March 25, 2023

Hurdles Still High for a New Front-Runner

The first would be to win confirmation from the Senate — an obstacle that doomed the previous front-runner for the job, Lawrence H. Summers.

While Ms. Yellen faces much less potential opposition than Mr. Summers did, the White House is not taking Senate approval for granted. Even as the administration informed legislators on Capitol Hill on Thursday that Ms. Yellen probably would be President Obama’s nominee, one official said the point of the calls was not so much to gauge support but to tell Democratic senators they should defend Ms. Yellen if she comes under attack before a formal nomination.

The second, even bigger, challenge would be to manage the central bank’s retreat from its unprecedented efforts to stimulate the economy, even as the nation’s job market remains frustratingly weak more than four years after the Great Recession.

With the collapse of Mr. Summers’s candidacy, White House officials began calling Senate Democrats about the Fed choice; a senior Congressional aide said the only name they mentioned was Ms. Yellen’s. Since she has become the focus of public discussion, the president’s staff is worried that she could become a target for criticism, just as Mr. Summers was, before the White House actually nominates her and can defend her.

Jeff Merkley, an Oregon Democrat who serves on the Senate Banking Committee, said in an interview Thursday that the White House had accelerated the vetting process for Ms. Yellen.

“Certainly my impression is the White House is taking a very serious and fast-track examination of her as a potential nominee,” Mr. Merkley said.

While Ms. Yellen enjoys strong support from Senate Democrats — a third of the caucus took the unusual step of signing a letter urging the president to nominate her, even before the White House indicated it was leaning toward Mr. Summers — Senate Republicans will be more difficult to persuade.

Some, like Senator Richard C. Shelby of Alabama, an influential member of the Banking Committee, have expressed reservations about her leadership in the past. Mr. Shelby voted against confirming her as vice chairwoman of the Fed in 2010.

Despite the opposition, Ms. Yellen, if nominated, is expected to win Senate confirmation and assume the leadership of the Fed early next year.

Mr. Bernanke handed his successor a gift this week when the central bank surprised Wall Street and many economists by not easing the stimulus effort.

On Wednesday, Mr. Bernanke walked back his earlier suggestion that the Fed’s huge bond-buying effort would cease when the unemployment rate fell to 7 percent, instead leaving the door open for that form of stimulus to continue well into 2014 and perhaps beyond, even if that jobless threshold is breached.

That flexibility is something that Ms. Yellen might well take advantage of. As the most prominent member of the Fed’s dovish flank, other than Mr. Bernanke himself, Ms. Yellen has focused more on the dismal state of the labor market and the pressures facing poor and middle-class families than on the potential threat of financial instability and inflation down the road.

In a major speech in February, Ms. Yellen highlighted not only the elevated unemployment rate, but also long-term joblessness, the high poverty rate, sluggish wage growth, labor force dropouts and homelessness as major reasons for the Fed to continue the stimulus. “The effects of the recession and the subsequent slow recovery have been harshest on some of the most vulnerable Americans,” Ms. Yellen said.

While the unemployment rate has fallen steadily, hitting a five-year low of 7.3 percent in August, much of that improvement has come from workers dropping out of the labor force rather than vigorous job creation. The monthly pace of new jobs has slowed, falling from well over 200,000 new jobs being added each month at the end of 2012 to 169,000 in August 2013.

A more telling indicator of the continuing weakness of the economy, analysts say, is the proportion of Americans who are part of the labor force, which in August hit 63.2 percent, a 35-year low. While some of that decline is because of structural factors like the retirement of baby boomers and the continuing shift from industrial jobs, the trend has accelerated significantly since 2007, prompting many economists to conclude it is primarily a cyclical phenomenon that can be cured only by faster economic growth.

Mr. Bernanke, in fact, highlighted the falling participation rate in a news conference after the Fed’s decision on Wednesday.

Jeremy Peters and Peter Baker contributed reporting.

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The Caucus: Romney’s Taxes Compared With Everyone Else’s

The Romney campaign revealed Friday afternoon that Mitt Romney and his wife, Ann, paid a 14.1 percent effective federal tax rate in 2011, paying $1.9 million in taxes on $13.7 million in income, much of it from investments. (That $13.7 million in income most likely puts him in the top 0.01 percent of earners, by the way.)

