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| Congressman Hakeem Jeffries |
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Jack McIlvaine
Showing posts with label Political Economy. Show all posts
Showing posts with label Political Economy. Show all posts
Wednesday, February 5, 2014
Can the U.S. Afford the Affordable Care Act?
Democrats and Republicans have again entered into heated debate over the possible side effects of the newly adopted Affordable Care Act. Nonpartisan budget analysts have reported that, starting in 2017, the act will start to push the economy in a negative direction by dampening the supply of labor. Projections show a drop of 2.5 million laborers by the year 2024. This is mainly due to the Affordable Care Act affecting the previous relationship between employment and healthcare. The fact that healthcare is now independent of employment serves as a disincentive for the work force, where individuals are receiving this benefit regardless of their employment status. Furthermore, the lower labor participation rates are affecting the amount of taxable income in the economy. Republicans believe that the decrease in hours worked will have a substantial effect on the amount of tax moneys the government will inherit from income taxes over the next several years. This is certainly a dangerous position, especially with a government that is already looking into the eyes of a $17.2 trillion deficit.
Democrats claim that the subsidies provided by the Affordable Care Act are freeing a large portion of the country from what the call a “job lock”, where individuals are unable to choose their work hours due to their dependence on their employer for healthcare benefits. Also, those who support the law are standing by the statistic that it will be responsible for the coverage of almost 13 million Americans this year alone. Hakeem Jeffries (D., NY) defended the Act; comparing it to the strict regulations put on child labor in the late 1930s. This shrunk labor participation rates, but was a necessary step to relieve the United States of its child labor problem. While many would see this as an extreme exaggeration, it poses the legitimate question of whether or not the law itself is worth the potential harm that it could bring to a slowly recovering US economy.
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Jack McIlvaine
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Jack McIlvaine
Getting Rid of the Debt Ceiling
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| Three decades of bipartisan debt ceiling raises |
For those who are unaware, the US debt ceiling is an amount set by Congress that the US Treasury is allowed to issue. However, the debt ceiling is set separately from the expenditures authorized by Congress. Therefore, when the amount Congress authorizes to spend exceeds the borrowing limit, the limit needs to be raised or the US defaults on its debt. Defaulting has catastrophic effects on both the domestic and international economy.
The debt ceiling was initially meant to make it easier for the US government to borrow money in times of unexpected war or expense. Today, it is a political bargaining chip that has the power to blow up the economy. In the past three years, Congressional stalemate over raising the debt ceiling has led directly to a downgrade of the US credit, a government shutdown, and a stock market crash. Now imagine if we crossed it.
The effects of defaulting on our debt are terrifying. Both short-term and long-term interest rates will spike, stock markets will lose confidence and drop, it will become more expensive for the US to borrow money, and countries may begin to question a dollar-based global economy. Now, why would risk these incredible consequences so some partisans can make a political statement? We shouldn’t.
The US government’s budget is extremely flexible. Entitlements have unpredictable growth depending on how much people go to the doctor, Presidents can ask for emergency funds and predicting the amount the US collects in taxes is an inexact science. It is ludicrous to set a hard limit on the amount we can borrow when, regardless of whether Congress authorizes a higher debt ceiling, we still owe someone money. We owe social security checks to the elderly, Medicare reimbursement to doctors, interest payments on foreign loans and countless more necessary payments.
I agree that the amount the US borrows does need to be reined in, but this is not the way to do it. Leaving the debt ceiling in place puts the minority party, currently the Republicans, but previously the Democrats, in a position to hold the economy hostage by not paying bills we have already committed to pay. Not paying our commitments is decidedly un-American. How can we hold other countries to a high standard of economic responsibility and critique fiscal policy abroad if we do not pay our own debts to the citizen next door? So when you here Speaker Boehner and Republicans discuss this week how they will demand concessions in return for allowing the US to pay their global commitments, remember that this should all go away.
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Luke Wolf
Friday, November 15, 2013
Book Review: Too Big to Fail
Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves
By Andrew Ross Sorkin
“The Most important risk is systematic: if this dynamic continues unabated, the result would be a greater probability of widespread insolvencies, severe and protracted damage to the financial system and, ultimately, to the economy as a whole” -- Timothy Geithner
The quotation above by Timothy Geithner, then head of the New York branch of the Federal Reserve in 2008, strikes at the heart of the finical crisis of 2008 and the severe consequences it posed for our nation’s economy. The economic recession that struck the global financial system was a historic and unparalleled crisis that challenged the bedrock of modern finance. It was a global recession that hit not only the United States but also every country that was exposed to the global banking system, a now essential and interconnected element of every developed economic nation. Dubbed by Ben Bernanke, Chairman of the United States Federal Reserve, as the worst economy since the great depression, the economic downturn in 2008 had far reaching and lasting effects that resulted in stunning losses not only on Wall Street, but Main Street as well. As an academic, and student of the Great Depression of the 1930’s, Bernanke was well aware of the stunning similarities between the then current declining situation and the era that crumpled the country for a decade. The turmoil of 2008 facilitated marked changes across the financial as well as governmental systems that would forever alter the business landscape within America.
