Both the New York Times and Washington Post’s fact-checks on the GOP presidential debate Thursday night missed the mark regarding former Senator Rick Santorum’s (R – PA) comments about Honduras.

Responding to the question, “What would each of you do as president to more deeply engage in Latin America and, importantly, to support the governments and the political parties that support democracy and free markets?”, Santorum’s answer included this statement regarding the Obama administration’s response to the 2009 coup in Honduras:

Our policy in Central and South America under this administration has been abysmal. The way we have treated, in particular, countries like Honduras, Honduras, which stood up for the rule of law, which threw out a would-be dictator who was using the Chavez playbook from Venezuela in order to try to run for re-election in Honduras, and the United States government, instead of standing behind the -- the people in the parliament, the people in the Supreme Court, who tried to enforce the constitution of Honduras -- instead of siding with them, the Democrats, President Obama sided with two other people in South America -- excuse me -- Central America and South America. Chavez and Castro and Obama sided against the people of Honduras.

The Washington Post’s The Fact Checker wrote:

Santorum’s statement reflects a commonly held viewpoint among conservatives, but it glosses over the fact that there was a coup against the democratically elected president of Honduras, Manuel Zelaya. The Obama administration, working with the Organization of American States, refused to recognize the parliamentary leader who had been named president and instead tried to broker a compromise that would have allowed Zelaya to serve out his term. But that effort failed. Eventually a new election was held and another man was elected president.

Center for American Progress

Movin’ It and Improvin’ It!: Using Both Education Strategies  to Increase Teaching Effectiveness
Craig D. Jerald

Center on Budget and Policy Priorities

Proposed Kansas Tax Break for "Pass-Through" Profits Is Poorly Targeted and Will Not Create Jobs
By Nicholas Johnson and Michael Mazerov

Center for Economic and Policy Research

Low-wage Lessons
John Schmitt

Pension Liabilities: Fear Tactics and Serious Policy
David Rosnick and Dean Baker

Union membership hit a plateau in 2011 after falling by almost 1.4 million workers between 2008 and 2010, according to the latest Bureau of Labor Statistics Union Membership report. At 14.8 million (up about 49,000), the total number of union members and the share of workers in a union, 11.8 percent (down 0.1 percentage points), were essentially unchanged last year.

In the public sector, the total number of union members declined 61,000, as squeezed federal, state, and local governments cut back employment. Union density (the share of the workforce that is a member of a union) in the public sector, however, increased 0.8 percentage points, to 37.0 percent - due to overall employment in the sector declining more rapidly than union membership. In the private sector, union membership increased by about 110,000, with union density holding steady at 6.9 percent.

For a more in-depth analysis, read our latest Union Byte.

That seems to be what the administration is proposing, according to an article in the New York Times. The article says that the Obama Administration wants to let people with underwater mortgages with private lenders refinance into government-guaranteed mortgages.

As described in the article, this would effectively mean that the government will be giving banks 100 cents on the dollar for mortgages where they could have anticipated substantial losses. If this is true, it would mean that the banks and investors who hold stakes in mortgage-backed securities would be getting far more money out of the deal than the homeowners who the policy is ostensibly designed to help.

To take a simple example, suppose a homeowner owes $250,000 on a home that is currently worth $200,000. It is likely that this homeowner will at some point default on the mortgage or need to make a short sale, which could result in the bank losing $50,000 or more. (Foreclosures involve substantial legal expenses and require that the bank pay a realtor to resell the property.)

On the other hand, if the government guarantees a new loan, the bank gets it full $250,000 back. The government would now stand in the same position as the bank had formerly, possibly losing $50,000 or more if the homeowner defaults. On the other hand, the benefit to the homeowner is paying a lower interest rate. If this arrangement results in a 2-percentage-point drop in the mortgage interest rate, the homeowner would save roughly $5,000 a year. In this story, the homeowner is almost certain to get much less out of the deal than the bank or investor.

