Has this ever happened to you? Your curmudgeonly uncle Rip wanders up into the mountains around the New Year, goes missing, gives everyone a good scare, and then emerges, as if from a night’s sleep, a year later. After all the rejoicing, you have to explain to him everything that happened in the past year, since he missed all of it. To make matters worse, uncle Rip is a policy nerd. He wants the wonky details.
It’s very frustrating! It’s hard to know where to start, and to remember everything that mattered that year. That’s where we come in. Here’s your guide, in graphs and gifs, to what happened this past year, what could have but didn’t, and what kept happening from years previous. Hopefully it’ll solve the Rip problem.
WHAT HAPPENED
Everybody got reelected: Barack Obama got reelected by a healthy 3.7 percent margin, winning the electoral college 332-206. That’s both what polling-based modelers like Drew Linzer, Nate Silver, Simon Jackson, and Sam Wang predicted at the time:
Source: Drew Linzer
And what economic models like Wonkblog’s predicted months in advance. Given that economic growth averaged 1.8 percent the first three quarters of this year, and Obama’s approval was around 46 percent in June, the model put his odds of winning at about 80.7 percent:
But at the same time, House Republicans retained their majority. Again, the forecasters saw it coming. Here’s how the Monkey Cage’s model’s predicted outcomes for all 435 House races compared to the actual outcomes:
Source: Eric McGhee et al.
Pretty good, right? So just because Obama was like:
Doesn’t mean Boehner was like:
Everybody was just more like:
The Fed got moving: 2011 was a strange year for the Federal Reserve. Following its November 2010 decision to start a new round of quantitative easing (read: buying up tons of government bonds with money it prints itself), the recovery continued but at a pace that left something to be desired:
That spurred Fed critics to urge stronger action. Chicago Fed chair Charles Evans called for it to commit to stimulating the economy until unemployment fell below 7 percent. Others, including Bentley economist Scott Sumner and former top Obama economist Christina Romer, wanted even more, arguing that the Fed should from here on out aim to keep “nominal GDP” (that is, economic growth plus inflation) growing at a constant clip. That’d effectively mean the Fed would abandon its traditional approach of only caring about keeping prices stable and permanently become more focused on boosting growth.
The year saw those complaints reach fever pitch, until Ben Bernanke finally went:
And gave the people what they wanted. First, in October, he announced a new round of quantitative easing that would continue for an indefinite period of time, meaning the economy would have constant injections of new cash from the Fed going forward. Then in December, he not only continued that policy but announced he wouldn’t consider tightening up — and certainly wouldn’t raise interest rates — until unemployment is below 6.5 percent or inflation above 2.5 percent.
That, give or take half a percentage point, is exactly what Evans called for. So the markets were excited:
And this happened:
That’s a bit confusing to read, but basically means investors are expecting more inflation in the next couple of years than they did a month or year ago, but then in the long run they expect things to even out. That suggests that the Fed’s attempt to signal that they’re willing to let inflation go up a bit now but will keep it in line going forward worked. So even though things are now like this:
Investors are still confident Bernanke will eventually tell inflation:
The Supreme Court upheld Obamacare but took a scalpel to Medicaid: People will probably remember the Supreme Court’s decision in National Federation of Independent Business v. Sebelius (or, as everyone calls it, the Obamacare case) for what it didn’t do, namely strike down the law’s requirement that adults who can afford it buy health insurance or else pay a fine. Solicitor General Donald Verrilli, whose initial performance before the Supreme Court was widely panned, was like:
But even as the decision kept that part of the law alive — and avoided striking down the law entirely, to some conservatives’ dismay — it struck down the mandate that states must participate in the Affordable Care Act’s Medicaid expansion on pain of losing their existing Medicaid funds. The Supreme Court said that the federal government could deny them the money from the expansion, but not from their existing Medicaid streams.
Even so, the Affordable Care Act is giving states an attractive offer. Under the law, the feds have to pay for the whole cost of expanding Medicaid to cover everyone up to 133 percent of the poverty line, at least for the first three years. The states pay nothing. So Obama’s pitch to the states is basically:
But some states are like:
Specifically, Republican governors across the country are opting out, both to protest Obamacare generally and out of a concern that the feds will pull the rug out from under them three years from now, when it’s no longer required to fully foot the bill.
The whole deep South has opted out, as have Texas and Florida, while New Jersey and Virginia, among others, are leaning against:
Ironically, states that don’t participate in the expansion are actually strengthening the health exchanges that are the crux of Obamacare. People who would otherwise be newly eligible for Medicaid will, in non-participating states, instead have access to private insurance on the exchanges, with generous subsidies to pay for it. So John Roberts may have quietly pushed millions of Americans from publicly-provided health insurance to private, exchange plans.
