October 13, 2011, 1:45 p.m.
Recovery Requires Consumers, and Consumers Require Jobs
Yesterday [Oct. 12, 2011] the Senate refused to even debate, let alone pass, President Obama's jobs bill. As the New York Times editorialized:
[Photo credit: Pete Souza, White House.]
It was all predicted, but the unanimous decision by Senate Republicans on Tuesday to filibuster and thus kill President Obama’s jobs bill was still a breathtaking act of economic vandalism. There are 14 million people out of work, wages are falling, poverty is rising, and a second recession may be blowing in, but not a single Republican would even allow debate on a sound plan to cut middle-class taxes and increase public-works spending.
Editorial, "No Jobs Bill, and No Ideas," New York Times, October 13, 2011, p. A28.
For at least the past three years I have been repeatedly blogging here on a similar theme, for example:
You can't improve business (profits, returns to shareholders, executive compensation) without improving retail sales; you can't improve retail sales without putting money in the hands, and confidence in the heads, of potential consumers; and unemployed consumers don't have money unless they are provided either unemployment compensation or wages from a public sector job (in an economy with a shrinking private sector).
Given our rotting, unattended, infrastructure (roads, bridges, pipelines, schools) resulting from the last 30 years of "tax cuts" it seems to me, given the same amount of money, that using it to create "jobs" makes more sense than providing it for "unemployment compensation."
But either makes more sense than trying to turn an economy around with "trickle down" -- whether tax cuts for the rich, or bailouts for the rich.
"Jobs, Not Unemployment, Key to Recovery," November 8, 2008.
I may be naive, and I claim no credentials as an economist, but to me the solution to our economic doldrums has always seemed quite simple and obvious.
My son, Gregory, when providing computer consulting service, likes to respond to customers' frustration and confusion with, "There are three steps," which he then proceeds to set forth.
I'm not sure I can keep this to a three-step analytical progression, but it's not much more complex than that.
1. We have an economy that is driven -- for good or for ill, in boom times and bad -- overwhelmingly (say, 70% or more) by consumer spending.
2. We now have 25% or more of the workforce that is unemployed, significantly underemployed, or has given up trying to find work (for African-American, male, high school dropouts, between 18 and 25, it's well over 50%). Those who are in the workforce are, understandably, concerned that they might become unemployed. At best they are, again understandably, confused and worried about the future of our global economy, and America's role in it.
3. As a result, and as a variation on "the tragedy of the commons," while we would all be better off as members of an inter-dependent community if we would all spend more, the most rational thing for every individual to do, as an individual, is to save more and spend less.
4. Similarly, providing cash, tax breaks, and other incentives to business to increase hiring, and banks to increase lending, has not worked and will never work. Why? Because a corporate CEO would be nuts, and deserve being fired, if he or she were to borrow more money, to hire more workers, to increase production, at a time when their company is unable to sell what it already has in warehouses, on the shelves, or in showrooms. As evidence, we are told that business is now sitting on something like $2 trillion in cash. Clearly, it is a lack of demand, not a lack of capital, that is the problem. The private sector has repeatedly, and again recently, made clear that it is incapable of turning around a plummeting economy all by itself.
5. So what do I think is so "simple and obvious"?
We have a short term, immediate problem, and a longer range problem.
Longer range, to become globally competitive during the 21st Century we need to provide more education and training to more people, and provide incentives for entrepreneurial activity. (As someone has said, "There has never been a more difficult time to find a job; and never been an easier time to create a job.")
But short term, the way to bring ourselves out of the economic doldrums, to give a boost to our economy, to increase consumer spending, is to create more consumers, with greater confidence in their future prospects for employment. That means a full-employment economy; jobs for all; provided by the private sector when it's rational for business to do so, and provided by the federal government when it is not.
Don't start by talking about private sector jobs, or even "infrastructure." Start by talking about full employment -- or as near "full" as practicable.
In January of 2009, had we taken all the money we lavished on the banks, auto and insurance industries, and other large corporations, and used it for wages for all, our economy would have turned around by the fall of 2009 at the latest, and be humming along right now.
With the increase in consumer spending would have come the confidence of business. Once there is the prospect of continuing, dependable demand, smart business people are perfectly capable of providing the supply. And as the economy continued to spiral up, the federal payrolls would have contracted as better paying jobs would be created -- rationally created -- in the private sector marketplace.
Our unwillingness to take that path has hurt us all -- up to and including that "1%."
Can I put this in three steps?