To understand President Obama’s State of the Union speech, you have to understand his political strategy. From the beginning of his 2008 campaign, his main constituency has always been the major media. He has always calculated that he can win without the energy companies and even some other big campaign donors, but not if the mainstream media doesn’t like him. So a little bit of populism on the tax issues – e.g, the Buffet Rule - is now acceptable, especially in the context of deficit reduction and Republicans’ pro 1 percent extremism.

The other key constituency is the swing voters – he is taking Democrats for granted – which for the last four decades have been composed largely of white working-class voters. According to the leading Democratic pollster Stan Greenberg, the speech was effective with swing voters. So, overall a success for Obama.

And the people? There were a lot of specific proposals around energy, education, skills training, infrastructure, etc. But with the President committed to the silly goal of deficit reduction, with Republican obstructionism, and Obama’s general lack of willingness to fight for human needs – remember his promises of a public option in health care reform? Or labor law reform? – I’m not holding my breath. Especially employment – can’t do much about that without federal spending. And seniors, hold on to your wallet when he mentions “strengthening Social Security.”

His foreign policy is much worse – “all options on the table” for Iran, which is code for the threat of yet another war. No commitment to get out of Afghanistan. When he talks about how “America is back” with “the enduring power of our moral example,” I see images of U.S. soldiers pissing on corpses, drones slaughtering civilians in Pakistan and Afghanistan, massacres like Haditha (with impunity).

“Above all,” he tells us, “our freedom endures because of the men and women in uniform who defend it.” This could hardly be more false. America has lost more freedoms in the last decade, including during Obama’s presidency, than any other developed democracy in the world; and nobody fighting these unnecessary wars is defending our freedom.

This post originally appeared in The Guardian.

That would seem to be the case from the leaks about a mortgage settlement which would reportedly give the banks and their executives immunity for all their misdeeds connected with the housing bubble in exchange for $20 billion in principle write-downs on underwater mortgages. And, Naked Capitalism reminds us that this $20 billion need not even come out of the banks' pockets. This includes write downs on mortgages that they are servicing, which means that the money would come out of investors' pockets.

Apart from the limited money at stake, the question is why would there be a reason to grant immunity for criminal wrong-doing? If people at these banks committed fraud, for example by lying about possessing documents that they did not possess, lying about the terms of loans to mortgage applicants or misrepresenting the mortgages in pools to investors, then why would we want to give them a get out of jail free card?

If no such fraud was committed, then there is no reason to include this sort of immunity in a settlement. The only reason to grant immunity of this type is if fraud was committed and the Obama administration wants to let the bankers off the hook.

This week, we post links to reports from the Center for American Progress, Center on Budget and Policy Priorities and National Employment Law Project.

Center for American Progress

Building a Technically Skilled Workforce
Louis Soares and Stephen Steigleder

Center on Budget and Policy Priorities

House republican proposal would undermine foundation of unemployment insurance system
Hannah Shaw and Chad Stone

Winning Wage Justice: A Summary of Research on Wage and Hour Violations in the United State

Winning Wage Justice: Choosing the Policy Options Right for Your Community

Late last year, the Congressional Budget Office (CBO) responded to an inquiry from Senator Orrin Hatch about the potential impact of a financial transaction tax (FTT) of three one-hundredths of a percent on (1) GDP and jobs, (2) municipal financing, and (3) U.S. Treasuries. 

In general, CBO responded that the FTT “could” or “would probably” cause “slight” negative effects in the short term, and it never quantifies these effects.  As for long-term impact, CBO states that it does not know whether it will be positive or negative.  While some media and critics have held up this letter as a major setback for the FTT, let’s take a closer look at what CBO actually said:

Question #1:  What impact would the proposed tax have on gross domestic product (GDP) and on U.S. jobs?

CBO’s response:

In the short term, imposing the transaction tax would probably reduce output and employment.  Beyond the first few years, however, the tax’s net impact on the economy is unclear… Employment would be unaffected in the long term.

