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A few well-written words can convey a wealth of information, particularly when there is no lag time between when they are written and when they are read. The IPS blog gives you an opportunity to hear directly from IPS scholars and staff on ideas large and small and for us to hear back from you.

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Entries tagged "Obama administration"

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Economists Unite Around Once-Demonized Capital Controls

January 31, 2011 ·

Who says economic policy has to be polarizing? In a remarkable sign of consensus, more than 250 economists across the ideological spectrum have signed a letter to the Obama administration in support of capital controls.

Until quite recently, this would have been unthinkable. For decades, the International Monetary Fund and the U.S. government led a crusade to eliminate capital controls, which include taxes and other measures to manage cross-border "hot money" flows.

As part of a broader liberalization agenda, the IMF used loan conditions and the U.S. government used trade and investment agreements to try to end such policies. U.S. officials even insisted that trade rules allow foreign investors to sue governments in international tribunals over violations of their "rights" to free capital mobility.

Then, after several countries used capital controls effectively to insulate themselves from the ravages of the 1990s financial crises, the IMF's opposition began to soften. And since the 2008 financial meltdown, the IMF has actually recommended such controls in certain circumstances, such as to prevent massive capital flight in Iceland or to stem assest bubbles in emerging markets.

The U.S. government, meanwhile, has carried on the old crusade and now has trade or investment agreements with 52 nations that prohibit capital controls.

In the statement delivered to to the Obama administration, economists are urging the Obama administration to end these outmoded policies. Initiated by the Institute for Policy Studies and the Global Development and Environment Institute at Tufts University (GDAE), the letter carries endorsements from:

  • Former IMF Economists: e.g., Arvind Subramanian, now a Senior Fellow at the Peterson Institute for International Economics, and Olivier Jeanne, a Professor at Johns Hopkins University.
  • Free Trade Supporters: e.g., Center for Global Development President Nancy Birdsall and her colleague Kimberly Elliott, who, while critical of capital control restrictions, have been generally supportive of U.S. trade policies, from the Central America pact of 2005 to the pending U.S.-Korea deal.
  • A Nobel Laureate: Joseph Stiglitz.
  • Former High-ranking Government Officials: Harvard's Ricardo Hausmann, a former Inter-American Development Bank Chief Economist and Minister of Planning of Venezuela; Y. Venugopal Reddy, former Governor of the Reserve Bank of India; and José Antonio Ocampo, former Finance Minister of Colombia.

As the letter points out, this is a timely issue since "in recent months, a number of countries, from Thailand to Brazil, have responded to surging hot money flows by adopting various forms of capital regulations."

The Obama administration has ample opportunities to bring a fresh approach to ongoing negotiations in its:

Making sure these deals don't prevent governments from using sensible capital controls would be one important part of a pro-worker, pro-environment, pro-democracy trade reform agenda. If we've learned anything from the current crisis, it's that we're living in a globalized financial system, where chaos in one part of the world can be devastating for businesses and workers elsewhere.

Unconventional Wisdom: No Secrets at IPS

December 3, 2010 ·

The release of secret diplomatic cables by the whistleblower organization WikiLeaks is either a truth-seeker’s treasure trove or a massive threat to international security and diplomacy. While much of the information has embarrassed members of the U.S. Foreign Service for their snide and “undiplomatic” portrayal of world leaders, the content merely confirms what we already suspected - the Obama administration's diplomacy is more of what we have seen in the past, further evidence of the insanity of our foreign policy, conducted at great economic and political costs through either force or negotiations.

The diplomatic leaks are “an orchard of exposés over-ripe for cherry-picking,” as IPS fellow Phyllis Bennis states in her most recent article, “WikiLeaks: War, Diplomacy & Ban ki-Moon’s Toothbrush." Bennis points out, in a recent interview with the Real News Network, one of the more bizarre and frightening disclosure of the leaks is the fact that U.S. diplomats have been effectively turned into spies, tasked with obtaining biometric and other information on top world officials. IPS fellow Emira Woods, in her recent Voice of America interview, also emphasizes this aspect of the leaks and lauds the transparency and the free flow of information that the leaks provide.

