the payroll tax cut. There's also some new, albeit unspecified, infrastructure spending thrown in.
There are a lot of moving parts here, but only three of these moving parts will matter in 2013: the end of the Bush tax cuts for the rich, the end of the payroll tax cut, and new infrastructure spending. In other words, it's unlikely any of the cuts will hit the economy next year. The can known as the sequester would get kicked for another year or so -- unless, haha, Congress can agree to other, immediate cuts -- and chained CPI will be the same as CPI-W in 2013. That leaves the three aforementioned changes -- changes that add up to about a half million less jobs in 2013 than if there was no fiscal cliff at all, as you can see in the chart below. The payroll tax cut is a political orphan in need of a champion.
The Cliff Notes version of why this deal would cost us 500,000 jobs next year is it sucks more money out of the economy than it puts back in. Let's look at it piece-by-piece.
Bush tax cuts for the rich expire. Less money for the rich means less money for the rich to spend. But the rich are different from you and me -- they tend to have money left over after they buy the things they want. In other words, they spend less of their incomes, so a tax hike on them doesn't hurt demand as much as a tax hike on the middle-class would (as we shall see). The Congressional Budget Office (CBO) figures higher taxes on higher earners would subtract about 200,000 jobs next year.
Payroll tax cut ends. Less money for everybody means less money for everybody to spend. That's what the payroll tax, which, remember, hits the middle-class harder than it does the rich, does. But it gets worse. A higher payroll tax means a higher cost of hiring and that means less hiring. A lot less hiring. Working backwards from thesetwo CBO reports shows it means about half a million less jobs in 2013. As the left-leaning Center on Budget and Policy Priorities (CBPP) points out, it's almost twice as stimulative as the Bush tax cuts for the rich, at similar costs. Spending the $115 billion to extend it another year would be money well spent.
Infrastructure. This is where things get admittedly speculative. We don't even know how much infrastructure spending both sides have talked about, let alone what kind of projects, but we can make some informed guesses. President Obama has asked for $50 billion of new infrastructure spending before, which he probably wouldn't get, but we'll use here as a best-case. If we take former Vice Presidential economic adviser and current CBPP fellow Jared Bernstein's rule of thumb that every $1 billion of construction or repair spending adds roughly 9,000-10,000 jobs, and then assume that this new spending would come in over two years, that gives us about 250,000 new jobs in 2013. Again, this is a pretty generous estimate.
As far as can-kicking goes, this ain't too shabby. The CBO figures that the fiscal cliff will cost us 3.4 million jobs next year if Congress does nothing; suddenly, half a million less sounds okay. But Washington can do better. It just needs to go over the fiscal cliff first.
Right now, Obama is offering lower revenues than he originally asked for and entitlement cuts for more stimulus -- and he's not even getting all of the stimulus! It's all because of the baseline illusion. As long as the Bush tax cuts are around, Boehner can claim he's the one offering concessions on revenues by saying he'll raise them at all. It's a silly argument, but it's a silly argument that goes away after January 1, when tax rates automatically go up. Then, Democrats can push a bill that cuts middle-class taxes and cuts deductions for the rich -- the $1.6 trillion from Obama's first offer -- and tell Republicans they have a choice. They can either get less revenue or less entitlement spending, but not both, and in return they have to sign off on all of the stimulus -- extended unemployment insurance, the payroll tax cut, and infrastructure spending. They could even set up a commission -- or a supercommittee, if they're feeling bold -- to cut spending in a year's time, with a new sequester to incentivize them to find cuts.
It's a deal that would bring our medium-term budget closer to balance, without costing the economy in the short-term. Now that would be grand.
The Fox host’s insistence that black laborers building the White House were “well-fed and had decent lodgings” fits in a long history of insisting the “peculiar institution” wasn’t so bad.
In her widely lauded speech at the Democratic National Convention on Monday, Michelle Obama reflected on the remarkable fact of her African American family living in the executive mansion. “I wake up every morning in a house that was built by slaves. And I watch my daughters, two beautiful, intelligent, black young women, playing with their dogs on the White House lawn,” she said.
On Tuesday, Fox News host Bill O’Reilly discussed the moment in his Tip of the Day. In a moment first noticed by the liberal press-tracking group Media Matters, O’Reilly said this:
As we mentioned, Talking Points Memo, Michelle Obama referenced slaves building the White House in referring to the evolution of America in a positive way. It was a positive comment. The history behind her remark is fascinating. George Washington selected the site in 1791, and as president laid the cornerstone in 1792. Washington was then running the country out of Philadelphia.