Congress barely maintained the status quo: It’s a testament to how inactive Congress was this past year that arguably the biggest piece of legislation they pushed through in 2012 was the Middle Class Tax Relief and Job Creation Act, which extended both payroll tax holiday — enacted as part of the December 2010 deal to extend the Bush tax cuts — and the 2009 stimulus’ expansion of unemployment insurance. That kept two of the few stimulus programs still in operation chugging, and reauthorized TANF (or welfare) and delayed Medicare cuts passed in 1997 for yet another year.
Then in September, rather than pass a real budget, Congress passed a “continuing resolution” to keep the federal government afloat. Like these corgis, they had to keep running just to stay in place:
And kept itself from insider trading: One of the few new pieces of legislation that passed this Congress was the Stop Trading on Congressional Knowledge Act, or STOCK Act for short, which prohibits government employees and members of Congress from using private information to inform private financial transactions. It’s primarily intended to stock politicians from trading based on information they get about companies they regulate. The bill followed reports that members bet that stocks would collapse as the financial crisis hit, even as those same members were tasked with tamping down the crisis.
But the bill hasn’t been implemented in full yet. It took effect for members of Congress on September 30 (after a month delay from the original start date of August 31), but has been repeatedly delayed for government employees, and now won’t take effect until April 15, 2013. Basically, Congress and regulators are just:
WHAT DIDN’T HAPPEN
The euro didn’t implode: Let’s be clear. Nothing good was going in the European economy in 2012. Not only is the euro zone in a recession, but the European Central Bank is continuing to not do anything about that. And the austerity measures that Greece passed will continue devastating that country’s residents, who’ve already been in an economic depression for going on three years now.
But those austerity measures passing meant E.U. money will keep flowing to Greece, and it won’t leave the euro just yet. And neither it, nor Ireland, nor Portugal, defaulted on their debts. And the interest rates on Spanish and Italian debt haven’t entered the 7 percent danger zone yet. Indeed, interest rates stayed pretty constant:
Indeed, Portuguese interest rates stopped rising and have fallen all year. Irish rates have continued their slide, and despite a brief spook from Spain in the summer, both it and Italy have kept rates in the single digits. Greece had an extremely volatile year, but is currently enjoying a sharp slide in rates.
Don’t get me wrong, the European economy is still burning to the ground. But it’s more of a controlled fire:
Than a huge explosion:
The United States didn’t double-dip: The U.S. economy had a lot going against it this past year. The Europe mess was depressing demand for U.S. goods among our trading partners there, and spooking investors the world over. Most fiscal stimulus efforts from the president and Congress had run their course. It was not at all clear until October that the Fed would launch QE3, or that it would be as ambitious as it’s turned out to be. And fear of the looming “fiscal cliff” didn’t help either.
But we kept growing, at least in the three quarters for which we have data:
At least now, we’re making steady progress. We’re not running, but at least we, like Troy Barnes, are crawling:
We didn’t avert the fiscal cliff: Rather than get their act together and put together a deal that protects the economy in the short run and cuts the deficit in the long run, Congress just kept running around and yelling loudly:
So starting Tuesday, we’re back to the Clinton tax code, complete with higher rates for the income, capital gains, and estates taxes, and automatic across-the-board cuts to Medicare and all discretionary programs (including defense) are taking effect.
Oh, and Medicare doctor payments are being cut 28 percent because we didn’t pass a doc fix in time, the stimulus tax breaks for working families are gone, and the debt ceiling will be hit on February. If Congress doesn’t act before then, the United States will default on its debt and almost certainly face another financial crisis in the mold of 2008. Hooray!
For the full rundown on that, see here.
The world didn’t end on Dec. 21: Small miracles. This 2012 survivor knows what I’m talking about:
WHAT KEPT HAPPENING
Wages stagnated: Take a look at this chart:
During boom times, like 2001 to 2007, wages and benefits (or current price compensation per hour, to name my specific figure) grow faster than inflation. And sometimes, like in 2003, they grow a lot faster. And during some of the financial crisis, wage growth still bested inflation, especially in 2009, which actually had some deflationary months. But since mid-2011, wages have been growing slower than inflation.
That’s not new. As the Hamilton Project’s Michael Greenstone and Adam Looney have documented, wages are actually falling for men, with high school graduates facing salaries that are half as big as they would have been in 1969:
So 2012 was the continuation of a trend that’s been going on for years. The median earner, especially the median male earner, is seeing his situation get worse, not better. Like this brave runner, middle-class Americans are working harder and harder and yet get slammed into the wall for their effort:
Inequality grew: Okay, so we don’t have inequality figures for 2012 yet. But we do have income data for 2011, and it suggests that the post-war trend of widening income gaps show little sign of abating. The gap between the top 5 percent and the rest of the country just kept growing:
Indeed, the gap between the 95th percentile and 80th percentile grew by $1,424 from 2010 to 2011. The distribution is widening, and fast. If it keeps going like it’s going, we could be in for:
