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Economy

‘Fiscal Cliff’ Would Cause More Austerity Than European Debt Crisis

The spending cuts and tax increases that will occur at the beginning of 2013 — the so-called “fiscal cliff” brought about by Congress’ deal to raise the debt ceiling last year — would cause more budgetary contraction than the austerity measures used to address debt crises across Europe.

The cliff would cause deficit reduction that totals 5.1 percent of gross domestic product, making the fiscal cliff a bigger package of austerity measures than those that have occurred in Europe as Quartz’ Tim Fernholz reports:

Absent new action, next year the US government’s budget footprint will contract more rapidly than those of Greece, the United Kingdom, Spain and Italy, all countries where post-crisis austerity measures sent protestors into the streets and growth plunging.

Across Europe, fiscal contraction caused by austerity has pushed unemployment to record levels, plunged multiple countries into double-dip recessions (perhaps even depressions), and caused cuts to social programs that have sent protesters rioting into the streets.

Many of those austerity packages have been instituted as a condition for bailouts or financial aid. Similarly, Mexico, Brazil, and Russia have instituted austerity measures in the past as a condition of bailouts and assistance from the International Monetary Fund.

In the United States, where borrowing costs are at historic lows, none of that is the case. The IMF is urging Congress to avert the cliff. The U.S. is hardly facing a debt crisis. And the economy is steadily recovering, however slowly. There is ample evidence that the American tack toward economic stimulus bested the European emphasis on austerity, and that Republican-led spending cuts have already held back economic growth at the state and national level. And yet, the fiscal cliff, a result of GOP insistence on taking the government to the brink of default in 2011, could cause even more unnecessary pain.

Education

Ann Romney: We Need To ‘Throw Out’ The Public Education System

Romney Visits Philadelphia Charter SchoolAnn Romney told Good Housekeeping magazine that the campaign issue closest to her heart is taking on teachers unions and dismantling public education as we know it. In an interview, she told the publication:

I’ve been a First Lady of the State. I have seen what happens to people’s lives if they don’t get a proper education. And we know the answers to that. The charter schools have provided the answers. The teachers’ unions are preventing those things from happening, from bringing real change to our educational system. We need to throw out the system.

This attack on public school teachers echoes one that has been frequently heard in her husband’s stump speeches and debates. In his Friday economic speech, he said “It matters for the child in a failing school, unable to go to the school of his parent’s choosing, because the teacher’s union that funds the President’s campaign opposes school choice.”

Both Romneys have it wrong. President Obama has also consistently supported charter schools as a supplement to traditional schools. In May, he declared in his “Charter School Week” proclamation, “charter schools serve as incubators of innovation in neighborhoods across our country.” Obama has opposed, however, proposals to take taxpayer money out of public schools and to fund private and parochial schools that do not have to achieve the same standards. Romney has embraced a risky school voucher scheme. Studies have also shown that charter schools may not necessarily improve children’s education.

Unlike Mitt Romney, President Obama’s campaign has not taken a single contribution from political action committees — teachers’ unions or otherwise. The National Education Association’s super PAC, NEA Advocacy Fund, has not made a single expenditure on the presidential race. While some individuals employed by the union have donated to the Obama campaign out of their personal funds, those contributions amount to less than one 1/100th of a percent of his total contributions.

Mitt Romney has made the questionable boast that as governor of Massachusetts, he made the state’s public schools number one in the nation. Those schools — with great union teachers — show that standards and certification are part of the solution, not the problem.

House GOP Voted To Cut Disaster Relief In Order To Preserve Military Spending

As part of their bill to void the military spending cuts included in the Budget Control Act — which was passed as a result of 2011′s GOP inspired debt ceiling standoff — House Republicans proposed eliminating a program that helps states and localities respond to disasters like hurricanes.

