We'll know more tomorrow when the jobs report is announced, but today's report on America's massive service sector -- which make up about 90 percent of the economy -- is sobering to say the least.
The Institute of Supply Management's non-manufacturing index fell to a four-month low in April (53.5, down from 56 in March -- still positive territory but just barely). New orders dropped to their lowest level in six months.
That doesn't bode well, especially when combined with other recent data. The Commerce Department reports that the economy as a whole has slowed from the last quarter of 2011 when it was expanding at an annual rate of 3 percent, to 2.2 percent for the first quarter of this year. And last month's unemployment report showing only 120,000 new jobs in March was downright alarming.
What's going on? Europe is sliding into recession, and gas prices are still high. But the real problem lies closer to home. Cuts in government spending are reducing domestic demand precisely at the time when consumers are reaching the end of their ropes and can't spend more.
Consumers did all the spending they could in the first quarter. Household purchases increased 2.9 percent between January and March. That was the biggest increase since the last quarter of 2010.
Absent real wage gains, that spending pace can't possibly continue. Consumer savings are down and their debt is up. Consumer confidence dropped last week to a two-month low.
The only people left spending are in the top 5 percent, whose stock portfolios have been doing so well they feel even richer. But the top 5 percent can't pull the entire economy out of the doldrums. Besides, if demand continues to slide the stock market will follow.
The real problem is political, not economic. Republicans in Congress insist on cutting public spending even before the economy has mended.
Conspiracy theorists might think Republicans want the economy to be so bad by Election Day that Obama is swept out of office, along with most congressional Democrats.
Paranoid double-conspiracy theorists might come to the opposite conclusion: Democrats are allowing Republicans to do this because they want Romney elected and Republicans in charge next year as the economy slides into a terrible recession due to far larger spending cuts already scheduled to kick in then, as well as increased taxes on the middle class.
Under President Romney and a Republican congress there will be no escape from this downward spiral; fiscal hawks and right-wing government-haters will be in control. As a result of this nightmarish mess, Republicans will be booted out of office for a generation.
ROBERT B. REICH, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
Arthur Goldwag: Why Is Everyone Talking About Obama's Composite Girlfriend?
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Except they won't be booted from office. You'd think after Bush's "stolen" 2000 election, after his lies, and years and years of wars, the country would have been done with Republicans. But no, Obama won with only a 7% popular vote margin.
The Republicans have mastered the art of reaching out and touching the Common Man. They have nothing to offer him, but they understand him and his fears far better than the Democrats do.
This was also accomplished with maximum tax rates of between 70% to 94% for the very rich.We were a great nation accomplishing great things! We also had 13 billionaires.
Since 1980, a drastic tax reduction experiment was initiated by the GOP, with maximum income tax rates cut from 70% to 50% to 30%.
The results of this 30 year "experiment" are in, and they are ugly! The national debt has increased to more than $14 trillion, the Bush (the lessor) economic collapse was felt worldwide,
unemployment is still above 8% and the recent debt ceiling fiasco was a national embarrassment. The only notable U.S. accomplishment since 1980 was the creation of another 400 billionaires.
The cause-and-effect relationship between tax cuts for the very rich and the economic crisis should be obvious.
And, the economic crisis fix should be equally obvious, unless you are a republican!
It's not a question of absolute tax rates, it's a question of relative tax rates. In the past American tax rates were lower than European tax rates and the rest of the world didn't really matter. Now American tax rates (combining state, local, and federal) are higher than those of many other countries. As the world has become more global it has become easier for business (and thus jobs) to migrate to lower tax areas.
Its also a question of the total cost of government. In the past there were fewer government regulation imposing costs on society. Therefore we could afford higher marginal tax rates.
Not exactly. First, it's a marginal rate we are discussing. And second, when rates were increased under Clinton, we actually started paying off the national debt. Third, the rest of the world did matter as we just came out of WWII and with the Marshall plan, we were rebuilding the war ravaged Europe. And, finally, current tax rates for the wealthiest Americans are at their lowest points since the year 1928 - one of the leading factors of the great depression, just as the bush (the lesser) tax rates were a contributing factor to the great recession and the income inequality that still exists.
"Its also a question of the total cost of government."
And, when viewed as such, national debt as a percent of GDP, of the last twelve administrations, only three [Reagan, Bush 1 and Bush (the lesser)] increased deficit spending and the national debt as a % of GDP while cutting taxes for the wealthiest Americans with the completely failed economic philosophy of "supply side", "trickle down", "voodoo" economics.