This appears to be far from damning.  CBO dilutes its assessment of the short-term impact with the qualifier, “probably,” and says that the long-term impact on GDP is “unclear” and that jobs will not be affected.  In explaining its reasoning, CBO looks at effects on investment and decides to counter an argument in favor of the FTT: 

Some analysts believe that… the tax would reduce volatility… [and] might discourage short-term speculation, which can destabilize markets… However, the tax would discourage all short-term trading, not just speculation—including transactions by well-informed traders and transactions that stabilize markets. 

In fact, the extent to which “well-informed” traders can stabilize prices is trivial. The transactions that CBO refers to happen when there are slight price discrepancies between different exchanges, and traders make profits by capitalizing on these gaps.  If, for example, the FTT were to make this trading profitable only when the gap between prices of a certain stock rose to 11 cents instead of 10 cents, then the FTT would allow prices to be slightly further out of balance for a little longer, which has essentially zero consequence.

The Consumer Price Index remained unchanged in December, according to the latest Bureau of Labor Statistics' reports on the consumer price, US import/export price and producer price indexes. This is the third month in a row without an increase in the index, bringing the three-month annualized rate of headline inflation to -0.4 percent. Much of the variation in inflation rates can normally be attributed to food and energy prices, and recent history is no exception. Energy prices fell 1.3 percent in December and fell at an 18 percent annualized rate since September, compared with a 26.6 percent rate increase over the three months prior.

The real hourly wage for production and nonsupervisory employees once again was flat in December. Though this may be in small part due to the creation of a few low-paying jobs, the low rate of wage growth will also help keep low the rate of inflation and make it difficult for consumers to repay their debts. In all, this report once again indicates that a high rate of inflation is far removed as a threat to the economy.

For a more in-depth analysis, read the latest Prices Byte.

Source: Alan Krueger, Council of Economic Advisers.

Economist Miles Corak, one of the world’s leading experts on economic mobility, has written a devastating take-down of the core of two recent pieces by the Brookings Institution’s Scott Winship. Winship has been arguing that President Obama, his economics team, and many others on the political left are wrong to claim that economic mobility has been on the decline in recent decades. But, as Corak documents, it is Winship that is misreading the data.

Winship’s first piece was written in response to President Obama’s much-commented-on speech last December in Osawatomie, Kansas, where the president argued that a child born into poverty today has a lower chance of reaching the middle class –about 33 percent– than a child born into poverty just after World War II – about 50 percent.

Writing in the National Review Online, Winship said that the president’s “claim of falling upward mobility … rang false” and “is contradicted most of the research that has been conducted to date.” Winship’s criticisms focused on some pretty technical issues in research conducted by Berkeley economist David Card, one of the country’s foremost labor economists and winner of the 1995 John Bates Clark medal. After reviewing Card’s numbers, Winship concludes that upward mobility today “is no worse than it has ever been and it does not translate into a general lack of opportunity for the middle class.”

CEPR Co-Director Mark Weisbrot continued to push for UN accountability in Haiti over the past week, for UN responsibility in introducing a cholera epidemic that has killed thousands, and for the sexual assaults that UN troops have perpetrated against Haitians.

A new ABC News article cites scientists as saying that there is “no doubt” that troops with the UN Stabilization Mission in Haiti (MINUSTAH) are responsible for bringing cholera to Haiti:

"The scientific debate on the origin of cholera in Haiti existed, but it has been resolved by the accumulation of evidence that unfortunately leave no doubt about the implication of the Nepalese contingent of the UN peacekeeping mission in Haiti," French epidemiologist Renaud Piarroux told ABC News’s Brian Ross Investigative Unit.

But the UN continues to deny the facts, and Mark Weisbrot is quoted as saying, “It's outrageous for the UN to try to deny responsibility for bringing cholera to Haiti.” Weisbrot has repeatedly pushed for the UN to own up to its responsibility in causing the epidemic, and provide compensation to victims, such as in this Guardian column and this press release.

