Age of Austerity

Republican voters are more sour on the debt deal than Democrats, and Nate Silver says polls show House Republicans owning the debt ceiling deal, creating an opportunity for Obama:

Voters’ Pavlovian reaction may simply be that fiscal austerity equals pain, which could complicate Republican messaging in the long-run.

In the short-run — depending on what happens with the markets over the next several trading days as well as with tomorrow morning’s jobs report — the question becomes whether Mr. Obama attempts to exploit the crisis by calling for stimulative measures that were lacking in the deal he signed with Republicans.

And speaking of that job's report for July: Hiring increases, expectations don't.  Via NPR, Brookings' William Dickens isn't impressed:

The July report also revised figures for the two previous months. The economy added 53,000 in May, up from an earlier estimate of 25,000; and 46,000 in June, up from 18,000.

Even so, the economy expanded at a meager 0.8 percent annual rate in the first half of the year, the slowest pace since the recession officially ended in 2009. Those figures, combined with financial troubles in the eurozone in recent days, have ratcheted up talk of a double-dip recession and put markets on edge in the past week.

"If Europe gets its act together and we don't have any more brinkmanship in the political arena here, I can see us just limping through without a double-dip recession," Dickens said.

Surely we've seen the end of "brinkmanship" hostage taking.  Dickens argues that the Fed is out of options. Dean Baker says not so quick:

... the Fed could pursue a path that Bernanke himself had advocated for Japan when he was still a Princeton professor. It could target a higher rate of inflation, for example 4 percent. This would have the effect of reducing real interest rates. It would also lower the debt burden of homeowners, which could allow them to spend more money.

That could relieve some pressure on consumers, but the numbers today are still a little good news in a sea of bad.  Private sector growth is almost -- but not entirely -- negating public sector cut backs.  Until something different than what we're doing is done, we'll be applauding "not as bad as it could have been" right into the double dip and President Mittens!/Bachmann/Perry's first term.

Obama's Economic Fatalism

Yglesias challenges (with graphs!) Obama's recent assertion on the Today Show that while the American Recovery and Reinvestment Act was a success, it's possible nothing more can be done about unemployment.

The President:

There are some structural issues with our economy where a lot of businesses have learned to be much more efficient with fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller. Or you see it when you go to the airport and you use a kiosk instead of checking at the gate

Yglesias:

Maybe Barack Obama has some reason to believe that the pace of technological change accelerated in some unaccountable way during his time in office. But above I’ve illustrated my alternative theory of the recession. It shows that the housing crisis and the problems in the banking sector led to a historically unprecedented drop in personal consumption. It also shows that while consumption has ticked back up, it hasn’t returned to its pre-recession trend level. All else being equal, if households spend fewer dollars, then fewer people will be employed in providing them with goods and services. One strategy would be to ensure that all else is not equal and that government spending fills the gap opened up by the collapse in private spending. But that hasn’t happened. Federal spending has continued roughly at trend levels, and state/local spending has also fallen below trend. The result is mass unemployment.

Prolonged unemployment, the White House seems to be arguing, is simply a result of a sudden structural shift in the economy due to rapid technological advances -- advances that haven't accellerated during Obama's first term or since the recession began.  The ARRA did all we could, and now we just wait and see what happens?  The government spent some.  Gave it an honest go.  End of story?

Outside of the poor economic (anti)-policy behind this position, I don't see how "Not Much Else We Can Do" plays well as a 2012 campaign slogan.

Where is YOUR Plan for Bringing Jobs GOP?

Where are your plans for creating jobs Rep. John Boehner, Senator McConnell, and Rep. Cantor?

 

 

There's more...

An Unrequited Love

In December 2012, the country will be ruminating its recent election of the first woman president: a polarizing survivor. President Obama will welcome Steve Scully, C-SPAN political editor and occasional host of Washington Journal, to the Oval Office for a wistful interview. Mr. Scully may invite the president to admit any mistakes.

That is where Cynthia Tucker’s op-ed, “Obama tried too hard to work with Republicans,” in yesterday’s Atlanta Journal-Constitution comes in. Tucker’s piece helpfully captures establishment thought. Undue emphasis on the lack of bipartisanship is an almost complimentary critique and will be articulately embraced by a reflective 44th president in his exit interview with Mr. Scully. Of course it is ridiculous, but Steve Scully is too classy to prod. In his 2008 interview with President Bush, Mr. Scully graciously allowed Bush to incredulously ponder how anyone could think of him as mendacious.

Boasts of bipartisanship are a fatuous but necessary aspect of campaigning. In handling Republican opposition, President Obama struck an appropriate tone in the early days of his administration. Bipartisanship for the Obama administration has meant peeling off one or two Republican votes and maybe hailing such as unprecedented unity. And that’s perfectly fine. Generally speaking, Republicans are nihilistic and unserious. For his part, the president is plagued by the failed substance of his policies. That’s the fundamental part that escapes the logic of Cynthia Tucker et al. Various exceptions to his tone, lack of emotional attachment, and his futile attempts to reach across the aisle are ultimately mild critiques.

Paul Krugman was exactly right regarding the size of the stimulus. To be sure, the Recovery Act was a measure worthy of support. I have seen reports in TIME on the Recovery Act’s administrative success and they are impressive. (One program to hit a few snags is the weatherization program, but it isn’t devastating.) This is good, but there was never any reason to believe the other hype; specifically the White House’s claim of keeping unemployment below 8% as a result of the Act.

