California Free Press

Off the Top of My Head

The Mid Terms: Out of the Frying Pan Into the Fire

by John Lawrence

Voters are going to vote Republican because they don't like the economy. Really? What have the Republicans proposed to do about that? Cut social security and Medicare. Yeah, that'll fix the economy all right. Give more tax breaks to billionaires? That'll fix the economy for sure. Take away Biden's forgiveness of student loan debt? That'll really fix it. "Kitchen table" voters don't like inflation? What are Republicans proposing to do about that? The only tool in the arsenal for inflation cutting is the Fed's raising interest rates and the Fed is independent of both parties. Besides the only tool the Fed has is probably not the right tool for fixing this inflation. But it will eventually destroy what seems to be a pretty good economy despite inflation. The biggest way to fight inflation is to end the war in Ukraine which will bring gas prices down. Additionally, all the weaponry that is being "given" to Ukraine is really being bought from US weapons manufacturers and defense contractors like Lockheed Martin. This is pouring more money into the American economy at a time when money needs to be extracted from the American economy to fight inflation. The Fed's raising of interest rates is an attempt to increase unemployment which is the traditional way that the Fed fights inflation. The so-called Philips curve says that inflation is directly caused by too much employment, and, if you increase unemployment, it will bring inflation down. There is a direct correlation between unemployment and inflation. So the Fed, although no politician will say it, is trying desperately to increase unemployment. This hurts poor people the most, and, whether it will decrease inflation under the present circumstances, is debatable.

However, the war in Ukraine amounts to a protracted stalemate. As long as the west supplies Ukraine with weapons and North Korea, Iran and China supply Russia with weapons, the war will continue. No one on either side wants to talk peace. Each side wants to win at all costs. So the war will drag the world economy down into inflation and recession. Russia holds the winning cards in terms of its ability to literally destroy Ukraine from the air regardless of what is happening on the battlefield. This is not World War II where success on the battlefield was the key to winning the war. It's more like World War I where trench warfare and stalemate predominated. Territorial Russia remains virtually untouched since the rules are that the war will be entirely fought on Ukraine's territory, and the west to its credit doesn't want an expansion of the war. In the final analysis this gives Russia the advantage. Ukraine is fighting a defensive war, and Russia is fighting an offensive war. It's likely that neither party will run out of resources. That means the longer the war goes on, the more of Ukraine will be destroyed. There needs to be a peace commission and a peace process in which both sides can air their grievances and aspirations. What makes the most sense? I'm sure there is a possible way out, but neither side seems to want to compromise in the interests of ameliorating the lives of the Ukrainian people and getting back to normalcy. For each side their national pride is more important than the lives of their citizens.

Joe Biden could propose a solution to the war which would also go a long way to ameliorating inflation. Unfortunately, Biden is only interested in demonizing Putin. This is not a productive way to create peace. Biden is only fueling the war, and Putin won't back down due to pride. The more Putin is demonized, the more his hackles are raised. The west should be trying to lower Putin's hackles, not raise them. Ukrainian lives hang in the balance. Russian soldiers' lives are also in the balance although Russian civilians so far have escaped most of the suffering. Ukraine taking back real estate will not in the final analysis win the war because Russia can lob missiles into Ukraine ad infinitum. Only a peace process, compromise, consideration for civilian lives and reintegration of Russia into the world community will make it possible for people in that region of the world to again lead normal lives. Winning the war for either side is not a realistic option.

Off the Top of My Head

Biden Alternately Fights, Fuels Inflation

by John Lawrence

Normally the government spending money into the economy is a good thing. It promotes economic growth and prosperity. But when the economy overheats causing inflation, the government needs to extract money from the economy. It does that by, among other things, raising taxes. Also the Fed, like it's doing now, raises interest rates. This puts a damper on major purchases because of interest costs. The American Rescue Plan injected a lot of money into the economy that kept the wheels turning during the worst parts of the pandemic. That was a good thing, but too much of a good thing is a bad thing. The traditional way the Fed controls inflation is to squeeze the economy in such a way as to cause higher unemployment. The Phillips curve is a theoretical economic tool that shows the relationship between inflation and unemployment, the higher unemployment, the lower inflation and vice versa. At present, however, businesses are begging for workers, not laying them off. This is good news for workers, bad news for inflation.

