Hey...did you hear that? It sounded like something just snapped.
It's the sound of America finally getting fed up with the high-stakes craziness going on here in the nation's capital. I could be wrong, but my read of the national mood is that it's changing and that enough people are both paying attention to the debt ceiling debate and are "taking names" such that we might see Congress shamed into some action.
I'll continue to track this of course, and I'll weigh in on parts that I believe are of interest, but frankly, it's not worth it to follow every wiggle. So let's put aside "the-gang-of-six-and-their-bag-of-tricks" for a moment and assess where we are and where we might be headed, political-economy wise.
[Note: Read in the New York Times this AM regarding the gang's plan: "...Representative Eric Cantor, the No. 2 Republican, and others like Representative Paul D. Ryan of Wisconsin, the Budget Committee chairman, warned that the most specific proposal to be made public so far -- and the one that has done the most to reopen the possibility of a bipartisan accord -- relied far too much for them on higher revenues to cut projected deficits." Like I said, don't get too attached to this or any other plan right now... I still think we'll lurch and muddle our way to avoiding default, but it's one ugly process.]
The Present: The US economy's stuck in something like neutral, with both consumption and investment in weakened states. The former remains 70% of the show, so if consumers are retrenching, absent policy help, we're stuck.
Conventional monetary policy is bound by zero (the Fed can't lower interest rates below zero) and less conventional stuff, like quantitative easing, might not even help much. The cost of capital is not a constraint right now, at least for larger firms, and corporate cash reserves are flush.
That leaves fiscal stimulus, which are two naughty words.
So the present is wracked with real problems -- the fallout from the housing bubble, financial collapse, deleverage cycle, weak demand, high joblessness -- strongly reinforced by self-inflicted handcuffs on policy relief and an invented debt ceiling crisis.
That's here -- in Europe, they've got their own version of dithering, refusing to rip the band aid off and restructure Greek debt, amplifying the threat of contagion and deeper sovereign debt crises in much larger economies.
The upside of the present: deleveraging is winding down in the household sector (debt service ratios are back to pre-recession levels), corporations have high levels of cash reserves and could create economic activity if they saw profitable opportunities, the housing correction is largely over (it ain't helping but it's not hurting as much), and the private sector has been adding jobs, though far too few.
The forecast is for slow improvement. We need a V-shaped recovery; we're getting an L.
The Future: As is the case by definition, this is where hope lies so it's where I'd like to focus for a while. It's not just that the present is depressing; it's that policy analysts like myself need to envision and articulate a better plan forward. It's of course entirely possible that any such path will be blocked by the same destructive politics on one side and hyper-cautious response on the other. But if there are no positive alternative paths out there, we're that much less likely to follow them.
Therefore, in coming days, I hope to post on post-debt-ceiling-debacle ideas for moving the economy forward, both "coulds" and "shoulds."
A number of us are continuing to develop the FAST! idea (Fix America's Schools Today), avoiding air-pockets (continuing some version of the payroll tax break and unemployment benefits), nudging the GSEs toward loan mods and putting their foreclosed housing stock on the rental market, pushing back on international currency managers to boost our exports, and other ideas in this space, including President Obama's forward-looking investment agenda, which has the potential to help our manufactures move from contracting (eg, autos) into expanding sectors (eg, clean energy).
It's also important to get back to bigger, structural job creation questions. Once the economy recovers, we'll need to be mindful of not just the quantity of job creation, but the quality. This means wage policies like the Earned Income Credit (which is interestingly protected in the gang of six plan), minimum wages, and union organizing (remember this -- it's still alive), will need attention.
And then there's the productivity challenge. This is the structural shift toward capital versus labor intensivity in sectoral job creation that I was fretting about a few weeks ago.
Labor saving technology has gone on forever, and I'm not at all a Luddite alarmist -- I always remind myself that there's no long term negative correlation productivity and job growth. Demand is the intervening variable and that makes all the difference, offsetting and absorbing higher output per hour.
But this warrants close analysis so more to come on all of the above.
This post originally appeared at Jared Bernstein's On The Economy blog.
Rep. Dennis Kucinich: The White House Now Conceals Plan to Cut Social Security
You say the housing market is de-leveraging.
But SWAPS leveraging is larger than ever.
The home loans were just the horses at the SWAPS track.
We need BIG changes:
Tax the Rich like Ike did, Cut the MIC by 90%, seize the bankster trillions, outlaw swaps and most other derivatives end the subsidies for rich companies.
Then invest in infrastructure, citizens safety net and green energy.
The GOP/Tea traitors to the Republic won't do that.
The Obama/DLC rulling democrats won't do that.
So who are ya going to vote for?
Vote for the Progressive caucus in the primaries and the dems in the general. The Bernie, Kucinich types
http://cpc.grijalva.house.gov/
Not the DLC corporatist anti-populist folks:
http://en.wikipedia.org/wiki/Democratic_Leadership_Council
Louder, you and a thousand others need to keep saying this louder and louder.
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That is true only as long as an increase in demand has a corresponding increase in hiring. But as productivity increases, more and more demand is needed for the same hiring effect. The time necessarily comes when the desired hiring effect simply takes more demand than the population can muster.