The House Republicans’ Sequester Replacement Reconciliation Act of 2012, which was passed without a single Democratic vote, called for zeroing out funding for the Social Services Block Grant (SSBG), a program that provides funding to state and local governments to aid needy children, adults, and the disabled. As the Center for Budget and Policy Priorities noted, the SSBG also offers assistance for disaster relief:

The SSBG has served as a conduit for emergency appropriations to help residents and communities respond to the additional social service and health needs resulting from natural disasters, such as floods, wildfires, and hurricanes.

For example, in response to the 2005 Gulf Coast Hurricanes — including Hurricane Katrina —Congress provided an additional $550 million in emergency funding to states via SSBG for use by public, non-profit, and private entities to repair, renovate, or construct health care facilities, among other purposes. The funds were disbursed promptly — within two monthsa — and SSBG’s flexibility allowed states to streamline eligibility for services funded by the emergency appropriations. Eliminating SSBG could make it harder to provide this sort of flexible human services funding in the face of emergencies.

President Obama’s budget proposed maintaining the SSBG’s annual funding of $1.7 billion; it has had that funding level since 2001. As CBPP noted, “Although the SSBG has received bipartisan support from governors and members of Congress, it has lost 77 percent of its value since 1981, due to inflation, funding freezes, and budget cuts.” This chart shows the drop:

Republicans last year held disaster relief funding hostage several times, demanding offsetting budget cuts. They also attempted to slash disaster funding in a 2011 continuing resolution. The Budget Control Act itself, meanwhile, cuts $900 million from the Federal Emergency Management Agency.

Congresswoman Accuses Obama Of ‘Harming’ Auto Company That Went Defunct In 1988

A Republican congresswoman accused the Obama administration of promulgating regulations that are undermining job creation at an auto manufacturer that has been defunct since 1988. She was responding to a question on Monday about Mitt Romney’s dishonest claims regarding Jeep moving its production overseas.

During an appearance on MSNBC, Rep. Marsha Blackburn (R-TN) dodged a question about Romney’s debunked Jeep claims and instead attacked the Obama administration for issuing regulations that are harming workers at American Motors Corporation, a company once headed by George Romney. AMC was sold to Chrysler during the Ronald Reagan administration and its brands were then discontinued:

CHIRS JENSING (HOST): Let me ask you about some of the things going on on the campaign trail, and there’s a controversy about Mitt Romney telling voters that jeep is going to move production to China. According to the company that’s entirely false. Is he lying about that?

BLACKBURN: Oh, well, I don’t know. I haven’t talked with with the campaign staff about that. I will say this. For workers in the auto industry, across the board, whether it is GM, whether it’s Nissan, whether it’s American Motors, individuals are very concerned about the impact of regulation that the EPA and OSHA and other federal agencies are heaping on our manufacturers.

Watch it:

Since the auto rescue, GM, Ford, and Chrysler are experiencing increases in sales of 10, 13, and 14 percent, respectively. Obama’s approach, which Romney vehemently opposed, helped save as many as 1.3 million jobs and the administration’s new fuel efficiency standards and incentives included in the 2009 stimulus are driving American-made cars to be become more competitive in an international market.

GOP Senator Alleges Obama May Delay Friday’s Jobs Numbers To Boost Re-election Prospects

When last month’s jobs report showed a dramatic drop in unemployment, some conservatives invented a new conspiracy that the Labor Department numbers were politically motivated.

On Monday, rumors that Hurricane Sandy may force a delay to October’s jobs numbers invited a new accusation. Iowa Republican Sen. Chuck Grassley tweeted that any delay from the Labor Department would be attempt to sway next Tuesday’s election, and not prompted by a natural disaster:

As it turns out, the Labor Department says its Friday jobs report is still on track for release. Even though federal government offices shut down on Monday due to the hurricane, the BLS said in a statement, “It is our intention that Friday will be business as usual regarding the October Employment Situation report.”