Biden is trying to blunt the cost of inflation to low wage workers by getting Congress to pass some of the remnants of his Build Back Better plan. However, some of these items would cause the government to spend more money into the economy causing even more inflation. Biden doesn't want to tell the truth about inflation which is that the traditional solution is to cause even more pain for low wage workers by squeezing the economy to the point that they will lose their jobs thus increasing unemployment as the Phillips curve dictates. So basically there is nothing Biden can do except to decrease government spending. Republicans would cut programs that benefit the poor and raise taxes on the middle class to do just that.

Biden is continuing to spend money into the economy by purchasing billions of dollars worth of weapons which are then sent to Ukraine. This is inflationary in and of itself. As of May 20, 2022, the US has spent $54 billion on Ukraine, and, evidently, even more will be allocated. Ukraine has become a ward of the US with the US taking responsibility not only for supplying weapons but also for keeping the whole economy afloat. All this money spent on Ukraine is money not spent on programs for the American people unless you are an employee of the military-industrial complex for which Ukraine spending has become a bonanza. Of course there are other causes of inflation than too much government spending. The loss of Russian oil is causing gas prices to rise. Chinese COVID lockdowns are exacerbating the supply chain crisis. This is not a traditional inflation, but too much government spending is certainly a part of it. Biden's good intentions of protecting the American people during the COVID pandemic by flooding the economy with money had the concomitant effect of also causing inflation. Biden will never, of course, tell Americans the truth which is that in order to fight inflation the government will have to turn around and cause them more pain especially low wage workers.

Off the Top of My Head

A Tree Planting Alternative for the Jobless

by John Lawrence

Modern Monetary Theory (MMT) proposes a Job Guarantee (JG) program that would employ the unemployed instead of just paying them unemployment insurance. This would be an automatic program whose numbers would very according to those employed in the private sector. When the private sector is supplying lots of jobs, the number in the JG would diminish and vice versa. So why not employ all those in the JG planting trees? This in no way competes with the private sector and doesn't require training or any skills whatsoever. The homeless could do it; the prison population could do it. The unemployed could do it. The pay would provide an automatic minimum wage, and the economy would be fully employed. There would be no wage inflation because people in the JG would not be competing for jobs with people employed in the private sector. When the private sector needed more workers, they could hire them out of the JG. Because these workers are employed, their work skills will not diminish like those sitting idle doing nothing but collecting unemployment insurance.

Conventional economic theory is based on the Philips curve which predicts that there must be a certain number of unemployed people in order to tamp down inflation. The inflation rate is contained based on the misery of the necessary number of unemployed people who are historically from minority communities. MMT replaces the Philips curve with an analysis that predicts that inflation can be contained and a full employment economy can be achieved because JG workers are not competing with those employed in the private sector, and, therefore, there is no wage inflation. Those workers are available for hiring out of the JG by offering them slightly more than the minimum wage which is set automatically by the government by the pay offered to those in the JG which would be a living wage, in other words enough so that they are above the poverty level. Therefore, a number of birds are killed with one stone. 1) The minimum wage is automatically set at the Federal level. 2) The unemployment compensation program and the money budgeted for it can be eliminated. 3) A full employment economy is achieved. 4) Climate change is addressed. 5) People's job related skills are not diminished as they would be if they were sitting idle.

This is from the Modern Monetary Network:

"A government job guarantee is a proposed program where the government would provide a job with a basic wage and benefits package to anyone willing and ready to work. The job guarantee is one component of an overall program to stabilize an economy. The job guarantee is financially feasible when a sovereign government’s currency uses a floating exchange rate.

"The job guarantee provides a floor for wages and benefits, creating a buffer stock of labor. The program is intended to “hire off the bottom,” i.e. those with less qualifications or skills. A job guarantee program hires people who otherwise cannot find employment. Once implemented, a job guarantee would be a permanent program, operating during good times and recessions alike.

"In times of recession, private sector employers typically lay off workers. This swells the ranks of the unemployed. Laid off workers cannot spend money, and this hurts the economy. With a job guarantee in place, laid off workers could take a job guarantee job. This would increase the size of the job guarantee workforce during recessions, and at the same time inject more money into the economy, helping to take the edge off of the recession. As the economy recovered, people would leave their job guarantee jobs and go to better-paying private sector jobs. As the number of people in the job guarantee workforce diminished, government spending would also fall.