Sorkin’s “Too Big to Fail” is an expertly written chronicle of the 2008 financial crisis: in particular the institutions and individuals who had leading roles in both its downfall as well as salvation. The book is above all a chronicle of human folly and the incredible mistakes made not only within this short window of 2008, but throughout the past 30 years of American business. The first and most essential aspect of understanding this book; and an element which Sorkin does well to point out; is how the crisis was not created or caused by events in 2008, but was the culmination and synthesis of a myriad of different factors that had been created for the better part of three decades. If one can learn anything form this book it is that there is no one element, no one smoking-gunthat can be attributed to the crisis of 2008; but a combination of complex and interconnected factors. The unprecedented growth or boomof the US economic system during the 80’s & 90’s laid the foundation for much of the 2008 recession. The US economy was on the rise, credit was flowing and mortgage industry was seeing incredible growth. With governmental pressure to promote homeownership and relaxed lending standards, the home mortgage industry was steering itself into a massive hole. No where was this rise to profitability more prevalent than within the financial services industry, by 2008 it has ballooned to more than 40% of corporate profits in the United States. (Sorkin, p. 3) It was a Wealth-creation machine known for large salaries and even larger risks. This rise is what marks the beginning of the many interrelated themes Sorkin highlights within the book.
The key characteristic of Sorkin’s book, a compilation of interviews and research, is that is flows chronologically; starting with the collapse and eventual sale of Bear Stearns to JP Morgan in March of 2008 all the way to the enactment of the government’s TARP (Troubled Assets Relief Program) in October. Although it was difficult at times to understand the multitude of events occurring so quickly and simultaneously; this calculated decision by Sorkin was critical to demonstrating the overwhelming nature of the period. The individuals facing these challenges were met with an ever-shifting landscape that would change daily if not hourly; their decisions were imperfect, but how could they not be -- they were simply doing the best they could during a terrible situation. As for the content of the book; it explains the rise and then fall of the interconnected banking system though the eyes of the people living through the crisis. The book highlights the complex financial instruments, risky lending practices, risk consolidation, leverage, asymmetric information as well as the many other factors that lead to the crash; however, Sorkin goes beyond simple description and does his best to distinguish to broader stokes of the crisis by placing it within the larger context of human decision making. Such terms as moral hazard and irrational exuberance are used to describe the key drivers of human error that lead to economy astray. (p. 33) For in the end, it was not financial products or lending standards that lead to the crisis of 2008, its was individual’s misguided decision making to use these complex instruments or sign off on a risky loan that truly lies at the heart of the crisis. The economy was not an autonomous decision maker; it was individuals who shepherded it into failure. The most important dynamic explored within Too Big to Fail, was the role of the government within these uncertain times, and its responsibility to protect the financial system. Never before in history had the government’s regulatory agencies played such an important and active role within the American economy. The fundamental characteristics of capitalism and a free market economy were severely challenged; some financial institutions had become so large and so integral to the rest of the system that letting them fail was simply not an option. What had started on Wall Street had become an epidemic of confidence all across the economy. This loss of confidence within the financial system is one of the few week points in the book; Sorkin does not fully explain the paralyzing consequences that a loss of confidence had on the system. The economy is not simply a machine that runs on tangible assets, it’s a larger symbiotic organism that relies on the hypothetical and theoretical relationships created by a collective trust in the system. Perception became the reality, and the economy stumbled. This relationship between Wall Street and Washington; and the interplay between the parties has forever shaped our nation. While many books have been written about the crisis, its origins and its ramifications; no other book offers such substantive insight into this brief period of time that will continue to guide the US economic system. Sorkin recreated the twelve months of 2008 that will most likely shape the economies path for the next twenty years. The crisis shook free many of the false realities our nation had about wealth creation and forced us to take a harsh self-evaluation of who we are as a country and what choices we are making. It pushed us to face the uncomfortable reality that we have serious challenges ahead of us, and that we can no longer afford to live blissfully unaware to the consequences of our actions. Our nations’ fanatical drive towards material wealth must come to an end; the 2008 crisis is evidence of that.
