Today, the House will likely pass a budget deal that will partially end sequestration—the across-the-board spending cuts to military and domestic programs that went into effect in March.
The deal is good news for many government agencies, such as the Department of Health and Human Services, which was forced to cut back on nutrition assistance for low-income mothers and infants, and the National Institutes of Health, which faced cuts to its medical research. It's also good news for defense hawks and top brass, who'd been complaining about the dire effects of automatic budget cuts.
Though the $22 billion in cuts to the Pentagon in 2014 were imperfect, says Ethan Rosenkranz, a national security analyst at the nonprofit Project on Government Oversight, they would have reined in unnecessary and wasteful spending. "Sequestration is a bad way of implementing spending reductions," he says. "However, it's an excellent way of forcing the Pentagon to make some tough budgetary decisions which they've been neglecting to make for the past 10 or 12 years."
Anticipating looming budget cuts, the Air Force was considering delaying the purchase of more F-35 fighter jets. That would have been a wise decision, Rosenkranz says, because the F-35 has not been fully tested yet, and the program is already billions of dollars over budget and years behind schedule. "You should make sure the jets work before you purchase [more of] them," he says. Now, with sequestration being lifted, "a lot of these hard decisions will evaporate."
The Navy was mulling cutting in half its littoral combat ship program, which has been plagued by cost overruns*. Now that the Pentagon may have less reason to make these careful budget considerations, Rosenkranz says, "My biggest fear is that the Navy will expand its fleet of littoral combat ships."
The military was also considering cutting spending by shuttering some of its domestic bases. The Department of Defense has reported two years in a row that it has 20 percent excess infrastructure. The military "was moving in the right direction," Rosenkranz says. Now, it's not clear the DOD will continue in that direction if the pressure from sequestration is lifted, he says.
"We should prioritize national security and get rid of those things that are not contributing to national security," Rosenkranz argues. "Now you're going to see this conversation fly out the window."
Correction: An earlier version of this story confused Navy cruisers with littoral combat ships.
Mary Harris "Mother" Jones, marching for workers' rights in Trinidad, Colorado, circa 1910.
Mary Harris "Mother" Jones, after whom Mother Jones is named, was a prominent labor leader in the late 1800s and early 1900s. When her long life came to an end, Mother Jones—"grandmother of all agitators"—was buried in Mt. Olive, Illinois, alongside miners whose rights she fought for. This week, teachers in Mt. Olive are striking, too. Tuesday marked the second day of their strike for higher salaries and better benefits.
The Mt. Olive board of education offered the 39 teachers in the district a 2 percent increase in their salaries this year, as well as an increase of 2 percent per year during their last four years to help them prepare for retirement, according to the local Fox news station, KTVI. The teachers want a 4.5 percent pay hike now, and a 6 percent annual increase for their final four years. Teachers told KTVI that they agreed to forgo raises in their last contract in exchange for larger salary increases this time around, but the town didn't keep its promise. "We feel that when you make a promise you need to keep it," Marcia Schulte, a kindergarten teacher who runs the teachers’ union, told KTVI Monday. "That's what we need to teach the kids." She added that last year, the administration and support staff got a six percent raise, while teachers haven't gotten a salary bump since 2009.
The teachers are also upset that the board wants to subject new hires to a different pay raise scale that would make their salaries increase more slowly. The teachers' last contract expired in August, and ongoing union contract negotiations since then have left issues unresolved.
The school district superintendant Patrick Murphy told KTVI that reduced aid from the state and lower school enrollment means that the district has to shrink its budget.
All 39 teachers went on strike Monday morning. On Monday night, union members and administrators negotiated until 1:00 a.m., but no progress was made.
The teachers will not meet again with the administration until next week, and they'll likely continue striking until then. Meanwhile, they have Mother Jones' words to keep them company. "Pray for the dead," she was known to say, "and fight like hell for the living."