1. If you have a downward spiraling economy, 70% of which represents consumer spending, you need to increase consumer spending.
2. If you have excessive unemployment and underemployment, you increase consumer spending by creating more consumers, with more money to spend.
3. If the private sector cannot create the jobs that create additional consumers, you must either (a) have the federal government become the "employer of last resort," or (b) resign yourself to the unnecessary prolonging of a grossly under-performing economy -- which has been our choice.
And that's what, to me, seems "simple and obvious."
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November 27, 2009, 11:00 a.m.
I Can CCC Our Way Out of Recession
(brought to you by FromDC2Iowa.blogspot.com*)
Today we transition from the poverty, and generosity, of Thanksgiving Day, e.g., Lee Hermiston, "Sharing food, lives; Church serves meal as a gift to community," Iowa City Press-Citizen, November 27, 2009, p. A1, to the profligacy of the Black Friday Stampede -- America's equivalent to Pamplona, Spain's running of the bulls -- on our corporatized, computerized, commercialized way to many religions' winter holidays.
It's a time for those of us who are still employed, more or less, to reflect upon the impact of the recession on those who aren't . . .
[. . . but first, know that at the bottom of this blog entry there are links to earlier entries on some of the hot topics from the past week or so that are now getting the most direct hits, along with links to "updates" in the form of subsequent news articles, among which may be the entries you came here looking for.]
Unemployment statistics are a classic example of the old definition of averages: A man with one hand in a pan of boiling water, and one foot in a bucket of ice water is, on average, comfortable.
During the past year no one has become 10.2% unemployed (unless you count "underemployment, of which more in a moment). It's binary; you're either employed or you're not.
The New York Times provides one of its "multimedia interactive graphics" that makes the point: "The Unemployment Rate for People Like You," New York Times, November 6, 2009. As it shows, the percentages of unemployment for various demographic groups that have been averaged into that 10.2% are widely disparate.
For example, the unemployment rate for white, college educated women, 45 and over is 3.7% -- a number well within the normal range for a fully functioning economy. (For white, college educated men over 45 it's an equally acceptable 4.1%.)
On the other hand, the unemployment rate for Black, high school dropouts, aged 15 to 24 is 48.5% -- equal to the worst numbers in third world countries with virtually no economy. For Hispanic men 25 to 44, with a high school diploma, it's 9.9%. For more of the combinations click on the link above and select the demographic characteristics that interest you.
Moreover, even that 10.2% increases to 17.5% if you include, along with the recently unemployed, those unemployed for over six months, part time workers who would rather be working full time, and those too discouraged to continue looking (and even that number does not include, so far as I know, those working full time but at jobs well below their skill, education, and experience level). Presumably that near doubling of the numbers would apply to the percentages within various demographic groups as well.
Since 1948 it has never reached this level except for a time in 1982 -- following which it took five years to return to pre-recession numbers. Kevin Quealy, "Behind the Jobless Rate; a multimedia interactive graphic," New York Times, November 6, 2009.
My point, for now, is that just as we have a growing gap between rich and poor in this country (including "information rich" and "information poor"), so we have enormous gaps in the impact of the recession on various demographic groups.
And from that truth come some serious questions about what we're doing about it.
So far we're applying the same "trickle down economics" that President Reagan taught us. In an economy 70% driven by consumer spending, the money and a sense of economic security are not reaching the middle-to-lower class consumers who make up the majority of Americans. When auto dealers lots are full of unsold cars, giving billions of dollars to General Motors (taxpayers' money that has little prospect of ever being repaid), does little to benefit either workers or consumers -- or to boost the economy. (And don't get me started on the trillions of dollars to Wall Street investment bankers and AIG.)
Providing up to $4500 "cash for clunkers" to clear out that inventory of new cars boosts the income of auto dealers (and provides a false sense of "jobless recovery" with a brief and insignificant blip in GDP as a result), but does little for those who are either too smart, or unable, to borrow more money for any purchase, let alone a new car. It's a gift to those 96.3% of white, college-educated women over 45 who are employed, and in a market for a new car -- but they would and could have made the purchase without the subsidy. Ditto for the $8500 subsidy for "new home buyers." That may help those of the relatively wealthy employed who are able to be in the market for a new home, but neither program does anything for the unemployed or the newly homeless who are unable to pay mortgages on their old homes.
The one program that Washington seems unwilling to try is the no-brainer solution that did work in the last Great Depression and would work now: federal employment.