Recently released reports from CBPP and NELP:

Center on Budget and Policy Priorities

Chart Book: The Legacy of the Great Recession

Policy Basics: Introduction to the Supplemental Nutrition Assistance Program (SNAP)

Proposal to Greatly Expand "Moving to Work" Initiative Risks Deep Cuts in Housing Assistance Over Time
Douglas Rice and Will Fischer

Romney's Charge that Most Federal Low-Income Spending Goes for 'Overhead' and 'Bureaucrats' is False

For Major Low-Income Programs, More Than 90 Percent Goes to Beneficiaries
Robert Greenstein and CBPP staff

SNAP Is Effective and Efficient
Dottie Rosenbaum

National Employment Law Project

Sticking to Principles: Congress Should Oppose Barriers to Unemployment Insurance And Instead Provide Meaningful Reemployment Tools

In his latest New York Times Magazine column, "The Other Reason Europe Is Going Broke," Adam Davidson writes, "One great way to start a bar fight during an American Economic Association conference is to claim that the U.S. economy is preferable to Europe's. Someone will undoubtedly start quarreling about how GDP per capita doesn't measure a person's happiness."

NPR's Planet Money blog asked Dean Baker, co-director of the Center for Economic Policy Research, to explain why GDP per capita, the total GDP of a country divided by the number of people in the country, is such a controversial measure. This post originally appeared there.

The gap in per capita income between the United States and Europe is striking, but these numbers do not tell the whole story in comparing living standards There are three important issues to keep in mind.

First, there are some very big measurement issues in international comparisons of GDP. At the top of this list, I would put our spending on health care. We spend 17 percent of GDP on health care, whereas the average across Europe is less than 10 percent GDP. What do we get for this extra 7 percentage points of GDP? That is not obvious to say the least. The U.S. ranks behind every West European country in life expectancy and does not stand out in most other outcome measures.

There are also important areas of spending that don't directly improve living standards. The United States spends more than 4.0 percent of GDP on the military as opposed to less than 1.0 percent across Western Europe. One can argue whether this spending is necessary, but this is another 3.0 percent of GDP that is not improving living standards. The same applies to spending on criminal justice, which is more than 1.5 percent of GDP in the United States and perhaps one-tenth this amount across Western Europe.

Natural gas companies are trying to sell fracking as the solution to all of the economic ills ailing this country.  Supposedly fracking can bring the economy out of its current stagnation by creating uncountable new jobs, without running up government deficits, and even save us from global warming in the process.  So how come local residents and environmentalists oppose fracking? The short answer is that fracking does not create local jobs, it lowers property values, and pollutes the water we drink and the air we breathe.

Hydraulic fracturing, or fracking for short, is drilling for gas buried more than a mile under ground in hard rock layers. In order to extract the gas, a toxic cocktail of chemicals is pumped deep into the ground to fracture the rock. In recent years, the state of Pennsylvania has embraced the fracking boom and more than 4,500 wells have been drilled there since 2007. The state of New York has taken a more prudent approach by implementing a moratorium until the environmental and economic effects have been evaluated. The New York Department of Environmental Conservation is currently seeking public comments on the issue (deadline January 11).

In an intensive lobbying campaign to influence a skeptical public’s opinions about fracking, the gas industry has commissioned a number of economic studies that find huge job gains from fracking. A recent study by the economic forecasting company IHS Global Insight Inc., paid for by the America’s Natural Gas Alliance, projects that fracking will create 1.1 million jobs in the United States by year 2020. However, a closer read of the study reveals that the analysis also projects that fracking will actually lead to widespread job losses in other sectors of the economy, and would result in slightly lower overall employment levels the following 10 years, compared to what it would be if fracking were restricted. In another study, commissioned by the Marcellus Shale Coalition, researchers with Penn State University estimated that gas drilling would support 216,000 jobs in Pennsylvania alone by 2015. The most recent data from the Bureau of Labor Statistics show employment in the oil and gas industry to be 4,144 in Pennsylvania.

Rather than trying to project what will happen in the future, one could look at what the employment impact has been from Pennsylvania’s love affair with fracking since 2007, using actual employment data readily available from the Bureau of Labor Statistics.

Recently released reports from CEPR, CBPP, Demos and EPI.

