On December 13, when the U.S. economy was still shedding jobs like water off a duck's back, Larry Summers, the Director of the President's National Economic Council, went out of his way to assert, on the record, that "everyone agrees that the Great Recession [of 2007] is over."
Those of us who believe that the health of a very large economy such as we have here in America is best measured by the economic vibrancy of its labor force -- particularly real unemployment and real wages -- found this Pollyanna-ish assertion of Summers' to be especially unwarranted and without any grounding. For at the time of his announcement, the number of real unemployed workers in the United States was 30 million, real unemployed workers represented 19 percent of the adjusted civilian labor force, and at least 10 million workers had been unemployed a half year or longer -- a figure in each case worse than at any time since the Great Depression of 1929.
Four months later (Apr. '10), when the number of real unemployed workers had improved very little despite the federal government hiring tens of thousands of temporary workers to assist with the 2010 Census, in another of his unwarranted displays of optimism, Summers said that "the process of job creation has started [and] we expect it will accelerate."
Even more concerning than Summers' several bullish pronouncements, however, was the contemporaneous assertion by Christina Romer, the Chairwoman of the White House Council of Economic Advisors and a long-time cohort of Summers', that:
"The overwhelming weight of the evidence is that the current very high levels of overall and long-term unemployment are not a separate, structural problem, but largely a cyclical one [due to] the effects of the collapse of demand caused by the crisis."
While Summers and his colleagues in the Administration have mostly been using their expressed optimism regarding the U.S. economy to justify cutting back on federal stimulus efforts when instead we should be advocating for more stimulus monies not fewer, Ms. Romer has been blaming reduced corporate and individual demand for goods and services for our nation's high real unemployment (see "Unemployment Is Tied to Big Drop in Demand").
The reason that accepting Romer's unsupported conclusion regarding 'structural' versus 'cyclical' is so much worse than just being bamboozled by Summers' unwarranted optimism, is that Romer's assertion that everything that's been going wrong in the country employment-wise can be blamed simply on being 'out of sync' timing-wise takes away any imperative for the Administration and Congress to address:
(1) The massive relative decline in manufacturing as a percent of GDP that has occurred over the last thirty years;
(2) The unfair offshoring of millions of jobs, mostly manufacturing, that occurred over the last decade or so;
(3) The nation's massive ongoing trade deficit; and
(4) The persistent income inequality that is now the greatest since 1928; or
(5) The demands from the House Populist Caucus and other Members that all focus go to "putting people back to work."
Romer's assertion, and the conviction with which she holds it, also frees up the Administration's economists and the nation's "free traders" to advance Summers' core belief -- even though almost universally discredited -- that a "job is a job" and that at any point in time drop-offs in America's manufactured goods (and, by extension, the labor force that makes them) can be made up by a favorable trade balance in such products as software, legal services, university tuition, and motion pictures.
According to a recent speech by Jeff Immelt, the CEO of General Electric, the U.S. took a macroeconomic misstep when it concluded 25 or 30 years ago "that we could move from being a technology and manufacturing-based economy to a service-based economy with a $1 trillion annual trade deficit" with no fundamental adverse result. Later, when he was asked why it was so important to keep manufacturing in the United States, he responded "American companies have to remember that we also have a responsibility to create jobs in our own country."
Well, it's pretty apparent that neither Larry Summers nor Christina Romer ever read Jeff Immelt's speech, since it's obvious to anyone whose head isn't in the sand that the four or five massive unemployment issues now plaguing the United States are mostly 'structural' and only modestly 'cyclical':
Larry Summers has said over and over again that the Obama Administration "inherited a terrible situation," and I completely agree. Nonetheless, it's time -- in fact, it's way past time -- to play the cards we've been dealt over the past thirty years by 'Reagan-Bush-Clinton-Bush.'
For all his talk about 'resuscitating Main Street' and 'reforming Wall Street', President Obama has to date largely failed to rein in the economic policy determinations of that small group of individuals now at the center of his Administration, most of whom previously served under Bob Rubin when he was at Goldman Sachs, the Department of Treasury, or at Citibank.
As a result, with no particular suasion coming from the White House regarding either the proper makeup of America's workforce or the proper role of large financial institutions in our economy, most large multinational corporations shirked their responsibilities to save existing, and create new, jobs on Main Street. At the same time, most large investment and commercial banks have resisted with every capability they have regulations that might curtail the risky financial schemes that were such a major impetus of the 2007-2008 financial crisis.
President Obama needs to get seriously engaged in these issues, and in doing so he needs to resist the lobbyists and special interests that still unduly influence both his Administration and Congress. The President especially needs to stop his extreme over-reliance on inputs from men and women who 'studied' at the 'Bob Rubin School of Economics', a School whose theories and laissez faire 'curriculum' have for too long errantly dominated the nation's thinking when it comes to globalization and trade, the proper role of Wall Street, and the true economic and moral strength of this country.
Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.
Sen. Carl Levin: Wall Street and the Financial Crisis: The Role of Investment Banks
Running through our findings is a thread that connects the reckless actions of mortgage brokers with credit rating agencies and Wall Street executives. That thread is unbridled greed, and the absence of a cop on the beat to control it.
The irony is that it's a terrible situation that Summers himself created back in the Clinton years, when he, Rubin and Greenspan fought like hell to prevent Brooksley Born from regulating the derivatives market.
You are not answering the tough questions. As best I can tell, you think that manufacturing employs more and pays better than trucking and clerking, so bring it back -- but that is not an answer -- that is a recipe for increasing costs and inflation. The problem is indeed structural, but to want the entire structure upended in the middle of this disaster is unrealistic when it took 30 years to achieve it.
Your condemnations are suspicious when the stimulus was clearly aimed at spawning a new economy. Even if it is true that some wind turbines were bought from China, it may have been the best deal we'll ever see toward beginning the hard work of putting this nation back on solid ground. It may be that luring us to buy stuff is destructive when buying our neighbor's services would save us.
I desperately want to envision a way out of this mess. You are not helping if you don't address the sticky questions. It makes you seem like Larry Summers, just hawking a different story.
His disdain for Summers and Romer and the poor job they are doing is completely understandable.
Truth is, nobody has the answer. Obama is just experimenting and hoping something will stick. What everybody fails to admit is that the foundation is so busted up that short of a miracle the long-term prognosis for the US is grim. I mean that we have seen our best days unless everybody NOW is willing to make a supreme sacrifice for the future generations. I don't see that happening since our government just wants to put a hope patch on everything and cross that issue off the list of things to do.
Sadly, I fear you are right that nobody has the answer, and that is a sad state of affairs for a nation with the world's highest paid CEO's and most respected academics. I'm not sure what the sacrifice is that we can make -- I'm intense about saving energy for the future and I don't understand why more people don't get into it, to the point of competing for the lowest impact innovations -- otherwise, I can't think what will help so I hound others to tell me if they have the audacity to offer a new track.
Boy, that's the understatement of the century!
We castigate our politicians for betrayal and allowing the collapse to happen but the people who matter most are the Jeff Immelts. Are there more CEOs out there who hold this view and what is he and others CEOs doing to solve the problem? Where do Main Street CEOs stand on the shenanigans of Wall Street?
those who rebel go broke
Apparently, neither the President nor his advisors understand that the Administration is on a path that almost surely guarantees that they will lose effective power to govern in the November elections with either GOP control of one or both Houses of Congress or tiny Democratic majorities.
Abraham Lincoln had to fire several generals to find a winner in U.S. Grant. Hopefully, President Obama will do the same to find an economic team whose priority is more just than helping Wall Street. Excellent article.
Pat Choate
"...most large multinational corporations shirked their responsibilities to save existing, and create new, jobs on Main Street."
Well, they don't think they have any such responsibility. They think they have only a fiduciary responsibility to shareholders to maximize profits.
So we need strong regulatory controls that change that.
If it is true, who cares, guilt by association, if you can even call it that , do you think that President Obama uses anyone's family history to make decisions for this Country?
Maybe I misunderstood this sentence, if I did I'm sorry.
Watching PBS NOVA last night, I am still amazed that there are still defenders of the efficient market hypothesis in a pure form. I am 50 years old and remember stagfaltion, the crash of 87, the S&L debacle, the internet boom/bust and our current fiasco. Who is so out of touch that they do not recognize these events for what they were and are: disastrous macroeconomic and microeconomic events casued by oh so 'inefficient' humans?
I an still dumbfounded to hear that conservatives still think that the business leeches will act in the best interests of their companies. They will act in their own best interests, period. And if that means earning $100 million as they ride their company into the ground? Hey, they still have their $100 million.
Greenspan, still such an Ayn Rand dupe, that he still seems to think, exclusive of his mea culpa last year, that we can count on people to act in the ultimate interest of themselves and all will be well. Voltaire's "Best of all possible worlds," for the uber-capitalist set.
Our recession and our long term decline are closely related but they are not one and the same. If you don't change oil in your car because you are diverting resources to the economic elites your engine will eventually stop. Fixing the engine is not the same as fixing the original problem that caused the engine failure.
The R & D pipeline was allowed to dry up as the 'best and brightest' went to Wharton & Wall St. rather than becoming engineers, physicists etc. I heard a Harvard Prof. speak about this at least 15 years ago...Even if we decided to miraculously reopen manufacturing facilities, we don't have enough people who would know how to run them!
HuffPost should ban him from posting unless they condone the defrauding of the U.S.
calm your retching down, seeing less of him in photos/video
and his name not being mentioned by others on camera.