Week in Review

The Week in Review: Pessimism Lingers Despite Optimistic Reports

Melanie Rader ’13

This week Politico columnist Glenn Thrush, along with many other major news outlets, discussed the positive and negative implications of President Obama’s decision to accept the support of super PAC donations. The economy also took center stage following the jobs report released last week by the Bureau of Labor Statistics, which showed a decrease in unemployment. Paul Krugman of The New York Times had limited optimism regarding the report in his article “Things Are Not O.K.,” as did Federal Reserve President Ben Bernanke. Bonnie Kavoussi of the The Huffington Post reported on Bernanke’s pessimism during a Senate Budget Committee hearing last Tuesday in regards to the jobs report and the weakness of the labor market.

Glenn Thrush calls Obama’s decision to give Democratic super PAC, Priorities USA Action, the go-ahead to start fundraising an “act of hypocrisy or necessity.” The decision is a surprising move for the Obama campaign, given the President’s previous denouncement of the Citizens United Supreme Court decision and criticism of super PAC fundraising due to its lack of transparency. However, the powerhouse Republican super PACs have been aggressively and successfully fundraising. The super PAC supporting Mitt Romney raised 30 million in 2011 alone, and if Obama expects to compete he will have to fundraise with similar results. Even though the Obama campaign will allow super PAC support, campaign advisors and staff are speaking out against the institution, saying that they plan to prohibit anonymous donations and explaining that they believe super PACs are out of line with the way the political system should function.

Paul Krugman showed reluctant optimism regarding the latest jobs report, which showed some improvements, such as falling unemployment. Krugman reports that the jobs report was one of the first positive jobs reports in a long time. However, as one can guess, based on the name of his article, “Thing are not O.K.,” Krugman is not convinced that this month’s improvement will be sustained. The issues that concern him are that fewer workers were employed in January 2012 than in January 2001 even though population has increased, the housing market is still depressed, and policy makers are not aggressively tackling these economic problems.  The improved job numbers will also discourage the Fed from taking any further expansionary action that is, according to Krugman, desperately needed. In the coming presidential election the economy will continue to be an important issue and the status of the recovery will reflect on President Obama. So far, he has faced criticism about the state of the economy; however, these improved job numbers will certainly reflect positively on him.

The Huffington Post’s Bonnie Kavoussi also reported on the jobs report. The Federal Reserve Chairman Ben Bernanke expressed concern about the jobs report last Tuesday at a Senate Budget Committee hearing. In spite of a decrease in the unemployment rate, other key indicators of the strength of the job market showed distress. Bernanke showed almost no optimism related to the long-run rate of unemployment, which has slowly but steadily increased in the last few years. The long-run rate of unemployment includes frustrated workers who have dropped out of the labor force and those who have been unemployed for more than six months. This group is currently tipping the scales at almost ten and a half million, in Bernanke’s opinion a national crisis because the longer these workers are unemployed the less likely they are to be rehired, exacerbating the issue. Bernanke also focused on the natural rate of unemployment, which has increased to between 5.2 and 6.0 percent. This is about 2.0 percent higher than the actual unemployment in 2006, a bad sign for the economy. Kavoussi also reported that, during the Committee meeting, Bernanke said that the U.S. government is better able to address these problems than the Fed because it can institute education, research, and development programs that create long-run value for the country.