Investors are awaiting the miraculous delivery from crisis by the ECB and the Fed, but they are waiting in vain. The economic problems in the U.S. and Eurozone are mostly structural, not monetary. Unfortunately ideologues and politicians on both sides of the spectrum are interested in quick fixes rather than the real groundwork of economic progress.
Consider the new U.S. unemployment announcement. If you are a college graduate, there is no employment crisis. 72.7 percent of the college-educated population age-25 and over is working. The unemployment rate is 4.1 percent. Incomes are good.
If you have less than a high-school diploma, however, you are barely scrapping by. Only 40.4 percent of those without a high-school diploma have a job. Their unemployment rate is 12.7 percent. Incomes are too low to make ends meet.
There are two Americas: the college-educated crowd that may have taken a hit in their retirement accounts, but who are generally doing well. Then there are the rest, around 60 percent of the population, who are increasingly dropping out of the middle class. Nearly one-half of American households are now classified as low-income, within twice the poverty line.
Most observers other than the ideologues and economists can see why this is so. Those at the top have been favored in three ways during the past 30 years. The ongoing digital revolution has been their friend, adding heft to the knowledge economy. The globalization of trade has brought a surfeit of low-priced consumer goods (including the computers and smart phones that are their daily companions). And the money-fed political system has ensured a stream of political favors for the affluent: low tax rates, offshore tax havens, financial deregulation, mere hand-slaps for corporate abuse, and more.
The rest of the labor force, however, is hurting. The digital revolution has automated millions of jobs. Globalization has offshored millions more jobs. And politics has increasingly neglected the bottom half of the population. The bottom half are fodder for TV-based campaign propaganda but not for policymaking. Tax cuts at the top are paid for by budget cuts on education, environment, and infrastructure. The Democrats are slightly better than the Republicans on this count, but the practical as opposed to rhetorical differences should not be exaggerated.
And then there are the three miracle cures. Keynesians propose to solve the unemployment problem by another dose of temporary deficit-financed stimulus. The approach doesn't work. A stimulus might at best create another temporary construction bubble. Yet the effect would be at best temporary and the hangover would again be serious. In practice, the outcomes of stimulus packages are even more meager. The temporary tax cuts and transfer payments in the recent Obama packages have been more saved than spent, adding to public debt rather than to aggregate demand even in the short term.
Quantitative easing by the Fed is a similarly weak salve. Monetary easing can potentially stoke more asset bubbles large and small, but cannot solve structural problems. Arguably the monetary hangovers are as bad as the fiscal hangovers. We are, after all, still digging out from the Hayek-type crisis of misplaced investment in real estate caused by excessive liquidity expansion during the past decade.
Tax cuts combined with budget cuts are the third miracle cure: the idea of getting government "out of the way" to let the private sector lift the economy out of its doldrums. The absurdity is that this policy is that it's the opposite of what's needed to overcome a structural crisis of insufficient education and job skills. Poor kids need society's help, not its neglect.
The Eurozone of course has its own added structural challenges. When German banks over-lent for most of a decade, and Spanish, Greek, Irish, Portuguese and Italian banks over-borrowed, the boom-bust cycle crossed national boundaries. ECB President Mario Draghi cannot solve the basic political problem that resulted. Southern Europe's debts need to be written down, and owners of German banks need to bear the losses. If that means that the German taxpayer ultimately must pay to recapitalize the banks, then so be it.
A few northern European countries have successfully avoided the deep structural problems. They've done this not through monetary, Keynesian, or tax-cut policies, but by ensuring that every child receives a decent education and skill training, no matter whether they are born poor or rich. Families are backed by generous family support of various kinds. Active labor market policies promote school-to-job transitions.
Therein lie the successful formulas of the German social-market economy, Scandinavia's famed social democracies, or the Netherland's polder model. In all of those countries, ample public financing levels the playing field across households. Structural crises between the haves and have-nots have been contained even as market forces have tended to widen income and skill inequalities.
So where does that leave the U.S. and Europe in macroeconomic policymaking? The U.S. needs long-term public investments -- in education, skills, and infrastructure -- so that its dual economy can once again become an inclusive middle-class economy. Out kids should be in school and training, rather than in unemployment or low-skilled work. The Eurozone needs debt relief, cleaned-up banks, and social inclusion in the south that matches the more successful north. The entire rich world needs to understand that it faces a new era, in which its growth will be earned the hard way, by having sufficient skills and technology to warrant a significant wage premium over the emerging economies.
And all countries rich and poor will need to plug two more structural holes. The first is the explosion of tax havens, the kind where Mr. Romney reportedly keeps his savings. Without adequate taxation of corporate and high-end income, there is no way to close budget gaps in the U.S. and Europe. The second is ecological. No economic trick, no amount of education and training, will suffice, if we do ourselves in by human-induced droughts, heat waves, famines, and floods. It's time, in short, to put away the gimmicks and to start thinking about the sustainable economic prosperity, built on education, skills, social inclusion, and environmental responsibility.
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If we do not focus our efforts on better education, our ranks of the unemployable will continue to grow.
At some point, the responsibility falls on the student to apply themselves to learning.
There is simply NO evidence to support the assertion that increased spending by the Public sector during downturns in the business cycle doesn't work.
Spending = Income which equals aggregate demand and that is what drives job creation and growth, nothing else.
From the end of WW11 to the late 1970's Western economies and their governments adopted the responsibility for full employment. This was extremely successful and provided the strongest period of robust growth, year over year and an absence of recessions, unlike the neo-liberal period that followed to date. The evidence cannot be disputed and is there for all who care enough to look.