Too Big To Fail, is a delightful read that presents the details of the crisis in a manageable and tangible manner. But by far its strongest quality was its ability to truly create the individuals who had to face these epic challenges and make decisions that would impact not only the United States, but also the world at large. It truly is an illumination of human discourse, reasoning, ineptitude and brilliance; and how the leaders of the financial system coped with the potential destruction of our economy and how they lead their companies and the nation to a more stable place. The book constructed a window into the past for us to understand how the decisions were made and where adversities arose. I became intimately connected to the characters and the firms; griped by the books consistent flow and steady stream of relevant information. Sorkin does a wonderful job of constructing the larger contextual framework in which these decisions were made. It presents the reader with meaningful questions and timely opportunities to evaluate what they have read and what it means to them within everyday life. Well written and gripping, I would recommend this book to anyone interested in finance, as well as to anyone engrossed with the future of our nation and our economic system. Sorkin does not harp upon financial instruments or paint a morbid picture of egotistical bankers running wild; but fairly presents the crisis in a context that is significant to any reader, i.e. ‘where do we go from here’?
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Editorial Staff
By Andrew Ross Sorkin
“The Most important risk is systematic: if this dynamic continues unabated, the result would be a greater probability of widespread insolvencies, severe and protracted damage to the financial system and, ultimately, to the economy as a whole” -- Timothy Geithner
The quotation above by Timothy Geithner, then head of the New York branch of the Federal Reserve in 2008, strikes at the heart of the finical crisis of 2008 and the severe consequences it posed for our nation’s economy. The economic recession that struck the global financial system was a historic and unparalleled crisis that challenged the bedrock of modern finance. It was a global recession that hit not only the United States but also every country that was exposed to the global banking system, a now essential and interconnected element of every developed economic nation. Dubbed by Ben Bernanke, Chairman of the United States Federal Reserve, as the worst economy since the great depression, the economic downturn in 2008 had far reaching and lasting effects that resulted in stunning losses not only on Wall Street, but Main Street as well. As an academic, and student of the Great Depression of the 1930’s, Bernanke was well aware of the stunning similarities between the then current declining situation and the era that crumpled the country for a decade. The turmoil of 2008 facilitated marked changes across the financial as well as governmental systems that would forever alter the business landscape within America.
Sorkin’s “Too Big to Fail” is an expertly written chronicle of the 2008 financial crisis: in particular the institutions and individuals who had leading roles in both its downfall as well as salvation. The book is above all a chronicle of human folly and the incredible mistakes made not only within this short window of 2008, but throughout the past 30 years of American business. The first and most essential aspect of understanding this book; and an element which Sorkin does well to point out; is how the crisis was not created or caused by events in 2008, but was the culmination and synthesis of a myriad of different factors that had been created for the better part of three decades. If one can learn anything form this book it is that there is no one element, no one smoking-gunthat can be attributed to the crisis of 2008; but a combination of complex and interconnected factors. The unprecedented growth or boomof the US economic system during the 80’s & 90’s laid the foundation for much of the 2008 recession. The US economy was on the rise, credit was flowing and mortgage industry was seeing incredible growth. With governmental pressure to promote homeownership and relaxed lending standards, the home mortgage industry was steering itself into a massive hole. No where was this rise to profitability more prevalent than within the financial services industry, by 2008 it has ballooned to more than 40% of corporate profits in the United States. (Sorkin, p. 3) It was a Wealth-creation machine known for large salaries and even larger risks. This rise is what marks the beginning of the many interrelated themes Sorkin highlights within the book.