One of those programs was called the "Civilian Conservation Corps." Opposed at the time by President Roosevelt's Department of Labor, Department of the Interior, and the U.S. Army (responsible for some of its administration), that President was willing to take the leadership, and the heat, to push it through to reality -- and great success.
Here is a description from "Scout Report" regarding an online PBS video documentary about the CCC:
American Experience: Civilian Conservation Corps
The excellent film from the WBGH website, The Civilian Conservation Corps (CCC), is offered in its entirety on this site. "Heal the man, heal the land," was the philosophy of the CCC, and they engaged in some of the first environmental conservation work in the country. Since many academics, politicians, and lay people compare the current troubled times with what was seen in the 1930s, this film is particularly pertinent and visitors can decide if it's an apt comparison or not. Regardless, the stories of the three million young men who benefited from the regular meals, healthcare, clothing, diversity and hard work are fascinating. The trailer for the film starts playing right upon entering the website, but can be stopped just by clicking on the screen. Visitors can scroll over the "The 1930s Collection" logo to the right hand side of the film's screen to see the playlist for the film, but watching the whole film is recommended, as it is truly a treat. [KMG]
As you can read from the "Timeline" on that site, the contrasts between the response of the Roosevelt and Obama Administrations is dramatic.
FDR was sworn in on March 4 of 1933. By March 31 the CCC legislation had been passed and signed. Five days later there were already 25,000 employed in the program -- soon to reach 250,000 and then 3 million. And not incidentally, the benefits to the participants in literacy training and health care paid national dividends for decades more.
"By mid-1933, sixteen CCC camps and thirty-two projects had been approved for Iowa. . . . By the time the CCC ended in 1942, the number of CCC enrollees in Iowa camps would total nearly 46,000. They would contribute to the development of more than eighty state parks, and leave a tangible legacy that still numbers more than seven hundred state park structures" -- including Johnson County's own Lake MacBride State Park. Rebecca Conard, "The Legacy of Hope from an Era of Despair: The CCC and Iowa State Parks," Books at Iowa 64 (April 1996). [Photo credit: the Iowa DNR CCC Web site.]
How far we have fallen from our once proud compassion for our fellow Americans in distress. Nor is that distress limited to homelessness and hunger. See Reid Forgrave, "Worry rises with suicide rate," Des Moines Register, November 28, 2009.
But hunger is still a very real problem. And yet some are even seemingly reluctant to provide the underemployed 17% with unemployment compensation and Food Stamps -- those who are suffering from an economic collapse brought on, through no fault of their own, by greedy, multi-million-dollar Wall Street bankers and those in Washington who've been blessed with their generous campaign contributions. See Jason DeParle and Robert Gebeloff, "Across U.S., Food Stamp Use Soars and Stigma Fades," New York Times, November 29, 2009, p. A1 (More than 36 million receive Food Stamps, a program that "now helps feed one in eight Americans and one in four children. . . . Under Secretary of Agriculture Kevin Concannon says 'there are another 15, 16 million who could benefit.' . . . [T]he program is now expanding at a pace of about 20,000 people a day. . . . In more than 750 counties, the program helps feed one in three blacks. In more than 800 counties, it helps feed one in three children. In the Mississippi River cities of St. Louis, Memphis and New Orleans, half of the children or more receive food stamps. [H]alf of Americans receive food stamps, at least briefly, by the time they turn 20. Among black children, the figure was 90 percent. . . . [During] the 1990s . . . some conservatives tried to abolish the program . . ..").
Notwithstanding the fact that many, if not most, of these recipients would prefer the self-esteem that comes from work, and the ability to support oneself financially, we have yet to see the first federal job created by the current Administration.
As a result, we all fail to receive the benefits -- for ourselves as well as the participants in a modern-day CCC -- if only we were willing to pay for their work rather than their unemployment.
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Here are links to earlier entries on some of the other hot topics from the past week or so that are now getting the most direct hits, along with links to "updates" in the form of subsequent news articles, among which may be the entries you came here looking for:
UIHC, Regents and UI.