Center for Economic and Policy Research

Down and Out: Measuring Long-Term Hardship in the Labor Market
John Schmitt and Janelle Jones

Center on Budget and Policy Priorities

Hundreds of Thousands of Lower-Wage Workers, Many of Whom Worked for Decades, Would Be Denied Unemployment Insurance Under Provision Now Under Consideration
Robert Greenstein, Hannah Shaw and Chad Stone

Demos

The State of Young America: Key Facts

Under Attack: New York’s Middle Class and the Jobs Crisis
with the Drum Major Institute for Public Policy

Economic Policy Institute

Working Hard to Make Indiana Look Bad: The Tortured, Uphill Case for ‘Right-to-Work’
Gordon Lafer

According to the Bureau of Labor Statistics' latest employment report, the unemployment rate fell to 8.5 percent in December, the lowest level since February 2009, when Congress approved the stimulus package. Discounting a 42,200 job gain reported for couriers — likely the result of seasonal adjustment, not real job growth — the economy created 158,000 jobs in December, in line with expectations.

Pulling out the courier jobs, growth has averaged 145,000 per month over the last four months, which is somewhat better than the 90,000-100,000 a month needed to keep pace with the growth of the labor force, but certainly not rapid enough to explain a 0.6 percentage point drop in unemployment. At this pace, we may not get back to pre-recession levels of unemployment until 2027.

CEPR Co-Director Dean Baker will take part in a live Q&A on the Washington Post at 1 p.m. today on the jobs numbers.

While attention has been focused on the activities of that great vampire squid, Goldman Sachs, investment firm BlackRock has been quietly taking over the American economy. In a presentation scheduled for 2:30 pm on Saturday, January 7 at the Labor and Employment Relations Association meetings at the Palmer House in Chicago, Professor Gerald Davis of the University of Michigan’s Ross School of Business documents the extensive reach of BlackRock. Aided by the growth of defined contribution pension plans and abetted by the weakness of other financial services firms, notably Barclay’s, during the financial crisis, BlackRock catapulted into first place in 2011 among the top holders of large blocks of shares of publicly-traded companies in the US. With $3.5 trillion in assets under management that they invest on behalf of their clients, the company has become the world’s largest investor. BlackRock manages assets for institutions such as pension funds and mutual funds, and its iShares business is popular with both retail investors and hedge funds who delegate all proxy votes for their iShares to BlackRock.

Among Professor Davis’ startling findings:

• Ownership of US corporations is no longer highly dispersed.
• In 2011 BlackRock held a 5% stake in 1,803 US listed companies. This is almost triple second place Fidelity’s 677 companies and more than triple third place Vanguard’s 524 companies.
• As a result of changes in the nature of equity markets – the growth of exchange traded funds (ETFs) and the decline in the number of new firms going public (IPOs) –  the number of publicly-traded corporations has dropped by half since 1997 to about 4,300 listed US companies in 2011.
• BlackRock owns a 5 percent stake in more than two-fifths of publicly-traded US companies.

Professor Davis concludes: “Prospects for control of corporations by financial institutions have never been this high in a century.”

UPDATE:

A July 2011 ruling by the DC Circuit Court vacated the SEC's 2010 proxy rule that allowed long-term shareholders’ that own at least 3% of a company’s shares to nominate directors.

As states get ready for cuts to the federal Extended Benefits program, those who have been unemployed the longest get ready for their struggle to become even more difficult. Our most recent recession has caused an unprecedented increase in the number of people unemployed for at least six months. In our new paper, John Schmitt and I make the case for two significant changes to our thinking on long-term unemployment.

First, we suggest expanding the current discussion on long-term unemployment to include all workers facing “long-term hardship” in the labor market. This broader category would include “discouraged,” “marginally attached” and involuntary part-time workers. While these workers are not included in the long-term unemployment rate, they have faced a good deal of long-term hardship in recent years due to the weak labor market. The figure below shows that the number of people facing long-term hardship, by this expanded definition, is more than double the amount of long-term unemployed.