The key characteristic of Sorkin’s book, a compilation of interviews and research, is that is flows chronologically; starting with the collapse and eventual sale of Bear Stearns to JP Morgan in March of 2008 all the way to the enactment of the government’s TARP (Troubled Assets Relief Program) in October. Although it was difficult at times to understand the multitude of events occurring so quickly and simultaneously; this calculated decision by Sorkin was critical to demonstrating the overwhelming nature of the period. The individuals facing these challenges were met with an ever-shifting landscape that would change daily if not hourly; their decisions were imperfect, but how could they not be -- they were simply doing the best they could during a terrible situation. As for the content of the book; it explains the rise and then fall of the interconnected banking system though the eyes of the people living through the crisis. The book highlights the complex financial instruments, risky lending practices, risk consolidation, leverage, asymmetric information as well as the many other factors that lead to the crash; however, Sorkin goes beyond simple description and does his best to distinguish to broader stokes of the crisis by placing it within the larger context of human decision making. Such terms as moral hazard and irrational exuberance are used to describe the key drivers of human error that lead to economy astray. (p. 33) For in the end, it was not financial products or lending standards that lead to the crisis of 2008, its was individual’s misguided decision making to use these complex instruments or sign off on a risky loan that truly lies at the heart of the crisis. The economy was not an autonomous decision maker; it was individuals who shepherded it into failure. The most important dynamic explored within Too Big to Fail, was the role of the government within these uncertain times, and its responsibility to protect the financial system. Never before in history had the government’s regulatory agencies played such an important and active role within the American economy. The fundamental characteristics of capitalism and a free market economy were severely challenged; some financial institutions had become so large and so integral to the rest of the system that letting them fail was simply not an option. What had started on Wall Street had become an epidemic of confidence all across the economy. This loss of confidence within the financial system is one of the few week points in the book; Sorkin does not fully explain the paralyzing consequences that a loss of confidence had on the system. The economy is not simply a machine that runs on tangible assets, it’s a larger symbiotic organism that relies on the hypothetical and theoretical relationships created by a collective trust in the system. Perception became the reality, and the economy stumbled. This relationship between Wall Street and Washington; and the interplay between the parties has forever shaped our nation. While many books have been written about the crisis, its origins and its ramifications; no other book offers such substantive insight into this brief period of time that will continue to guide the US economic system. Sorkin recreated the twelve months of 2008 that will most likely shape the economies path for the next twenty years. The crisis shook free many of the false realities our nation had about wealth creation and forced us to take a harsh self-evaluation of who we are as a country and what choices we are making. It pushed us to face the uncomfortable reality that we have serious challenges ahead of us, and that we can no longer afford to live blissfully unaware to the consequences of our actions. Our nations’ fanatical drive towards material wealth must come to an end; the 2008 crisis is evidence of that.
Too Big To Fail, is a delightful read that presents the details of the crisis in a manageable and tangible manner. But by far its strongest quality was its ability to truly create the individuals who had to face these epic challenges and make decisions that would impact not only the United States, but also the world at large. It truly is an illumination of human discourse, reasoning, ineptitude and brilliance; and how the leaders of the financial system coped with the potential destruction of our economy and how they lead their companies and the nation to a more stable place. The book constructed a window into the past for us to understand how the decisions were made and where adversities arose. I became intimately connected to the characters and the firms; griped by the books consistent flow and steady stream of relevant information. Sorkin does a wonderful job of constructing the larger contextual framework in which these decisions were made. It presents the reader with meaningful questions and timely opportunities to evaluate what they have read and what it means to them within everyday life. Well written and gripping, I would recommend this book to anyone interested in finance, as well as to anyone engrossed with the future of our nation and our economic system. Sorkin does not harp upon financial instruments or paint a morbid picture of egotistical bankers running wild; but fairly presents the crisis in a context that is significant to any reader, i.e. ‘where do we go from here’?
--
Editorial Staff
Wednesday, October 23, 2013
Government Shutdown: A Sound Investment?
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Nyall Islam
Nyall Islam
Friday, December 2, 2011
Occupy Wall Street: Where Is It Headed?
As the Occupy Wall Street movement continues to sweep the nation, and the 99% continue to cry for accountability and justice within the financial system -- we should take heed in not only their movement, but also the glaring reality that the group is fighting a battle they simply cannot win. For despite the growing number of Occupy groups that have sprung up across the nation (both on and off college campuses) -- these protesters face a discouragingly long uphill battle. Starting with the negative media surrounding the group’s often fragmented goals, and ending with a financial situation that is often too complicated to explain to the average American -- OWS was doomed from the start. The blame the group seeks falls to no one individual, nor can the economies downturn be traced to one specific event. Beyond the desperate cries for Wall Street executives to be held accountable for what they have done -- what the movement has failed to realize is that they are not protesting the greed and corruption of the financial system, but those of American society. The full-bodied, drastic changes OWS wish to see implemented would only come only at the cost of broad-spectrum changes to American consumer culture and massive disruptions to the American economy.
Without even taking a stance on the movement, it is easy to see that the group’s vision completely outdistances the realities of our current situation. There is no doubt that the glaring disparities in wealth, education and living standards need to be addressed within our society -- but protesting the men and women who have the means and the ability to keep themselves in the 1% is not the best way to get there. To attack the principals of capitalism -- the foundation upon which this nation was built -- is but to alienate yourself to a position where you can no longer create the meaningful change you wish to create.
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Editorial Staff
Without even taking a stance on the movement, it is easy to see that the group’s vision completely outdistances the realities of our current situation. There is no doubt that the glaring disparities in wealth, education and living standards need to be addressed within our society -- but protesting the men and women who have the means and the ability to keep themselves in the 1% is not the best way to get there. To attack the principals of capitalism -- the foundation upon which this nation was built -- is but to alienate yourself to a position where you can no longer create the meaningful change you wish to create.
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Editorial Staff
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