"The job guarantee would also serve as a mechanism to ensure price stability within the economy by fixing the price of employed labor.

"The concept of a job guarantee dates back to at least the New Deal of the Roosevelt Administration. There were several programs that had job guarantee attributes, such as the Civilian Conservation Corps (CCC), and the Works Progress Administration (WPA). After the Second World War, many industrialized economies embraced full employment. For example, Australia had an implicit buffer stock of jobs that were always available, both in the private and public sectors. Hyman Minsky also conceptualized an Employer of Last Resort (ELR) program during the 1960s. Most recently, L. Randall Wray, William Mitchell, and Warren Mosler have proposed a job guarantee program in conjunction with their work in Modern Monetary Theory (MMT)."

So why not address climate change this way? There are never enough trees on planet earth, Workers in the Civilian Climate Corps (CCC) will never run out of work. The state governments will never have to pay unemployment compensation again, and the private sector will have a buffer stock of already employed working people to choose from when their needs arise for an increased work force. In effect the Federal government will take over the responsibility for unemployment insurance relieving the states of this burden.

Off the Top of My Head

Why Should Blue Collar Workers Have to Pay Taxes to Bail Out White Collar Student Loan Debt?

by John Lawrence

Short answer: There is no need for the Federal government to tax in order to spend. That has been demonstrated by Modern Monetary Theory. However, taxation, if imposed in order to fight inflation, needs to be imposed primarily on the rich and upper middle class, not on the poor or lower middle class. The smart thing for the Biden administration to do would be to decrease taxes on the lower middle class ^i.e. blue collar workers before 2022 thus drawing them away from the Trump camp. In general the American people need to be educated that deficits don't matter except just as accounting entries on the Fed's balance sheet. Biden's COVID relief initiative of $1.9 billion will not raise taxes nor will his follow-on trillion dollar initiative for the build-out of green infrastructure.

The question, "Can We Afford to Pay for the Green New Deal?" is equivalent to the question "Can We Afford to Pay the Costs of Avoiding Annihilation?". In the past we have been able to afford a massive build-up to pay for the Second World War. The climate challenge is the moral equivalent of war. If we lose this war we lose not just our freedom. We lose the habitability of the entire planet. Various attempts have been made to cost out the components of a Green New Deal. Green power generation and transportation are not sufficient in themselves to get to net zero carbon emission, but they are a start. As Bill Gates has pointed out in his recent book, How to Avoid a Climate Disaster, major industrial processes also generate much greenhouse gas emission. For instance, every ton of cement that is produced contributes one ton of carbon dioxide which goes into the atmosphere. Every ton of steel produced results in 1.8 tons of carbon dioxide emitted into the atmosphere, and every ton of plastics produced emits 1.3 tons of carbon dioxide. So it's not enough just to deal with green transportation (electric vehicles) and green power generation (solar and wind).

The cost of "greening" these industrial processes is pretty steep. Capturing carbon dioxide at the site of the manufacturing process is possible, but there is no cheap way to do it. Bill Gates is investing in promising start-ups and is counting on innovation to come up with new processes and materials which will not result in so much carbon dioxide being released into the air. Gates points out that we need to electrify every possible manufacturing process and make sure that all that electricity is generated cleanly. He advocates a new generation of nuclear power sources as wind and solar can not possible fill every energy need mainly because they are intermittent. Nuclear can fill the gap for consistent power generation when solar and/or wind are offline. Smart nuclear power which Bill Gates has been instrumental in developing would solve the problems encountered so far of explosion and what to do with nuclear waste. As a last resort Direct Air Capture of carbon dioxide from the air is possible but also costly.

What it all boils down to is this: we will need on the order of a trillion dollars a year for 10 years commitment to address climate change if we have a prayer for avoiding the worst consequences. What's more a lot of this commitment must be made in cooperation with China which is one of the worst polluters. Rivalry and even a Cold War must be set aside if the world is to avoid the worst outcome from global warming. India and China are building coal fired power generation plants at a rapid pace because coal fired power plants are so cheap comparatively and those countries are developing so quickly. It's not enough just to "green" the US. It has to be cooperation on a world wide basis. Competition has to be set aside and replaced by cooperation. The ownership of intellectual property is irrelevant when it comes to saving the planet.

A national budget for a Green New Deal shouldn't contribute to inflation since there are currently so many unemployed people available for work, and particularly because so many of the small businesses that were lost during the pandemic are not coming back. Also further robotizing of manufacturing processes will eliminate whatever blue collar workers are left working in those fields. In World War II there was some postponement of consumption in order to fight inflation. That may be necessary for the moral equivalent of war which the Green New Deal represents. If so, workers in certain nonessential industries may have to be repurposed and retrained for industries involved in combating climate change.

Off the Top of My Head

Contrary to Larry Summers Biden's Relief Bill Will Not Cause Increased Inflation

by John Lawrence, February 8, 2021

Joe Biden's almost $2 trillion pandemic relief deal will not be inflationary despite Larry Summers' opinion. Inflation occurs when there is too much money sloshing around in the economy chasing too few goods, services and human resources. That is not the case here. First of all it will reemploy the unemployed. This is a presently unused resource. Secondly, it will suck up unused or unsold goods and services funding things that are currently unfunded like child care, and thirdly, it will serve to pay off debt and replenish savings. Any money going into savings or paying off debt is not inflationary. It's deflationary in the sense that the banks will lose money due to interest they won't collect if loans are paid off. The middle class that did have savings or credit in many cases has had to use those to survive the pandemic. That's why giving money to higher earning, but not wealthy, families is a good thing. To hear some people talk only money should be given to those who are desperate and living from paycheck to paycheck. Yes, those are the families most in need who should be given money first, but higher earning families who have depleted their savings or gone into debt need to be resuscitated also.

So here is what Larry Summers says about inflation:

"First, while there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability. This will be manageable if monetary and fiscal policy can be rapidly adjusted to address the problem. But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply."

Summers fails to take into account the deflationary effects of the relief bill. Money going to states and municipalities will actually be deflationary because much of it will be used to pay down debts and loans. Many state budgets are in horrible shape and employees such as police, librarians and firemen have been laid off. People paying back rents and mortgages will have a deflationary effect on the economy. People on the lower end of the economic spectrum who are living paycheck to paycheck will be able to get a little ahead and also save. This will not add a lot to inflation. Also money can always be withdrawn from the economy by taxing the rich, those who actually added to their wealth and income during the pandemic. This is the only reason that taxes might need to be raised because the US government has the ability to spend without raising taxes. The only reason to tax would be to fight inflation and those taxes can be targeted towards wealthier families and individuals. The Federal Reserve has not been able to achieve its target rate of 2% inflation recently despite maintaining almost zero percent interest rates. It wants more money sloshing around in the economy.

There are other ways to suck money out of the economy to offset inflation. Modern Monetary Theory (MMT) recommends Medicare for All which would result in much less money spent on health care while providing better health outcomes. This would be deflationary which would counteract any inflationary propensities of government deficit spending. Conventional economic thinking is that there is a tradeoff between unemployment and inflation. The more people unemployed there are, the more inflation is diminished. Therefore, full employment as defined by economists is not really employment where everyone is employed. It is that level of unemployment which just keeps inflation in check. However, according to "The Trade-off between Inflation and Unemployment in an MMT World: An Open Economy Perspective" by Emilio Carnevali and Matteo Deleidi, MMT it is contended that inflation "occurs when the system reaches the point of full utilization of its productive capacity, both in terms of capital utilization and in terms of availability of workers. At this point, the government should curb inflation forces cooling down the effective demand. This is another fundamental task of taxes." As long as there is unused capacity in human or production terms, increased employment will not be inflationary. So Larry summers need not worry that putting all those unemployed people back to work will lead to inflation.

Biden's putting a $15.00 an hour minimum wage in the relief bill is also what MMT advocates in relation to a Federal job guarantee. Real full employment at a minimum wage of $15.00 an hour does not need to be inflationary especially if it is in areas that don't compete with already employed workers. Biden's relief bill will have the effect of putting almost everyone to work with at least an hourly pay of $15.00 an hour. People who are living paycheck to paycheck and employed at $15.00 an hour are not going to contribute to inflation since their demands on the economy are those that can be easily accommodated by existing production and easily increased production. Deficit spending is not a problem. Former Chair of the Federal Reserve Alan Greenspan said, "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." So the real limit on government spending is inflation which can be controlled by taxes on those sectors of the economy which are not easily upscaled to provide more supply.

There is much unused capacity in the current US economy both in human and material or physical terms. People should be put back to work with a minimum wage of $15.00 per hour. A follow-on bill that would address infrastructure rebuilding and a Green New Deal also needs to be done. Resources may have to be managed by government to control inflation, but the important thing is that work needs to be done in these areas and people need to be put back to work. Inflation can also be offset by the deflationary effect of withdrawing funds form a bloated defense sector.

Off the Top of My Head

Is Full Employment Possible or Even Desirable?

by John Lawrence, January 14, 2021

The important and crucial consideration is what kinds of jobs does the full employment society consist of? The type and quality of the jobs is something to be concerned with. After all Hitler had a full employment society. Everyone had a job in his full employment society. Ditto for Mussolini. Once the US got involved in the Second World War, the US had a full employment society. That ended the Great Depression. Trump bragged about presiding over a full employment society pre-COVID. The question is fully employed at what? Our infrastructure is crumbling, approaching Third World status. Republican economists don't give a hoot about the composition of jobs in the US as long as they're all in the private sector and not in the public sector. Meanwhile, China has built 24,000 miles of high speed rail in its own country and a $4-billion, 470-mile-long rail line, the first electrified cross-border rail system in Africa, Ethiopia-Djibouti Railway.

Modern Monetary Theory (MMT) favors a Federal Job Guarantee. The answer to the grievance that many Americans have about the disappearance of good paying jobs is to guarantee them a job. In The Deficit Myth, Stephanie Kelton writes:

"The MMT solution to involuntary unemployment is to introduce a federal job guarantee that establishes a legal right to a good job at good wages with good benefits. This would address one of the most pernicious effects stemming from trade - the unemployment that is too often visited upon whole communities as jobs are lost to foreign competition. It's not enough just to provide training and other temporary forms of assistance to workers whose jobs are lost to foreign competition. ...something more is needed.

"That something is a federal job guarantee. By no means is it a panacea, but at a minimum, it begins to tackle the problem of unemployment directly (as opposed to subsidizing the effects of unemployment). Through the thick and thin of the business cycle, we leave tens of millions of Americans idle in the belief that this makes political, economic and social sense. ...

"The benefits of a federal job guarantee not only include the production of goods, services and income. The guarantee also features on-the-job training and skill development; poverty alleviation; community building and social networking; social, political and economic stability; ... With a program like this in place, the government would have mitigated the localized devastation of communities that directly experienced the loss of well-paying US industrial jobs.

"It may be hard to imagine an economy that doesn't allow millions to fall by the wayside. But that's because America has almost never achieved anything like true full employment. It's something we've rarely experienced outside of wartime. One of the most important features of a job guarantee program is that it maintains a form of full employment by immediately hiring the unemployed into public service work, providing them with income and the retraining required when they are displaced by trade shocks. In this way, the job guarantee can can serve as the core of a response to both "free trade" and the "trade war." With a job guarantee, free trade is no longer a threat to full employment, and trade wars are no longer necessary to prevent unemployment."

Many of the grievances of right wing workers and Trump supporters can be tied to the fact that their communities have been destroyed as good decent paying union jobs have been moved overseas where labor costs are cheaper. MMT argues that those disenfranchised workers should be automatically reemployed especially when their labor is greatly needed to build green infrastructure in order to combat climate change. That's the real war we face right now - not against an imagined enemy - but against the fossil fuel economy which, if left unchecked, will surely destroy the habitability of the planet. It should be obvious that more workers are needed to fight the pandemic and other public health crises likely to happen in the future. It's also obvious that instead of spending a trillion dollars a year on a military-industrial complex which has to instigate another cold war to justify its existence, we should be spending money subsidizing jobs that are really necessary to make the lives of Americans and others around the world better as we move forward.

