Voters in Italy — while not giving any party firm control of their government — did deliver a rebuke to austerity during yesterday’s national elections. “This election, I think, is the logical consequence of pursuing policies that have dramatically worsened the economic and social picture in Italy,” Simon Tilford, the chief economist of the Center for European Reform, told the New York Times.

But Eurozone Commission President Jose Barroso (who holds the highest EU office) wants to make sure that other Europeans don’t get any ideas regarding ditching their own austerity programs following Italy’s results:

Speaking at a Reuters summit on the future of the euro zone, Barroso said efforts to revive Europe’s economy would take time and required determination. The fact Italian voters had turned Monti out of office did not mean his policies, or those advocated by the European Union, were wrong.

“I hope we are not going to follow the temptation to give in to populism because of the results in one specific member state,” Barroso, speaking with passion, said of the EU’s efforts to combat the sovereign debt crisis.

“The question we have to ask ourselves is the following: should we determine our policy, our economic policy, by short-term electoral considerations or by what has to be done to put Europe back on the path to sustainable growth? For me the answer is clear.” [...]

Barroso said it was incumbent on all EU and euro zone countries, especially those receiving aid from the bloc’s rescue funds, to retool their economies and cut deficits in an effort to improve competitiveness and stimulate growth.

Barrosso is far from the only EU official imploring countries to stay the course, despite the clear evidence that austerity is stifling economic growth in Europe while not delivering significant debt reductions, as these two charts from economists Paul De Grauwe and Yuemei Ji show:

As De Grauwe and Ji wrote, “As it becomes obvious that the austerity programs produce unnecessary sufferings especially for the millions of people who have been thrown into unemployment and poverty, resistance against these programs is likely to increase. A resistance that may lead millions of people to wish to be liberated from what they perceive to be shackles imposed by the euro.”

Our guest blogger is Jane Farrell, a research assistant for economic policy at the Center for American Progress Action Fund.

When Marissa Mayer became the first ever pregnant CEO of a fortune 500 company, there was hope that her perspective as a new mom would highlight the importance of parental leave and workplace flexibility for families and for businesses. But when she said she’d work remotely during her “few short weeks” of maternity leave and, later, that she didn’t consider herself a feminist, there was some cause for concern about whether she would strive to improve workplace policies.

Now that her company has eliminated its work-from-home options for thousands of its employees, requiring them to instead work in Yahoo! offices or leave the company entirely, many of her admirers and employees are feeling disappointed and angry.

Yahoo! announced this new plan last Friday, claiming that in order “to become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side.” This means that employees who telecommuted full-time, along with those who just worked remotely one or two days per week, will now need to be at a Yahoo! office every day, without exception.

While there is something to be said for fostering a creative and collaborative workplace, Mayer is ignoring myriad studies showing the benefits of telecommuting and workplace flexibility, possibly to the detriment of her company. She’s also neglecting to consider how Americans are increasingly reliant on two working parents to support families, meaning that every hour saved on commuting time is an hour they can spend programming for Yahoo! and not worrying about leaving the office in time to meet their children at the bus stop.

Read more

According to the Federal Deposit Insurance Corp., banks in 2012 had their most profitable year since 2006 and their second most profitable year ever. Banks made nearly $35 billion in the fourth quarter of last year, bringing their yearly total to more than $141 billion:

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $34.7 billion in the fourth quarter of 2012, a $9.3 billion (36.9 percent) improvement from the $25.3 billion in profits the industry reported in the fourth quarter of 2011. This is the 14th quarter in a row that earnings have registered a year-over-year increase. Increased noninterest income and lower provisions for loan losses continued to account for most of the year-over-year improvement in earnings. For the full year, industry earnings totaled $141.3 billion — a 19.3 percent improvement over 2011 and the second-highest ever reported by the industry after the $145.2 billion earned in 2006.

Wall Street bonuses, while not attaining the same heights to which they rose in 2006, also increased last year. Despite their high profitability, banks are still trying to circumvent or water down the Dodd-Frank financial reform law, claiming that it will undermine their ability to do business. Overall, the financial sector sucks $635 billion out of the economy every year that could be spent on more productive uses.

The automatic budget cuts set to take effect March 1 will likely mean significant flight delays for travelers across the country. Forced spending reductions at the Federal Aviation Administration could lead to closures of air traffic control towers, furloughs of federal workers, and slower maintenance and safety response times.

The Department of Transportation will lose $1 billion, $600 million of which will come from the FAA, due to the sequester, leading to the possible closure of more than 100 regional and municipal airports that will not be able to pay their air traffic controllers, the agency warned last week. Meanwhile, most of the FAA’s 47,000 workers will face one- or two-day furloughs each pay period, putting a burden on safety officials, maintenance staffs, and airports that could delay flights by 90 minutes or more, Transportation Secretary Ray LaHood said:

“[Safety] is our top priority and we will never allow [more than] the amount of air travel we can handle safely to take off and land, which means travelers should expect delays,” LaHood said. “Flights to major cities like New York, Chicago and San Francisco and others could experience delays of up to 90 minutes during peak hours because we have fewer controllers on staff,” which would ripple across the country.

Cuts also mean preventive maintenance and quick repair of runway equipment might not be possible, leading to more delays, he said.

“And once airlines see the potential impact of these furloughs, we expect that they will change their schedules and cancel flights,” the outgoing transportation chief said. “So we are beginning today discussions with our unions to likely close more than 100 air traffic control towers at airports with fewer than 150,000 flight operations per year.”

Without its workers on the job, the FAA will likely be unable to manage the current volume of air travel, as the Center for American Progress’ Scott Lilly detailed in August, leading to delays that will make the airport yet another place where Americans will feel the effects of sequestration.