Read Martin Ford's "The Lights in the Tunnel," or check out Marshall Brain's articles on his website. We have labor-saved us into permanent unemployment, and that permanent unemployment can only grow in the decades to follow. We should plan for that before unemployment reaches 40%. At that level, Bastilles tend to burn.
I deserve the benefit to which I contributed and the fund is solvent up until 2025. If the rich were forced to pay the same % in SS as I do, the fund would be solvent into perpetuity. So what's the problem here? Lift the cap and pay out what is owed. It's not ever part of the debt or deficit. Why is it being discussed?
If Obama, in one of his latest incarnations of capitulating, weak kneed give aways, and throw it all to the Republicans, deal making throws SS to the wolves through some 'reform' I for one will walk away from him.
Obama might have forgotten that many of us nearing retirement lost up to 50% in our 401Ks and watched the value of our homes plummet. Right now, all we've got is SS. If Obama and the Republicans come for that it's time for us all to stand up and stop taking it.
I'll be one of the first ones to join demonstrations over what the Washington laggards are and are not doing for this country.
ECONOMIC RECOVERY CONTINUES IN 2010
(Tempe, Arizona) — Economic growth in the United States will resume in 2010, say the nation's purchasing and supply management executives in their December 2009 Semiannual Economic Forecast. Expectations for 2010 are for the positive conditions experienced in the second half of 2009
http://michael-hudson.com/2011/07/the-euthanasia-of-industry/
Look; before you spent $787 Billion dollars, a bunch of us yelled very loudly at you and told you that it pork spending wouldn't fix the economy. But the president's economic team said it would keep unemployment below 8%. Paul Krugman, who felt that the stimulus wasn't enough, said that it would probably bring the unemployment rate down to "7.2%" but that it would be used to "spin" the stimulus into a failure.
Well guess what?
It was a huge, gigantic, colossal failure.
And if you can't admit that?
Well heck... its going to be really hard for us to agree on -anything-!
If this were a medical situation, we'd have a patient, and a doctor who prescribed an ineffective treatment, and you would be arguing against all treatment and for letting Nature run its course.
If the doctor admits to his malpractice, will you admit that medicine is in fact a valid science?
I'm certainly glad to see anyone write about the quality of jobs that might be created during/after economic recovery. As far as I can see the goal is to improve Chinese wages times 5, while simultaneously decreasing US wages by half or more. The two may find equilibrium someday, and at that time maybe jobs will return to the US. Wages and benefits won't be good, but, after long time unemployment, any job looks good.
The whole of Reaganomics was based on two falsehoods. Tax cuts for the wealthy stimulate more growth than they cost and Government is the problem. Likewise Democrats have been suffering under some illusions. If some Government is good then more must be better and going along with Republican doctrine on trade and financial regulation is good. Perhaps the single greatest obstacle to our economic well-being is the Foreign Policies crafted or acquiesced to by most in Washington. Our Foreign Policy is one of Empire more specifically Military Empire. It is this need to dominate World affairs that wrenches forth a trillion dollars per year in spending. It is this burden that saps our economic essence.
To mitigate the present and create a brighter future we must address the past. Republican tax policies must be reversed. Effective financial regulations must be returned and the recent crimes addressed as legal issues with stern consequences. Job killing trade pacts must be re-examined. Effective Government not just more Government should be the goal. Our Foreign Policies should promote peace and prosperity not war and disparity.
They are bankrupt if they had to acknowledge their losses because those losses are multiplied with leverage.
Poorly regulated Derivatives and leverage [Think your neighbor taking a basically unregulated Fire Insurance Policy on Your House without a vested interest and people wonder why your house and your neighbor's house burn down] and counter party risk [Someone has to make the payment].
These Losses are to Large to Socialize by their respective governments but that hasn't stopped Wall Street and those TBTF Banks from lobbying their respective politicians.
Probably a few more years of pain until TLTS [To Large To Socialize] which nobody will see coming followed by a few more painful years.
The global economies won't recover until those losses are addressed. Remember Iceland told the bankers No and their economy is recovering.
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It seems that in the above you conflate, perhaps even confuse, rate of pay with quality of job.
These are distinct issues and should be dealt with separately. The creation of high quality jobs requires the development of complex policies with many interests in society. The raising of minimum wages requires legislation and enforcement. Measures in opposition to low pay have no relation to measures required to create high-quality jobs.
To your second point, did you see that Obama's very close pal Jeff Imelt (GE) showed a 3.69 billioin quarterly profit, up over 21% over last year's? GE paid no taxes last year (2010) on over $5 billion in profits. It pays to own politicians.
In the case that the American economy were to enjoy a three percent annual growth, nearly 1.6 million jobs would be created to flesh out a much-needed increase in the labor force. A mere two percent growth rate would, however, only lend itself to roughly 700,000 new jobs. This is not enough to absorb the ever-increasing numbers of people in search of work and would ultimately lead to a higher unemployment rate. Renowned Moody’s analyst Mark Zandi accordingly predicted that, should the U.S. economy only grow at an average rate of 2.5 percent for the next five years, the unemployment rate would once again rise into double digits. Joblessness would eventually soar to 12 percent after ten years of such slow growth.