Right now the US dollar is the world's reserve currency, interest rates on Federal debt are around zero, and there is no reason why the Federal Reserve cannot issue the money necessary to implement a federal jobs guarantee if there is not enough tax money available to cover it, the way it created the money with a few keystrokes on a computer to bail out the Big Banks during and after the Great Recession. The Federal Reserve is the loaner of last resort to the banks, and, since the US dollar is a sovereign currency, as much money as necessary can always be created to support a federal jobs guarantee. Taxes should function as a means to reduce economic inequality but they are not necessary to fund the government as MMT has shown. As long as productive resources in human or material terms are idle, putting them to work will not cause inflation.

The trillions created and spent by the Federal Reserve to bail out the banks have not caused inflation nor have they caused a depreciation of the dollar which is still in great demand by other nations around the world. The old thinking is that the government has to fund itself out of taxes or go into debt which it has to pay back. That certainly applies to households and states, but, with the ability to print its own sovereign currency, the US is in the position that the national debt is just an accounting entry on the Fed's balance sheet. The provision of a good paying job as a guarantee will help to ameliorate the grievances of Trump supporters and move them to the other side of the political spectrum.

Off the Top of My Head

Why is the Stock Market Surging in the Midst of Huge Unemployment

by John Lawrence

Simple answer is that the stock market has nothing to do any more with the Main Street economy. There are two economies: Main Street and Wall Street. There's the economy of rich investors, and the economy of the 90% who aren't investors. The stock market is dominated by large multinational corporations like Apple and Google, and is invested in by rich people from all over the world. As COVID has shown, we have a bifurcated economy. Secondly, interest rates for Treasury bonds are zero so why would an investor buy them when investing in stocks amounts to a self fulfilling prophecy? The more money going in, the greater the rate of return, and rich people are continuing to make huge amounts of money. Business Insider reported that billionaires saw their net worth increase by half a trillion dollars during the pandemic. All that money has to go somewhere. Meanwhile, middle class people with 401(k)s are draining them to meet expenses. Thirdly, the Federal Reserve has all but gifted rich investors trillions of dollars.

More than 1 in 4 Americans are raiding their retirement accounts after a coronavirus-related job loss. The unexpected loss in income is causing many Americans to tap their retirement savings just to make ends meet. And many people who lost a job — or have a spouse or partner whose income has declined — didn’t have much money saved in the first place. Half of Americans who were recently furloughed or let go have saved less than $500 for retirement in the past year — and 70% have saved less than $1,000, according to a report by fintech firm SimplyWise. Of those who have an individual retirement account, 401(k) plan or retirement savings account, 1 in 5 now plan to tap those funds. Of course rich investors don't suffer job losses because they don't have jobs other than managing their money. That they can do from home.

Some has been written about a K-shaped recovery from the pandemic. In a K-shaped recovery, the economic bounce-back is bifurcated like a "K": The wealthiest Americans are quickly rebounding, even thriving, while the middle- and lower-income set are not. As of the first quarter of 2020, the wealthiest 10% of American households owned 87% of all stocks and mutual funds, according to the Federal Reserve. So where does that leave the other 90%? Struggling. Waiting in line at food banks. Getting evicted and foreclosed on. Losing their small businesses in droves. The fact that a second relief package has not been implemented and in all probability won't be for another 2 months till after Biden takes office will hinder those people in the lower part of the K even more.

So what does this say about essential workers? Are rich investors essential workers? I don't think so. Are doctors and nurses? You bet. But they are being shafted by the American people who won't obey simple guidelines in the midst of a surge upon a surge in COVID. Many of them are committing suicide. Others will soon throw up their hands and quit their jobs rationalizing that their own families are more important than taking care of sick patients which puts them at risk. Multitudes of Americans traveled during the Thanksgiving holidays ignoring pleas to stay home. Now doctors and nurses will pay the price for those who exercised their "freedom" as Americans to ignore the pleas of others and only think of themselves. Even family members of these will pay the ultimate price. Another ghastly statistic: the US with 4% of the world's population has 19% of the world's COVID cases. An in November there were an average of a million new cases per week.