Election

GOP Strategist Defends Romney’s Plan To Dismantle FEMA

Atlantic City, NJ

Mitt Romney’s past comments about dismantling FEMA and privatizing disaster relief have come back to haunt him as Hurricane Sandy begins to wreak havoc on the East Coast. Still, one Republican strategist, Ron Bonjean, agrees with him. On CNN Monday morning, Bonjean, a private consultant who advises GOP congressional leaders, defended Romney, suggesting that even talking about federal disaster relief is politically toxic:

Most people don’t have a positive impression of FEMA and I think Mitt Romney was right on the button. But I don’t think anybody cares about that right now. I think people care about whether or not their power’s on, whether or not their basement’s going to be flooded. And I think that if the president gets too far in front of this and something goes wrong, people are going to remember, hey, my power’s not out, and the president’s talking about FEMA. I’m not a real big fan of FEMA. That could sway their vote.

Watch it:

Sandy has already caused severe flooding in the Northeast, hours before the worst of the storm is projected to hit. President Obama has declared a state of emergency in 7 states and DC after several governors’ urgent requests for federal aid to combat the storm. Though Bonjean fails to make the connection between FEMA’s services and people worrying about their power going out, the agency has already dispatched emergency power teams to try to reinforce vulnerable power grids before the storm hits and provided hundreds of generators and other back-up power sources. Americans are unfortunately well-acquainted with the agency, despite Bonjean’s insistence that they “don’t care” about it; a recent study of FEMA data found that, since 2006, 4 out of 5 Americans have been affected by weather-related disasters.

How Economic Inequality Makes Hurricanes More Deadly

The aftermath of Hurricane Katrina.

While the Eastern seaboard braces for Hurricane Sandy, 65 people have already been killed by the storm in the Caribbean. The tragic death toll and accompanying widespread property damage are caused in part by poor infrastructure and poverty — problems that aren’t limited to the Caribbean. Indeed, America’s inequality problem is a key reason why natural disasters wreak such havoc inside the United States.

That our stratified society makes storms more deadly is nearly universally believed by disaster experts. According to a paper by three experts at the University of South Carolina (Cutter et al.), “[t]here is a general consensus within the social science community” that some key causes of vulnerability to storms include “lack of access to resources (including information, knowledge, and technology); limited access to political power and representation; social capital, including social networks and connections; beliefs and customs; building stock and age; frail and physically limited individuals; and type and density of infrastructure and lifelines.” Inequality was, the researchers found, the single most important predictor of vulnerability to storm damage — variation in the wealth of individual counties alone explained 12.4 percent of the differences in the impact of natural disasters between counties.

The reasons for this are fairly clear — poorer communities have less resources to evacuate and prepare for storms, and also live in housing that’s less likely to be build to withstand nature’s wrath. As Kathleen Tierney at the University of Colorado puts it:

[Dimensions] of social class, including education and income, affect the ability to engage in self-protective activities across all phases of the hazard cycle. Educational achievements and literacy competence influence access to information on disaster risks and risk-reduction measures…The lack of affordable housing in U.S. metropolitan areas forces the poor to live in substandard housing that is often located in physically vulnerable areas and also to live in overcrowded housing conditions. Manufactured housing may be the only viable housing option for people with limited resources, but mobile homes can become death traps during hurricanes and tornadoesdisaster evacuation scenarios are also based on other assumptions, such as the idea that in addition to having their own transportation, households also have the financial resources to leave endangered communities when ordered to do so. This is definitely not true for the poor.

Other sorts of related inequalities also make the impact of storms worse. Cutter et al. found that black, Hispanic, and Asian communities in the United States were also more at risk from storms, as were communities dependent on one industry (like mining or fishing), ones with high percentages of residents living in mobile homes, and ones with high population density.

The most vulnerable place in the country, in their analysis? Manhattan Borough.

How House Republicans Would Make It Harder To Provide Hurricane Relief

Red Hook, Brooklyn flooded on Monday morning


The East Coast is bracing for the ever-strengthening Hurricane Sandy, which will affect 50 million people when it makes landfall on Monday evening. President Obama has declared a state of emergency in 7 states and DC, allowing them to receive federal funds for emergency disaster assistance.