There's more...

The Weekly Audit: One Nation With No Jobs

by Lindsay Beyerstein, Media Consortium blogger

Tens of thousands of Americans rallied for jobs and justice at the Lincoln Memorial in Washington, D.C. on Saturday. Organizers say that 175,000 people turned out for the One Nation Working Together rally, which was organized by labor unions, the NAACP, and other progressive groups. In an interview with GritTV's Laura Flanders, AFL-CIO president Richard Trumka, a leader of the One Nation coalition, summed up the agenda: "Jobs, jobs, and more jobs."

America isn't working

In total, 8 million jobs have been lost in this recession and 2.5 million homes have been repossessed. According to the official figures, about 10% of Americans are unemployed. The true number may be much higher because the official stats don't count those who have given up looking for work. In AlterNet, NAACP President Benjamin Todd Jealous, another featured speaker at One Nation, points out that the black unemployment rate is nearly twice that of whites. Another 11 million Americans are underemployed, according Trumka.

No end in sight

An already bleak job market is about to get even bleaker. Last week, Senate Republicans scuttled a popular emergency fund to create jobs and an extension of long-term unemployment insurance benefits, as Andy Kroll reports in Mother Jones.

Steve Benen of the Washington Monthly offers more details on the now-defunct job creation program known as the Temporary Assistance for Needy Families (TANF) emergency fund. The fund provided cash to create jobs in the public and private sectors. Over 240,000 people in 32 states and the District of Columbia worked at jobs created with TANF subsidies. Last week, Senate Democrats lost their fight to extend the program for another 3 months. With the TANF money gone, layoffs will soon follow.

The Department of Labor will release the its monthly unemployment statistics on Friday. One group of independent analysts predicts that September's unemployment rate will be higher than the previous month, according to Brian Beutler of Talking Points Memo. Unemployment rose from 9.6% in July to 9.7% in August and experts surveyed by Bloomberg News expect the trend to continue. It's doubtful that the economy produced enough new jobs to make up for all the census workers whose temporary jobs ended.

Job skills for America

On the bright side, President Barack Obama is scheduled to unveil a new job training program this week, Annie Lowrey reports in The Michigan Messenger. The program is called Skills for America’s Future. The goal of the project is to encourage partnerships between community colleges and corporations. Colleges and companies will work together to identify areas of rapid job growth and train students to fill those jobs. So far, five companies have agreed to participate in the program, including the Gap., Accenture, United Technologies, PG&E and McDonald’s.

Lowrey argues that this kind of training program will do little to help unemployment in the short term. Right now, companies aren't hiring because there's an economy-wide lack of demand, not because they can't fill positions for lack of trained workers. Demand is low because unemployment is high. Quite simply, people buy less when they don't have jobs, or fear that they will lose their jobs. It's a Catch-22. The jobs won't come back because not enough people have jobs.

Food stamps are stimulus

At the most basic level, an economic stimulus package is designed to break the no jobs/no demand/no jobs impasse by injecting large amounts of cash into the economy. Extending unemployment benefits makes for very effective stimulus because the unemployed typically spend their money quickly. Food stamps are another very efficient stimulus because recipients redeem them right away. To give you some indication of how quickly, consider the Wal-Mart at Midnight effect, which Lowrey discusses in the Washington Independent.

Wal-Mart managers are noticing that increasing numbers of customers are buying staples like bread, milk, and baby formula at midnight on the first of the month. That's because state governments directly deposit welfare and food stamp benefits into debit accounts at midnight. Wal-Mart says it brings in extra staff to keep up with the influx of customers during this period.

By contrast, tax cuts are an inefficient stimulus, especially if the cuts go to people who are already wealthy. In tough times, people who already have everything they need may prefer to save their extra money instead of blowing it on luxuries. Rich people will not throng Best Buy at midnight on tax refund day, no matter how big their checks are.

The high cost of economic inequality

It would be nice to think that unemployment is part of a cyclical downturn, but there is mounting evidence that short-term unemployment is a symptom of a deeper problem: pervasive and growing inequality. Sam Petulla of the American Prospect interviews economist Jacob Hacker and political scientist Paul Pierson about their new book, Winner Take All Politics: How Washington Made the Rich Richer and Turned its Back on the Middle Class.

The authors note that the U.S. has greater inequality than other industrialized countries. Since the 1970s, the richest Americans have gotten much richer while the rest of us lagged further behind. The authors found that almost 40% of household income gains from 1979-2007 went to the richest 1% of households. The trend is accelerating: the top 1% of households pocketed over half of the economic gains of the 2000s. Hacker and Pierson blame tax cuts for the wealth, lax financial regulations that allow the wealthy to rake in unprecedented profits, and stagnating middle class wages for the widening gap between the ultra-rich and the rest of society.

This brings us back to the old demand/jobs paradox. Contrary to the platitudes of trickledown economics, shoveling an ever greater share of society's resources to the ultra-rich doesn't make everyone else better off. Shocking, right?

Right wing economists say that letting the ultra-rich accumulate still more wealth is good for the economy as a whole because the rich have more money to invest in businesses, which are the main source of jobs. The ultra-rich aren't stupid, however. They aren't going to start businesses unless they foresee demand for goods and services; and everyone knows that demand is flat because there are no jobs. Trying to stimulate the economy by making the rich richer is like shoving money into a black hole. The tried and true way to end a recession is to create jobs and provide social services for people who need the money enough to spend it.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

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