While there are reasons to applaud WikiLeaks, there is also great concern that information taken and interpreted out of context could have negative and even fatal consequences. IPS scholar John Feffer points out how the current and possible future revelations exposed through leaks about South Korea, North Korea, and China can easily undermine secret negotiations in his latest article in the Institute's weekly foreign policy ezine, World Beat, “Transparency Fundamentalists.” Our hard-hitting analysis isn't top-secret but it's free and always worth a close read. Subscribe to World Beat today.

For 47 years, IPS has responsibly spoken truth(s) to power. We look forward to the many years to come.

Tax Wall Street to Pay for Jobs

June 17, 2010 ·

Yesterday, the Senate rejected an urgently needed jobs bill that would reauthorize several expired necessary stimulus programs, including the extension of unemployment benefits. The bill failed 45-52, with 12 Democrats voting against it.

Senator Ben Nelson, one of the dozen Democrats, reasoned that, “I've said all along that we have to be able to pay for what we're spending…$77 billion or more of this is not paid for and that translates into deficit spending and adding to the debt, and the American people are right: We've got to stop doing that."

Senator Nelson is wrong. The country is not facing a debt crisis, but a jobs crisis. Ordinary people on Main Street are still suffering from the consequences of Wall Street’s reckless mismanagement of capital that led to our current economic crisis. Extending programs like Unemployment Insurance and providing more aid to local and state governments are necessary acts to stimulate our economy. Yet the 12 moderate Democratic Senators are unwilling to address our 9.7% unemployment rate and our weak job growth in the past few months because they are concerned about having too much debt.

If these Senators are serious about stimulating the economy in a budget neutral way, they should pass a Financial Speculation Tax (FST). An IPS report released today, Taxing the Wall Street Casino, illustrates that an FST is the best way of creating the necessary revenue, while also discouraging the irresponsible financial speculation that is common on Wall Street today.

According to the Center for Economic and Policy Research, an FST, a small levy on all financial transactions (0.25% or less) would create about $177 billion in revenue per year. Not only would this tax stabilize our financial markets, but it would also provide more than enough revenue to support a robust jobs program and deal with other urgent needs.

Compared to other proposals on the table, an FST is the plan that would generate the most revenue:

FST chart

The Senate should be looking for ways to jumpstart our economy in a fiscally responsible manner. However, they shouldn’t be doing it at the expense of those who suffered the most from the crisis. A financial speculation tax is the solution to getting those who caused the crisis to pay for the damage that they have created.

Obama's Speech on the BP Oil Disaster

June 16, 2010 ·

Obama BP speechObama addressed the nation in primetime last night from the Oval Office to placate fear and anger about the BP oil spill. The president’s somber, seated address was a firm reassurance of a forthcoming solution and continued governmental assistance. He listed ongoing clean-up efforts and successes, forthcoming projects, and federal oversight efforts through the Coast Guard and National Guard.

But it was also a rallying cry. Using provocative language in attempts to galvanize the American public around his new “battle plan,” Obama characterized the challenge of the oil spill clean-up as a “battle” against the oil “assaulting our shores.” This tactic certainly oversimplifies the issue into a black and white, good vs. evil duality, but judgment should be withheld until we see how effectively the administration leverages this duality for progress.

To his credit, Obama acknowledged that mistakes had been made and that imperfections would continue to arise, but asked for feedback and critique to be channeled to a newly created commission. This commission, in charge of retroactively determining the cause of the Deepwater Horizon rig’s explosion and enforcing new regulations on the oil industry, is undeniably one of Obama’s strongest reactions to the irresponsibility of the corporate world thus far. He clarified in a sharp tone that the federal commission would, “act as the oil industry’s watchdog, not its partner.”

In addition, Obama placed considerable financial pressure on BP to compensate gulf coast residents and businesses damaged by the spill, channeling money through a third-party escrow fund. Only 16 hours after the national address, BP executives announced they would offer $20 billion over the course of several years into a private escrow fund for spill claims.