On Tuesday, banking regulators finalized one of the most important provisions of the 2010 Dodd-Frank financial reform law. It's called the Volcker rule, and it's supposed to prohibit the high-risk trading by commercial banks that helped cause the financial crisis. Here's what you need to know about it.
What's the reason for the new rule? In the run-up to the financial crisis, big banks invested in low-quality mortgage-backed securities. When those over-leveraged bets turned sour, the economy collapsed, and the government had to bail out big financial institutions. The Volcker rule ensures that banks don't engage in what is called proprietary trading—that is, when a firm trades for its own benefit instead of trading on behalf of its customers. In May 2012, JPMorgan Chase lost $2 billion on a bad trade, which led to calls for a strong Volcker rule.
Why is it called the Volcker rule? The rule is named after Paul Volcker, the chairman of the Federal Reserve in the 1980s, and later an adviser to President Barack Obama. He advocated this change in financial regulation and persuaded the president to back the rule in 2010, when the Dodd-Frank bill was passed.
2010? What took so long? One reason it took three years to finish the rule is that after the legislation was passed, the actual regulation had to be crafted jointly by five banking regulators—the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC). That's a lot of coordination amongst people with different backgrounds and priorities. And during the 2012 campaign, Mitt Romney vowed to repeal Dodd-Frank. So for several months, wait-and-see regulators slowed down devising the details of the rule.
Wall Street lobbying also played a big part in delaying the unveiling of the final rule. The financial industry pushed like mad to get key loopholes into the regulation. "It's relentless, nonstop, day and night lobbying," Dennis Kelleher, the president of the financial reform advocacy group Better Markets, said a year ago. "It is absolute total nuclear war that Wall Street is engaged in here." One loophole Wall Street tried to get written into the regulation would characterize certain forms of risky trading as hedging against risk. (Yes, you read that correctly.)
So who won? Kelleher says financial reformers won; these loopholes were not included. "Today’s finalization of the Volcker rule ban on proprietary trading is a major defeat for Wall Street and a direct attack on the high-risk ‘quick-buck’ culture of Wall Street," he said in a statement. Treasury Secretary Jack Lew said the rule would have prevented JPMorgan's $2 billion trading loss last year. CFTC commissioner Bart Chilton, a fierce Wall Street critic, is happy with the rule. Former Rep. Barney Frank (D-Mass.), one of the authors of the Dodd-Frank law, told Mother Jones today, "I have been confident all along that it would be a tough rule. I'll make one prediction: all of the cries of doom that you're going to hear from the financial institutions, three years from now will come to about as much validity as the cries of doom we heard about same-sex marriage."
Obama noted, "Our financial system will be safer and the American people are more secure because we fought to include this protection in the law....I encourage Congress to give these regulators adequate funding to effectively and efficiently implement the rule, which will help protect hardworking families and business owners from future crisis, and restore everyone’s certainty and confidence in America’s dynamic financial system."
But the success of the rule depends on how it is implemented. Marcus Stanley, the policy director at Americans for Financial reform, says that he's "lukewarm" on the rule, mostly because a lot hangs on how it is interpreted by banking regulators who supervise compliance. "Whoever is the primary supervisor has enormous discretion about how this [rule] will affect trading," he says, adding that the final Volcker rule does not include transparency provisions that would allow the public to judge whether banks are complying.
So is financial reform all finished now? No. Proprietary trading contributed to the crisis, but it was not the main cause. Regulators still have other Dodd-Frank provisions to finalize. Wall Street watchdogs have to implement plans to wind down failing banks; finish writing rules governing derivatives trading (which was largely unregulated before the financial crisis); and enforce strong requirements regarding the level of reserves banks must maintain.
Last week, the president and vice-president of the centrist think-tank Third Way accused Sen. Elizabeth Warren (D-Mass.) of ignoring what they call Social Security's "undebatable solvency crisis." In an interview with Mother Jones, Warren fired back, countering the charge, and elaborating on how Social Security could be expanded.
"If we made no changes at all to Social Security," Warren said, "it would continue to make payments at the current level for about 20 years," meaning there is no immediate crisis facing the program, which assists some 58 million Americans. "Modest adjustments," she added, "will make certain… we could increase benefits for those who need it most."