Slaves did participate in the construction of the White House. Records show about 400 payments made to slave masters between 1795 and 1801. In addition, free blacks, whites, and immigrants also worked on the massive building. There were no illegal immigrants at that time. If you could make it here, you could stay here.
In 1800, President John Adams took up residence in what was then called the Executive Mansion. It was only later on they named it the White House. But Adams was in there with Abigail, and they were still hammering nails, the construction was still going on.
Slaves that worked there were well-fed and had decent lodgings provided by the government, which stopped hiring slave labor in 1802. However, the feds did not forbid subcontractors from using slave labor. So, Michelle Obama is essentially correct in citing slaves as builders of the White House, but there were others working as well. Got it all? There will be a quiz.
A former NATO general imagines a frightening scenario.
In 2014, shortly after Russia forcefully intervened in Ukraine and admitted Crimea into the Russian Federation, Richard Shirreff stepped down as NATO’s deputy supreme allied commander Europe, one of the highest-ranking positions in the military alliance. The British general proceeded to do something highly unusual. He criticized the government he once served, arguing that Britain’s cuts to defense spending were “one hell of a risk” at a time of renewed Russian aggression. Next, he wrote a startling account of what might follow from the failure of the United Kingdom and many of its NATO allies to, in his view, sufficiently invest in countering the Kremlin militarily. He describes the account as a “work of fiction,” but also a “realistic” and “urgent” warning.
The billionaire former New York mayor denounced the Republican nominee as a “dangerous demagogue” and a “risky, reckless, and radical choice.”
Michael Bloomberg, a brand-name billionaire far wealthier than Donald Trump, a famously independent voter who derides both the Democratic and Republican parties, endorsed Hillary Clinton on Wednesday and called Trump a “risky, radical and reckless choice” for president.
“Let’s elect a sane, competent person,” he said.
The normally soft-spoken owner of Bloomberg financial-news service excoriated his fellow New Yorker, labeling him a “dangerous demagogue,” a hypocrite, a con, and—slashing at the core of Trump’s self-worth—a horrible businessman.
“Throughout his career,” Bloomberg said in his prime-time address. “Trump has left behind a well-documented record of bankruptcies and thousands of lawsuits and angry shareholders and contractors who feel cheated and disillusioned customers who feel ripped off. Trump says he wants to run the nation like he’s run his business. God help us!”
His first Q&A on the site seemed free-wheeling and open to all, but it was actually obsessively controlled.
Cruising the skies above Ohio (and perhaps looking to take more attention away from the Democratic National Convention), Donald Trump tried a new publicity tactic Wednesday night. Instead of his typical podium-and-flag setup, he opened his MacBook and invited users of Reddit to ask him anything.
AMAs—that’s the popular abbreviation—are a staple of the free-wheeling forum site, which has hosted hundreds of celebrities and slightly less famous people who are willing put out a shingle and take questions from strangers on the internet. Reddit—part old-school forum, part meme-machine, part possible-future-of-human-society—prides itself on its community, which moderates itself and (in theory) highlights the best the internet has to offer. Barack Obama hosted his own AMA back in 2012; so have Bill Gates, Patrick Stewart, and a guy who fought off a bear.
His call on a foreign government to hack Hillary Clinton’s email account is a complete subversion of GOP ideals.
The first excuse for Donald Trump’s amazing press conference on Wednesday, in which he called on the Russians to hack and publish the 30,000 emails wiped from Hillary Clinton’s home server, was: He was only joking.
That excuse almost immediately dissolved. When Trump was asked by CNN’s Jim Acosta whether he would call on Vladimir Putin to stay out of U.S. elections, the presidential nominee answered that he would not tell Putin what to do. After the conference ended, Trump tweeted out a slightly tidied up request to the Russians to find Clinton’s emails—but to hand them over to the FBI rather than publish them.
The second excuse, produced on Twitter minutes later by Newt Gingrich, is that Trump’s remark, while possibly unfortunate, mattered less than Clinton’s careless handling of classified material on her server. That defense seems likely to have more staying power than the first—about which, more in a minute.