During a Senate Banking committee hearing on Tuesday, Sen. Elizabeth Warren (D-MA) grilled Federal Reserve Chairman Ben Bernanke on whether Wall Street banks should have to pay back U.S. taxpayers for the implicit funding advantage those banks receive by virtue of being viewed as “too big to fail.” According to a Bloomberg News study, big banks are essentially subsidized by about $83 billion per year because investors anticipate that those banks will be saved by the government if they get in trouble.

“These big financial institutions are getting cheaper borrowing to the tune of $83 billion in a single year simply because people believe the government would step up and bail them out. If they are getting it, why shouldn’t they pay for it?” asked Warren:

WARREN: So I understand that we’re all trying to get to the end of “too big to fail.” But my question, Mr. chairman, is until we do, should those biggest financial institutions be repaying the American taxpayer that $83 billion subsidy that they are getting?…It is working like an insurance policy. Ordinary folks pay for homeowners insurance. Ordinary folks pay for car insurance. And these big financial institutions are getting cheaper borrowing to the tune of $83 billion in a single year simply because people believe that the government would step in and bail them out. And I’m just saying, if they are getting it, why shouldn’t they pay for it?

BERNANKE: I think we should get rid of it.

Watch it:

As Bloomberg found, the biggest banks wouldn’t even be profitable without the expectation that they would be rescued by the government. “The banks occupying the commanding heights of the U.S. financial industry — with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders,” Bloomberg noted.

Congressional Republicans have taken every opportunity to gum up the implementation of the Dodd-Frank financial reform law. They have denied regulators the funds needed to finalize the law’s rules, leading to huge delays.

And the GOP is about to receive a hand from the so-called “sequester,” budge cuts scheduled to take effect at the end of the week. As The Hill reported, both the Securities and Exchange Commission and the Commodity Futures Trading Commission, regulators charged with large responsibilities under the law, will see hefty reductions in funding:

The Securities and Exchange Commission’s (SEC) $1.3 billion budget would fall by $108 million, while the CFTC would take a $17 million haircut to its $205 million budget.

The OMB’s report also states that the new Consumer Financial Protection Bureau (CFPB) — despite not having its budget set by Congress like the SEC and CFTC — would also face cuts totaling $34 million from its $448 million budget.

During a House Financial Services Committee hearing today, both ranking member Rep. Maxine Waters (D-CA) and Rep. Keith Ellison (D-MN) raised concerns about the ability of those agencies to do their jobs should the sequester go into effect. Watch it:

Allowing the sequester to go ahead would have a huge impact on many important programs. Meanwhile, Wall Street will continue to avoid the scrutiny it deserves.

Barring a last minute Congressional compromise, $85 billion in automatic across-the-board cuts will go into effect in the next 72 hours as a result of the sequester mechanism included in the 2011 Budget Control Act.

Republicans — many of whom voted for the BCA and have for years championed deep spending reductions — are hoping to blame the Democrats and President Obama for the consequences of the cuts, claiming that if “bad things” happen as a result of sequester, “it’s because [Obama] wants them to.” As the nation moves closer to the March 1 deadline, here is your guide to the GOP spin on the sequester:

1. We need spending cuts to get the economy going. The GOP claims that government spending is out of control and reason that reducing spending would spur greater economic growth. But government expenditures have grown at its slowest pace since the Eisenhower administration under President Obama and the latest projections from the Congressional Budget Office show that the nation’s deficits have shrunk by trillions of dollars, and the debt is close to being stabilized as a percentage of the economy. Austerity measures have dragged down economic growth in Europe and some economists argue that sequestration won’t actually lead to substantial shrinking of the deficit, since fiscal contraction caused by sequestration is likely to slow economic growth, reducing tax revenue and preventing meaningful deficit reduction.

2. Agencies need more flexibility to avoid cuts in crucial services. After backing sequestration mechanism — the harmful cuts that were designed to force lawmakers to reach a comprehensive deal to reduce the deficit with additional revenue and spending reductions — Republicans are now considering legislation that would leave Obama and federal agencies with the responsibility of carving out waste and unnecessary spending while preserving critical government services. In reality, the problem isn’t one of authority. Programs will see their budgets cut by anywhere between 2 and 10 percent and most will be unable to salvage services and only target inefficiencies. The Republican replacement is just another effort to implement spending reductions without increasing revenues and blame Obama for the consequences.

3. The federal spending will still be higher next year. This claim is technically true, but only because the sequester target the growth of government programs: they will grow at a slower pace as a result of the spending reductions. This is simply how federal budgeting works. The sequester will reduce spending as percentage of the economy, lowering discretionary spending to historic lows.

4. These are very modest cuts. The reductions may not mean much for wealthy Congressman, but states will lose funding for education, job training, health care, and a plethora of other services, jeopardizing assistance for low-income and middle class families alike and threatening the economic recovery. The cuts will also undermine everything from border security to the screening of containers. Estimates show that the sequester would reduce 2013 gross domestic product (GDP) growth by half a percentage point, and would cost the economy close to one million jobs in the next two years.

5. Democrats have rejected the GOP’s sequester replacement bills. Republicans in the House passed a sequester replacement bill in the last Congress that doesn’t raise any new revenue and includes cuts in domestic programs like food stamps, Medicaid, and the social services block grant (which, among other things, funds Meals on Wheels). The GOP has not introduced a replacement bill in this current Congress and refuses to compromise on the Democrats’ balanced approach of higher revenues and more spending cuts. Budget deals cut over the last year have already reduced a substantial amount of spending and even with the revenue included in the fiscal cliff deal, there have been $2.50 in spending cuts for every $1 in revenue signed into law by Obama.