 $20 billion will only be a drop in the bucket for the true cost of this disaster. The federal, state and local governments will end up shouldering considerable costs as well. Obama pronounced that we will “fight this spill with everything we’ve got for as long as it takes…we will offer whatever additional resources our coastal states may need.” 

While this may be reassuring rhetoric, Obama needs to take precautions to ensure his bold promises are not a blank check that will damage the Treasury even worse than the Gulf Coast.

Ultimately, a long-term solution will involve the input and resources of the private sector and all levels of government to clean-up and restore the gulf coast. To accomplish this, Obama truly needs to rally the country onto their feet to contribute to his battle plan. He drew the analogy between the enormity of breaking America’s fossil fuel dependency with Kennedy’s space race ambitions to land an American on the moon first. Yes, we succeeded then. But how feasible is landing on the moon during a recession while fighting two wars and facing a debt crisis? 

Obama said that it can be done.  He has set the stage for an energy transition of monumental proportions, and turned the spotlight on himself for the first act. He needs to act quickly to harness the nation’s outrage/progressive spirit in order to set the wheels in motion for real change in Act Two.

Obama BP Speech Should Signal Shift in Energy Future

June 15, 2010 ·

This blog post was originally posted on Grist.

Tonight President Obama addresses the nation to talk about how his administration will hold BP accountable for the damages incurred by what has become the worst oil spill in U.S. history, and how he plans to reregulate the oil industry. The American public will be looking for bold action.

Obama has a golden opportunity to show the growing ranks of disappointed progressives and moderates that his administration is about changing politics as usual - if he and his advisors have the political courage to seize the moment. Obama must harness the public outrage at BP and momentum toward economic revitalization to make concrete steps toward U.S. leadership in the global transition away from dirty fuel to clean, renewable energy.

In less than two weeks, leaders from the 20 wealthiest countries (the G20) will meet in Toronto to discuss global economic recovery and closely related matters such as climate change. Outstanding on their agenda – as proposed by Obama last September – is the elimination of fossil fuel subsidies.

Worldwide, developed countries spend up to $100 billion a year making oil, coal and gas cheaper for energy companies through tax breaks, subsidized loans, price controls and other giveaways. Estimates of federal handouts to the U.S. oil industry range as high as $39 billion a year.  

The idea behind fossil fuel subsidies is to keep the cost of producing energy low so that company profits are high enough to incentivize continued production. That might have made sense when oil, coal and gas were the only feasible sources of power to run the American economy. You could have even argued for oil company handouts or when the price of a barrel of oil was only $18 – as it was in 1995 when Congress established a royalty waiver program for deepwater drilling. But today the price of oil is more than $70 a barrel. BP just posted a $6.1 billion profit in the first quarter. And scientists, governments and schoolchildren around the world understand that burning fossil fuels is putting the future at risk from climate change. Enough is enough.

Obama should return to his commitment tonight, outlining not only how to regulate the out of control oil industry, but how to shift the tens of billions of taxpayer dollars going to dirty energy each year into safer, cleaner and more secure energy sources in the U.S. and abroad.

But he’s got to get the cuts right. The OECD – a group of 31 industrialized countries – have their eye on consumer subsidies in the developing world. Eliminating tax exemptions that make energy accessible in impoverished countries and communities should be off the table until government handouts to oil, coal and gas companies raking in billions have ended.

And we should make sure that these incentives go to the right place – to deployment of proven technologies like wind and solar, research and development of innovative ideas, and to small and medium sized energy companies that can help decentralize and localize the energy sector, making energy companies accountable to the communities in which they operate.

In his speech to an anxious country, Obama should lay out how federal support for a vibrant clean energy economy will usher in a new era of environmental and economic security.

Getting the right laws on the books, and then enforcing them, is clearly critical to avoiding another environmental and economic disaster like BP’s Deepwater Horizon explosion. No question. But until we collectively kick our oil addiction – and dependence on other dirty energy like coal, gas and nuclear power – we can expect to continue reading headlines like Deadly Coal Mining Disaster in West Virginia, Radioactive Waste from Nation’s Oldest Nuclear Power Plant Reaches Aquifer in New Jersey, and Massive Oil Slick Hits Battered Gulf Coast. Obama can help us start tonight.

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