One way to increase monthly benefits to seniors, Warren said, would be to broaden the program's funding pool. She did not elaborate on how, but one proposal that has been floated in recent years would raise the cap on the level of earnings subject to the Social Security tax. In 2013, for example, Americans paid a Social Security tax of 6.2 percent on wages up to $113,700. Earnings over that amount were not subject to the tax. Several members of Congress have introduced legislation that would lift or eliminate this cap, including Sens. Tom Harkin (D-Iowa), Mark Begich (D-Alaska), and Bernie Sanders (I-Vt.), and Reps. Gwen Moore (D-Wisc.), Pete DeFazio (D-Ore.), and Linda Sanchez (D-Calif.). Harkin's bill would increase Social Security payments by $70 a month for low- and middle-income beneficiaries.
A less obvious, but effective way of directing more money into the Social Security pot, Warren said, would be to increase the federal minimum wage. "Raising the minimum wage means we have workers paying more in to support the Social Security system," she said. Warren backs Obama's call for a minimum wage hike from $7.25 to $9 an hour.
The average monthly Social Security payment is $1,162. Americans have become more dependent on the program in recent years because a growing portion of retirees can no longer rely on pensions through their employer. Twenty years ago, 35 percent of private sector employers offered workers a traditional pension that provided monthly payments to retirees. Today, only 18 percent of employers offer such a plan. About 44 million workers get no retirement help from their employers.
In the interview, Warren emphasized that Third Way, as well as many in Congress and the media, are framing the debate over Social Security in the wrong way. "We should stop having a conversation about cutting Social Security a little bit or a lot," she said.
Warren has said time and again that she will not run for president in 2016, but this conflict between the progressive wing and the centrist wing of the Democratic party could serve as a warning for the next Democratic presidential nominee not to stray too far towards the center.
Employment increased in the private and public sectors, despite the continuing effects of the drastic budget cuts that went into effect in March. Industries including transportation, manufacturing, retail, and leisure and hospitality saw jobs gains, and average hourly earnings increased by 4 cents to $24.15.
The stock market rose on the news, and economists say the new employment numbers make it likely that the Federal Reserve will halt its stimulus efforts early next year. But many Americans are still out of luck.
As my colleague Kevin Drum notes, 90,000 of the 203,000 new jobs created last month were needed to keep pace with population growth. That means net job growth last month was more like 113,000.
And although about 2.1 million unemployed workers found jobs last month, 2.4 million stopped looking. November is the 43rd month in a row in which more job seekers left the labor force than found employment. A total of only 63 percent of American adults are either working or looking for work. That's the second-lowest monthly labor force participation rate in 35 years. (The lowest-ever labor force participation rate was recorded in October, but the data for that month was skewed because of the government shutdown.)
The number of long-term unemployed—those without a job for 27 weeks or more—edged up slightly to 4.1 million. Unemployment amongst African-Americans and Latinos remains much higher than average—at 12.5 percent, and 8.5 percent, respectively. For those without a high school diploma, the unemployment rate is 10.8 percent. It's 14 percent for people under 25.
About a third of employment gains in the private sector last month came in the form of low-wage service jobs in retail, hotels, restaurants, bars and temp agencies. Retail employment added 22,000 jobs last month, and bars and restaurants added 18,000. Low-paying service sector jobs have been the hallmark of the recovery. The growth of these low-wage jobs has given rise to a string of strikes over the past year by workers at Wal-mart, and fast-food joints like Wendy's, McDonald's and Burger King, who are demanding a living wage.
In his speech on the economy on Wednesday, President Barack Obama called on Congress to boost job growth by investing in infrastructure and education; doing away with harmful sequestration cuts; ending incentives for companies to ship jobs overseas; and increasing the minimum wage. "[I]f we refocus our energies on building an economy that grows for everybody," the president said, "then I remain confident that the future still looks brighter than the past."