The tax for the top bracket under Eisenhower was 90%. Even by the time of Reagan, it was still 70% See, THAT's what those higher taxes at the top give you. A future.
We've done SOOO well under the various Republican incarnations of "strangle the government by robbing it of income" trickle-down economic violations of the laws of human physics.
As a nation, we're right where most families are today. A while back, we were making good income, and we bought all the stuff we needed (and lots we didn't, but that was after what we needed). By now that stuff is at the end of its service life. It's ALL wearing out and needs replacing, but there's no money to replace it. And when there is money, it will go to replace necessities, not to splurge on extras.
On a government level that means we're not the replacing bridges and roads that made the nation work, and still using 40-year old nuclear reactors and the like. When THAT type of thing reaches crisis, it's a little worse than needing a new refrigerator. And have you seen the state of our educational system?
Starving government starves us all.
Got Sulfur?
Robert can you do radio? organicsulfur at sisna.com
US labor costs many times as much as Asian Labor according to the DOL website:
ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/ichccpwsuppt01.txt
The unknown increased cost of Extended Unemployment Benefits will be added to US company payroll costs.
The unknown amount of National Healthcare Reform cost will be added to US company payroll costs.
The increasing cost of compliance with existing and proposed new environmental laws is unknown.
The increasing cost of electrical energy that is generated in the USA in compliance with US EPA regulations is much more than the cost for the same amount (kilowatt hours) of electrical energy in most Asian countries today, and the future US costs are unknown.
Existing environmental laws, and the anticipated costs of future environmental legislation that will be "piled onto" our remaining US located industries if they elect to stay in the USA instead of relocating to overseas locations.
I live in Houston and we are still afraid that the previously proposed "Cap and Trade" will be created by the US congress or Presidential executive oeder in the future, and then our remaining Houston area petrochemical industries will ECONOMICALLY BE REQUIRED relocate to foreign countries.
I find it highly appropriate that your concern is deregulation. Self-rationalization at it's best. Texas, I should ad, is already the least regulated state in the nation, and home to some of the most toxic waste dumps in the country.
If Texas were an island in the Pacific, it may be uninhabitable.
Notice anything odd about your weather in the last few years down there. Hmmmm.. Just sayin...
Did you know the carbon emissions from coal burning power plants spew mercury emissions that can cause mental retardation and birth defects. But, let's not think about any of that stuff. Or, if you've been around that stuff for a long time, perhaps you've been affected.
Foreign countries would be a good place maybe as you can then spew all you want without regulations of any kind I assume. Boy that's just great.
Cut down the tropical rain forest in the Amazon regions perhaps. Blow a big hole in the lungs of the earth so we can all breath a little easier, huh! Oh, Papua New Guinea may have you if you don't break their rules. I'd watch out if you do, however, as they use poison darts as the solution to oil men who don't abide by their cultural expectations. Talk to Chevron execs about the number Chevron guys killed by the locals before they found "environmental concern".
Signed: Helen Caldicott disciple.
Without greedy business activity to generate NATIONAL WEALTH to be CONFISCATED (taxed) to pay for government activities, then all of those government jobs, government services, government benefits, government contracts, Tax Supported Non Government Organizations and other government programs at every level will disappear for lack of funding because there might/will not be any NATIONAL WEALTH left in the private sector to be confiscated in order to pay for those government spending activities.
I think you forgot to include how the oil industry subsidies in the billions to the wealthiest industries in the world play into all this, or would that not be the best set of details to marshall your arguments here?
Signed: A guy that doesn't like trickle down or job creator talk. I heard that before, from a guy from Texas in fact. Hmmm... isn't that surprising.
When you have a small efficient government and a balanced budget or small deficit you can spend and you will get some economic activity in return, the amount is the subject of intense debate but let’s just assume there is some activity.
When you have a large and inefficient government and a large deficit you never get full value of each dollar spent in the first place. You could build a model that attempts to peg this - economists love models and we could have more intense debate about the efficiency ratio of the government and its spending but let’s just assume there is indeed some "overhead" cost in deploying dollars. Now we have to take into account the interest cost of repaying the borrowed stimulus dollars.
amount spent: $1
efficiency ratio : 91% - Really generous assumption !
Interest cost 3%
Multiplier : 1.2 (?) another debatable number !
.91 deployed with a 1.2 multiplier = 1.092 - .03 interest cost = 1.062 net gain
As in all things economic the presumption in in the models are open to debate but I think this illustrates how you do not get a real significant boost from spending. If have any greater inefficiency of higher interest costs the wheels come off the wagon completely