Where does that effective tax rate put him in the universe of taxpayers? The Romneys paid a higher effective tax rate than the average middle-income American, though a significantly lower rate than the average rich, or very rich, American.

According to the nonpartisan Tax Policy Center, the middle quintile of taxpayers – earning between $33,542 and $59,486 a year – had an effective direct federal tax rate of about 12 percent in 2011. The top 1 percent of earners, making more than $532,613 a year, paid a direct federal tax rate of about 22.7 percent. And the top 0.1 percent of earners, making more than $2,178,886 a year, paid a direct federal tax rate of about 21.4 percent.

(We’re just using income, employee-side payroll and estate taxes in this comparison. A fuller picture would include state and local, employer-side payroll and corporate taxes.)

Still, the Romneys revealed that they paid more taxes than they really owed, pushing their effective federal rate higher. The couple made more than $4 million in charitable donations in 2011, but claimed a deduction for only $2.25 million of those donations “to conform to the governor’s statement” that he “paid at least 13 percent in income taxes in each of the last 10 years.”

In light of that, expect Mr. Romney to take some heat for this statement, which he made to ABC News in July: “ I don’t pay more than are legally due and frankly if I had paid more than are legally due I don’t think I’d be qualified to become president. I’d think people would want me to follow the law and pay only what the tax code requires.”

Follow Annie Lowrey on Twitter at @AnnieLowrey.

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The Caucus: Perry to Propose a National Flat Tax

LAS VEGAS – Gov. Rick Perry of Texas said Wednesday that he would propose a flat tax next week as part of a tax overhaul program, signaling a new effort to separate himself from Mitt Romney and the rest of the Republican field.

Mr. Perry signaled his intent in a speech to Republicans on Wednesday morning after Tuesday night’s brawl of a Republican debate. He has in the past suggested support for some form of a flat tax, but has backed off from endorsing one. Mr. Perry recently recruited as an adviser Steve Forbes, who ran for president in 1996 on a pledge of implementing a single flat tax on income, without any deductions.

Mr. Perry did not offer details of how his plan would work. He said he wanted to scrap “the three million words of the current tax code and start with something simple: a flat tax.”

“I want to make the tax code so simple that even Timothy Geithner can file his taxes on time,” the governor said.

Mr. Perry said his tax plan would also advocate a “serious” round of spending cuts and endorse a balanced budget amendment.

His remarks come after one of his opponents for the nomination, Herman Cain, has gained traction with his 9-9-9 plan, which seeks to tax personal and corporate income at 9 percent, while imposing a 9 percent national sales tax.

In his remarks, Mr. Perry picked up where he left off Tuesday night in trying to differentiate himself from Mr. Romney, the former Massachusetts governor, telling an audience of Republicans that he was not a candidate “of the establishment.”

“The American people are not going to trim around the edges when it comes to 2012: They are going to turn Washington inside out,” he said. “Let me share with you one thing. I am not the candidate of the establishment. You won’t hear a lot of shape-shifting nuance from me. I am going to give the American people a huge big old helping of unbridled truth — that we can’t continue to spend what we are spending, that we can’t avoid entitlement reform because we are afraid of the third rail of politics.”

Mr. Perry did not mention Mr. Romney’s name in 15 minutes of remarks to the Republican Leadership Conference, but his target was clear. It came the morning after the two men tangled repeatedly during what was the most contentious Republican debate of the year.

Mr. Perry’s appearance also comes as his standing in many polls has fallen after a rough start to his campaign. He suggested that the establishment was writing him off too soon.

“Pundits and the establishment, they may think they choose, or it’s their responsibility, or their right, to choose our next president,” he said. “Primary voters and caucus voters haven’t got that memo yet.”

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Economix Blog: Rick Perry’s Scientific Campaign Method

A coming book, “The Victory Lab” by Sasha Issenberg, looks at the new science of political campaigns, and a section about Gov. Rick Perry of Texas, “Rick Perry and His Eggheads: Inside the Brainiest Political Operation in America,” is being published as an electronic book on Tuesday. On The Caucus, David Leonhardt interviews Mr. Issenberg about Mr. Perry’s approach, described as “skeptical about the effectiveness of basic campaign tools” and “committed to using social-science methods to rigorously test them.” Read more

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