"UI's Basketball Fees Self-Defeating," November 23, 2009
I'll drink to that: "UI Has A Drinking Problem," November 18, 2009 [see "Updates," below];
If UI has become a for-profit corporation . . .: "Corporatizing the University of Iowa; If We're Going to Do It, Let's Do It Right," November 17, 2009
Strategic Communications VP position: "Strategic Communications a Failed Strategy; Actions Speak Louder," November 13, 2009 [See "Updates," below]
Executives trip to Disney World: "Mickey Mouse Patient Satisfaction; UIHC's Troubles: Is Orlando the Answer?" November 8, 2009
"Contributions from patients" proposal: "UIHC: 'Sick Brother, Can You Spare a Dime?'; A Check-In and a Check," October 31, 2009, 7:00 a.m. (with numerous updates through November 4, links to additional, related material -- and now with over 30 of the Press-Citizen readers' comments on B.A. Morelli's stories) [see "Updates," below]
Board of Regents and State universities' budget cutting: "Cutting Slack, Cutting Budgets; Regents, University Presidents, Deserve Some Thanks and Credit," October 30, 2009, 8:30 a.m. (with links to prior, related blog entries)
Spence break-in grand jury proceedings: "UI Spence Break-In: Gazette Scoop Illustrates Issues," October 27, 2009 [See "Updates," below]
School boundaries, school boards, and the ICCSD.
"School Board Election: Now Work Begins; It's Swisher, Dorau, Cooper; Old Board 'Starting Off Backing Up' With Consultant and Tough Decisions," September 9, 2009, 7:00 a.m. (with its links to 11 prior and related blog entries including, for example, "School Boundaries Consultant Folly; Tough Boundary Questions Are for Board, Not Consultants or Superintendent, Plus: What Consultant Could Do," and "Cluster Schools: Potential for IC District?")
Nicholas Johnson, "School Board Has Work to Do," Iowa City Press-Citizen, November 2, 2009 (and reproduced in blog)
"Boundaries: Only Board Can Do Board's Job; Drawing School Boundaries Made Easy," November 2, 2009
And Updates: UI VP Medical Jean Robillard says patient-donation-dunning plan "canceled a week ago"; spokesperson "clarifies," says "canceled" means "under review," B.A. Morelli, "Leaders Address Employee Concerns; UI Officials: No Decision on Job Issues," Iowa City Press-Citizen, November 20, 2009, p. A3; Ashley Oerman, "UI Cancels Asking Patients for Money," The Daily Iowan, November 20, 2009, p. A1; UI's Funded Retirement Insurance Committee asks President Mason to "abolish rather than just delay" UIHC's "patient donation plan," B.A. Morelli, "Group Wants UIHC Patient Donation Plan Nixed," Iowa City Press-Citizen, November 19, 2009, p. A1;
Two Spence break-in grand jury witnesses jailed for refusal to testify, one now indicted, "UI Spence Break-In: Gazette Scoop Illustrates Issues," October 27, 2009; Anonymous, "Davenport Grand Jury Subpoena for Scott DeMuth," Nov. 11, 2009; "Two jailed for refusing to testify before grand jury," Iowa City Press-Citizen, November 17, 2009; Carrie Feldman's Web site and the new "Support Carrie and Scott!"; "Activist indicted for alleged role in Spence Labs vandalism," Iowa City Press-Citizen, November 19, 2009 [in hard copy as "Man Indicted for Animal Terrorism," Iowa City Press-Citizen, November 20, 2009, p. A1]; Ann McGlynn, "Activist who refused grand jury testimony now charged with conspiracy," Quad City Times, November 19, 2009; Ann McGlynn and Diane Heldt, "Lab Break-in Charge Pleases UI Officials," The Gazette, November 20, 2009, p. A1; Regina Zilbermints, "Man Charged in Spence Action," The Daily Iowan, November 20, 2009, p. A1; Ann McGlynn, "Animal rights activist pleads not guilty in University of Iowa vandalism," Quad City Times, November 20, 2009; Zack Kucharski, "Judge Orders Animal Rights Activist Held," Quad City Times, November 26, 2009;
Press-Citizen editorial: Hold off on VP for Strategic Communications: Editorial, "Stakes Have Risen for UI's Strategic Communication," Iowa City Press-Citizen, November 20, 2009, p. A7 ("it's wrong when UI seems to care more about finding the right way to spin its decisions than about making the right decisions in the first place. The best strategy for UI communication is for officials to be more forthright and to show more common sense.");
Press-Citizen editorializes for 21-only, Editorial, "21-Only Still an Option for Bars with PAULAs," Iowa City Press-Citizen, November 19, 2009, p. A7;
Hancher Relocation: Rachel Gallegos, "Property owner for Hancher site won't sell land," Iowa City Press-Citizen, November 26, 2009, p. A1 (and see related five-part series, "Hancher - Part V," September 18, 2009, with links to prior four).
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source, even if I have to embed it myself. -- Nicholas Johnson
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