Today, Office of Management and Budget Director Peter Orszag appeared on Neil Cavuto’s show to discuss the budgetreleased by the Obama administration, which “proposes significant tax increases for businesses and wealthy families worth nearly $2 trillion over the next 10 years.” Throughout the course of their conversation, Orszag debunked various conservative tax myths trumpeted by Cavuto including: the budget proposes to raise taxes during a recession, tax increases on the wealthy are a “job killer” that will ruin economic growth, and the increases will discourage investors from playing the stock market. Watch a compilation:
As Orszag said, “we’re returning to the tax rates that applied during the 1990′s. I think all Americans — including high income Americans — did quite well during that decade.”
Claiming that the “folks at the Center need to make some progress on their math skills,” Hannity pointed to an employer payroll survey showing that Louisiana added jobs in December. Watch it:
We wonder –- are Hannity and Jindal trying to assert that the fundamentals of the economy in Louisiana are strong? While their statements are technically true, the statistic they are highlighting tells us the number of jobs — not the number of people who are unemployed.
Here’s where the confusion lies: In our headline, we should have said Louisiana had 430 new unemployed people for every day in December, as opposed to 430 jobs being lost.
There are two primary ways that the government measures the labor market: the employer payroll survey and the household survey. Hannity and Jindal are relying on the fact that the employer survey, which asks businesses about additions and subtractions from their payrolls, showed that businesses added jobs (although even this measurement is down .4 percent for Louisiana from its peak in August 2008).
The household survey, however, asks members of households whether or not they have jobs or are looking for work. This measures the unemployment rate, which has been rising steadily in Louisiana, from 4 percent in December 2007 to 5.9 percent in December 2008. There was also an increase from 5.3 percent in November 2008 to 5.9 percent in December 2008. This statistic is more pertinent to the discussion at hand, since we are debating unemployment benefits.
We believe that rejecting additional funds for unemployment benefits at a time when unemployment in Louisiana is rising is an unwise decision. However, the people of Louisiana will have the final say on whether that is the right thing to do. Read more
During an interview yesterday with Jim Lehrer, Treasury Secretary Timothy Geithner firmly dismissed nationalization as an option for combating the banking crisis:
GEITHNER: I think that’s the wrong strategy for the country, and I don’t think it’s a necessary strategy. What we need to do is to make sure that these institutions have the resources necessary to perform their critical function on an ongoing basis in our economy as a whole.
Now, Geithner is clearly in a tough spot. Openly musing about whether or not to nationalize the banks can have an effect on bank stocks, and as Matthew Yglesias noted, “while it’s fine if the stock market doesn’t like the idea of nationalizing banks, it’s not fine if the stock market goes into a total panic over it.” So there is wisdom in not parading around the fact that nationalization is being considered.
That said, nationalization needs to be considered, and there’s something wrong if Geithner really believes it’s not an option. Adam Posen, Deputy Director of the Peterson Institute for International Economics, explained the logic of nationalizing to Congress today:
[N]ew private owners will always demand majority voting control and removal of current top management who are accountable for the accumulated problems. The American taxpayer would be ill-served to receive anything less for putting in the vast amount of money needed to restructure and recapitalize [the banks]. And the American taxpayer, just like any acquirer of distressed assets, deserves to reap the upside from their eventual resale. That basic logic is why failed banks that are too systemically important to shut down should be nationalized temporarily.
Geithner’s alternative has the government receiving stock in the banks “just like anybody else,” so there will be a return on the investments. But that doesn’t change the fact that the government would be sinking a lot of money into these banks without gaining authority and accountability over the use of taxpayer funds. The banks could simply work to maximize short-term gains — or throw lavish parties — and there would be very little Treasury could do about it.
In the budget that the administration proposed today, there is a $250 billion placeholder for more bank aid. While it’s admirable that the administration acknowledges that more might need to be done to save the banks, there is no sense in spending this amount of money without positioning taxpayers to reap significant rewards. A situation in which the government is providing a “slow intravenous drip that’s enough to keep the banks shambling along” will hinder the economic recovery and be a tremendous waste of money.