To claim otherwise is without an empirical basis.
" what's needed to overcome a structural crisis of insufficient education and job skills. "
There are NO skills shortage nor insufficient education and that is NOT where the crisis lies. This is not to say that the nation should forgo investing in education and it's young people, we should.
There is nothing stopping firms from hiring and training their own employees, no law, no intrinsic hurdle, nothing.
There is simply no demand for the output of that labor.
All economic growth over the last 25+ years came from increasing private sector debt, not increases in real wages as any and all income growth went to the capital / investor class. That's the crisis.
Traditionally, things like these were accomplished through diplomacy of the gun boat variety. I hope the 'tax havens' who help steal other peoples' money reform themselves before it comes to this.
www.voterocky.org
www.jillstein.org
Consumers lack the confidence to spend and businesses lack the confidence to hire. You can try all of the parlor tricks common to politics on both sides of the aisle and you will not get this economy moving until confidence has been restored.
The solution is very simple, change the messaging coming from DC. Unfortunately, that cannot happen in the middle of an election cycle, so we are all forced to wait. Consumers and producers will all sit on the sidelines clutching their wallets until next Spring at the earliest.
Who will the President be, what will the makeup of Congress be, what will be the next tax policy be, will regulations increase or decrease? Too many questions, no direction, and no hope for an answer until next year.
Sorry folks, that's reality.
Their motives are short-term profits driven and in many cases, they profit from a boom/bust cycle. They are Super-Citizens that no longer need the US consumer.
Lack of confidence has become a Political weapon in the political power War between Corporate and Private citizens.
That's reality.
But investing in renewable energy infrastructure will yield long term benefits. First, remember than the "fuel" for solar wind and hydro is free. Your long term operating cost for energy is zero. This is a difficult concept to grasp if you've always paid for energy.
Most of these systems will operate 25 to 50 years before they need replacement, so the boost to the economy is long term, unlike a road which starts to fall apart again after a few years.
Another great stimulus -- and Republicans know this so that's why they are so vehement in opposition -- is a nationwide passenger rail system. Our governor in Florida, Republican Rick Scott, actually turned down $5 billion in funds that could have employed 50,000 + directly, many more indirectly.
The anti-progressive forces are ruthless. They got theirs, and they want to close the gate behind them.
Democrats launched the Apollo Program, and in nine years, landed on the moon. This was a project opposed by Republicans.
The shuttle program, likewise.
Democrats are the can do party. Republicans are the do nothing party.
Here is how you know why wind power is a hoax. When the developer looks to build the tower, they don't buy the land. They lease it from the farmer or whoever owns it. Trust me, for what they pay in rent - they could easily by the land. But they don't - why?
Here is the answer. These wind farms change owership on a regular basis. When they last person owning it finally goes broke - the land owner will be responsible for it. The landowner will have to pay to take them down. The structure is sitting on his land so he is responsible.
Another thing to think about. When the salesmen come to talk to you about siting a wind tower, the bring a notory public (spelling?) along with them - why? They will tell you that it is for your convenience. That way if you were to sign the contract - it will be notorized immediately. The salesman doesn't want to inconvenience you by having you to have to go the bank the next day to notorize the agreement. Hey folks, if a salesman will not allow you overnight to think about it - it
As with healthcare where the US per capita is the highest in the world, although some of our actual "health" statistics make us wonder whether we are getting the bang for our buck, so to we fall behind where education is concerned. We spend more on education than any other developed nation but we do not get the bang for our buck in what our children are actually learning. We definitely need a revamp of the system. We are failing our children. Not in dollars spent, we have always been good at throwing money at the problem, but in substance. We cannot compete on a global level if we do not step up our game. We really need to look at what other countries are doing that allow them to achieve those better science and math scores and adapt those for American learning. I believe it will cost us less in the long run.
Because of imprudence on the part of our government (which we citizens have allowed to happen), our economic future is, for the next couple of decades, rather bleak. But a rising class of educated and industrious people will lead the way out. These folks aren't going to be the ones waiting for another futuile government program, but rather those who take it upon themselves to bring about change.
Will you be part of that change?
No government program will make kids do their homework, and understand the important qualities of a successful person in the work force. These things must be taught within the context of family and community. Public schools, by and large, don't make strong enough demands on the students so that they can be competitive in the world markets (and we've known that for three decades now (refer: "A Nation at Risk").
So, stop expecting your goverment to do the heavy lifting. It isn't going to happen. They promise more and more (to get your votes) and deliver less and less (all the while, making future prospects bleak with debt). Educate yourselves and your children by using the abundant resources that are available.
You can't legislate most of this. It has to come from hard work and determination among the masses. There needs to be a collective ethic that will promote these things. And that ethic cannot possibly come from the government (that is, from the top, down).
This author indicates that government programs (QE, stimulus, bailouts) don't solve anything. Well, duh! We all knew that before the government squandered trillions and piled up a mountain of debt on top of an existing mountain.
If one looks beyond the political rhetoric, the demands of the election cycle, the politician's soundbites, and the quick fixes, the ONLY thing that will have long term effects is a change in our national psyche from one of entitlement to one of taking personal responsibility to better one's self and one's country. And there is no way that any Congress, President, or Fed board can accomplish this.
And what will change the national psyche? Unfortunately, only a desire to do that. This desire will be forged out of a desire to remove ourselves out of adversity.
http://www.npr.org/2012/05/10/152354154/college-grads-struggle-to-gain-financial-footing