The Republican presidential nominee appeared to suggest he’d recognize Russia’s annexation of the Ukrainian territory in 2014.
Donald Trump’s call on Russia to hack Hillary Clinton’s emails Wednesday resulted in widespread criticism. But his comments on Crimea, coupled with ones he made last week on NATO, are likely to have greater significance if he is elected president in November.
The question came from Mareike Aden, a German reporter, who asked him whether a President Trump would recognize Crimea as Russian and lift sanctions on Moscow imposed after its 2014 annexation of the Ukrainian territory. The candidate’s reply: “Yes. We would be looking at that.”
That response is likely to spread much cheer through Russia—already buoyant about the prospect of a Trump victory in November. But it could spread at least an equal amount of dread in the former Soviet republics. In a matter of two weeks, the man who could become the next American president has not only questioned the utility of NATO, thereby repudiating the post-World War II security consensus, he also has seemingly removed whatever fig leaf of protection from Russia the U.S. offered the post-Soviet republics and Moscow’s former allies in the Eastern bloc.
We can all agree that Millennials are the worst. But what is a Millennial? A fight between The New York Times and Slate inspired us to try and figure that out.
We can all agree that Millennials are the worst. But what is a Millennial? A fight between The New York Times and Slate inspired us to try and figure that out.
After the Times ran a column giving employers tips on how to deal with Millennials (for example, they need regular naps) (I didn't read the article; that's from my experience), Slate's Amanda Hess pointed out that the examples the Times used to demonstrate their points weren't actually Millennials. Some of the people quoted in the article were as old as 37, which was considered elderly only 5,000 short years ago.
The age of employees of The Wire, the humble website you are currently reading, varies widely, meaning that we too have in the past wondered where the boundaries for the various generations were drawn. Is a 37-year-old who gets text-message condolences from her friends a Millennial by virtue of her behavior? Or is she some other generation, because she was born super long ago? (Sorry, 37-year-old Rebecca Soffer who is a friend of a friend of mine and who I met once! You're not actually that old!) Since The Wire is committed to Broadening Human Understanding™, I decided to find out where generational boundaries are drawn.
The president took the DNC stage on Wednesday, showing why he will be his one-time rival's best advocate this fall.
Barack Obama needed to bring Democrats together tonight at the DNC. Tim Kaine had a far more difficult task: Hillary Clinton’s vice-presidential pick needed to prove he can be trusted, has the capacity to inspire, and can effectively take on Donald Trump.
In the end, Obama and Kaine both won raucous cheers and applause. At one point during the president’s speech, someone in the crowd cried out: “Four more years!” Another screamed: “I love you!” And despite earlier threats of revolt from Bernie Sanders supporters, Kaine made it through his speech without major incident. He came across as dedicated to the cause, and ready to fight, hitting high notes along the way. In all, the evening showed a party that seemed far more willing to come together than it did when the convention began.
Biology textbooks tell us that lichens are alliances between two organisms—a fungus and an alga. They are wrong.
In 1995, if you had told Toby Spribille that he’d eventually overthrow a scientific idea that’s been the stuff of textbooks for 150 years, he would have laughed at you. Back then, his life seemed constrained to a very different path. He was raised in a Montana trailer park, and home-schooled by what he now describes as a “fundamentalist cult.” At a young age, he fell in love with science, but had no way of feeding that love. He longed to break away from his roots and get a proper education.
At 19, he got a job at a local forestry service. Within a few years, he had earned enough to leave home. His meager savings and non-existent grades meant that no American university would take him, so Spribille looked to Europe.
Narcissism, disagreeableness, grandiosity—a psychologist investigates how Trump’s extraordinary personality might shape his possible presidency.
In 2006, Donald Trump made plans to purchase the Menie Estate, near Aberdeen, Scotland, aiming to convert the dunes and grassland into a luxury golf resort. He and the estate’s owner, Tom Griffin, sat down to discuss the transaction at the Cock & Bull restaurant. Griffin recalls that Trump was a hard-nosed negotiator, reluctant to give in on even the tiniest details. But, as Michael D’Antonio writes in his recent biography of Trump, Never Enough, Griffin’s most vivid recollection of the evening pertains to the theatrics. It was as if the golden-haired guest sitting across the table were an actor playing a part on the London stage.
“It was Donald Trump playing Donald Trump,” Griffin observed. There was something unreal about it.