Depending on the outcome of next week’s election, future victims of natural disasters may not be able to receive the same kind of assistance. Mitt Romney has suggested shutting down FEMA and turning disaster relief over to private companies. Meanwhile, House Republicans have repeatedly attempted to slash funds for disaster preparedness and response in 2011:

According to the House Appropriation Committee’s summary of the bill, the [GOP's 2011 continuing resolution] funds Operations, Research and Facilities for the National Oceanic Atmospheric Association with $454.3 million less than it got in FY2010; this represents a $450.3 million cut from what the president’s never-passed FY2011 budget was requesting. The National Weather Service, of course, is part of NOAA — its funding drops by $126 million. The CR also reduces funding for FEMA management by $24.3 million off of the FY2010 budget, and reduces that appropriation by $783.3 million for FEMA state and local programs.

With each major natural disaster in 2011, House Republicans dug in their heels over providing disaster relief. They repeatedly demanded the funds be offset by other spending cuts in the budget — even as a deadly tornado tore through Missouri, an earthquake shook Virginia, and when Hurricane Irene struck the east coast last year.

The politicization of disaster relief is likely to continue; the House Republican budget ignored a bipartisan agreement to make it easier to fund disaster relief, instead insisting again that spending cuts offset the emergency aid.

Republican Senate Candidate’s Company Collected Millions In State Subsidies While Laying Off Workers

Connecticut Republican senate candidate Linda McMahon

On her campaign website, Republican senate candidate Linda McMahon (CT) rails against “reckless” and “out of control” government spending. She calls for the institution of a Balanced Budget Amendment (despite the widespread economic damage such an amendment could cause), and specifically singles out earmarks, claiming that they displace private sector job creation. McMahon has also called for “an end to corporate welfare.”

However, at the CT Post reported, McMahon was all too happy to accept government subsidies for her company, World Wrestling Entertainment, even when the company was laying off workers:

The Stamford-based WWE empire received about $37 million in state tax credits for staging and recording its wrestling spectacles dating back to July of 2009, state officials reported Friday.

The state Department of Economic and Community Development (DECD), in response to a request by Hearst Connecticut Newspapers, indicated that the WWE has received 20 separate tax credits totaling $36.7 million.

Three of the 20 credits, awarded as part of state legislation aimed at fostering film, TV and digital production in the state, totaled more than $5 million each in 2010, 2011 and 2012, according to a summary released under the state’s Freedom of Information Act.

Jim Watson, spokesman for the DECD, said Friday that the credits were granted, without strings, based on how much money the WWE had spent in Connecticut on producing its events.

“There are no job creation or retention requirements for them to earn the credits,” Watson said. “The credits are awarded based on qualified expenditures made in the state.”

In 2009, WWE collected $9 million in subsidies after announcing plans to lay off 60 workers.

Most states in the U.S. provide tax credits for movie and television production, despite the dubious effect they have promoting job creation. In 2007, Connecticut’s own Department of Community and Economic Development found that its film production credits were not worth the cost. (HT: Kenneth Thomas)

Econ 101: October 29, 2012

Welcome to ThinkProgress Economy’s morning link roundup. This is what we’re reading. Have you seen any interesting news? Let us know in the comments section. You can also follow ThinkProgress Economy on Twitter.

  • Hurricane Sandy is expected to make landfall tonight in New Jersey, with the storm affecting 50 million people. [Associated Press] The National Weather Service has updates here.
  • U.S. stock markets will be closed today due to the hurricane. Both the NASDAQ and the New York Stock Exchange are closed. [Wall Street Journal]
  • Transit systems in major cities, as well as Amtrak, will be closed on Monday. [Reuters]
  • Most of the banks being investigated for manipulating the LIBOR interest rate are expected to settle in the next 12 months. [Financial Times]
  • The leaders of Spain and Italy are meeting today to discuss their countries’ respective economic woes. [Associated Press]
  • Consumer confidence is at a five-year high. [The Hill]
  • The White House denied that it has a plan to replace the payroll tax cut that is expiring at the end of the year. [Reuters]

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