Having a President for the past four years who has dumbed down the American people has not been a big help in contributing to a better society for Americans or those in the rest of the world who had looked up to America. Now the question is to what degree the Biden administration can recover some semblance of American democracy and respectability among other world leaders and also economic equity for all Americans. A lot of it will hinge on whether or not Democrats will control the Senate after the two runoff elections in Georgia. If Republicans continue to control the Senate, we can expect four more years of gridlock and straitjacketing of Biden's ambitious agenda. This will be devastating for America and the world. The US will continue to diminish in importance in the world community. Economic inequality will be exacerbated, and global warming will get even worse as hurricane and fire seasons become normal year round events.

GOP Plan to Slash Unemployment Benefits by $1,600 Per Month Condemned as 'Absolutely Unacceptable'

Published on Monday, July 27, 2020

by Common Dreams

"The country is on fire and the chief concern for Senate Republicans is that unemployed people have too much money."

by Jake Johnson, staff writer

 

2 Comments

Senate Majority Leader Mitch McConnell (R-Ky.) conducts a news conference after the Senate Republican Policy luncheon in the Hart Building on Tuesday, July 21, 2020. (Photo: Tom Williams/CQ-Roll Call, Inc. via Getty Images)

Progressives are rejecting out of hand a proposal by Senate Republicans to temporarily slash the weekly federal boost to unemployment benefits from $600 to $200 until states develop the capacity to implement a more complex system that would pay laid-off workers 70% of what they earned prior to losing their jobs.

Bloomberg reported Monday that the Senate GOP plan, which was approved by the Trump White House, will call for a two-month transition to the new unemployment system and provide states with an option to apply for a waiver for up to two additional months. Senate Majority Leader Mitch McConnell (R-Ky.) is expected to officially unveil the plan later Monday as part of the GOP's coronavirus stimulus package.

"Senate Republicans want to cut unemployment benefits for 30 million Americans by $400 a week. This cannot stand."
—Sen. Sherrod Brown

 

"Millions of Americans are out of work and millions of renters will soon face eviction," said advocacy group Patriotic Millionaires. "Meanwhile, Trump and Senate Republicans want to cut unemployment benefits from $600 to $200 a week. Absolutely unacceptable."

Analysts warn that replacing the flat $600-per-week payment with an individualized benefit would overwhelm antiquated state unemployment insurance (UI) systems, potentially causing massive relief delays for millions of people on the brink of financial collapse.

Michele Evermore, senior policy analyst with the National Employment Law Project, tweeted Monday that the GOP's proposed "70% income replacement is a weird technocratic solution to a problem that doesn't exist."

"This would require a different individual calculation for every person. States will take months to get this up while still processing historic new claims," Evermore wrote. "The fact that low income folks are getting more on UI is a good thing and has kept unemployed workers’ pain from spreading in their communities. This is giving people the economic power to make good choices to slow the spread of Covid, which is out of control."

Under the GOP proposal, the $400-per-week reduction in UI payments would be implemented as states transition to the wage replacement program. The change would amount to a $1,600 monthly income cut for the tens of millions of Americans currently relying on the boosted UI benefits to cover basic expenses.

The steep benefit reduction would also cost the U.S. more than three million jobs over the next year, according to the Economic Policy Institute.

Unless Congress reaches a deal to avoid a lapse in additional federal payments, state unemployment benefits will revert to the pre-pandemic rate—which averaged about $370 per week nationwide—starting August 1.

"Senate Republicans want to cut unemployment benefits for 30 million Americans by $400 a week," tweeted Sen. Sherrod Brown (D-Ohio). "This cannot stand."

🚨 Senate Republicans proposing to cut the incomes of 30 million+ unemployed Americans and their families by $1,600 per month in the middle of a pandemic. 🚨 https://t.co/zQ9gqUqv7x

— Charlie Anderson (@EconCharlie) July 27, 2020

With bipartisan negotiations over the stimulus package expected to begin late Monday, Democratic leaders have not said the Republican unemployment proposal is a deal-breaker.

Asked about the UI payments in an appearance on CBS "Face the Nation" Sunday morning, House Speaker Nancy Pelosi criticized the GOP's 70% wage replacement idea as overly complicated but said "you don't go into a negotiation with a red line."

In May, the House passed a bill that proposes extending the $600-per-week benefit through January of next year. Senate Minority Leader Chuck Schumer (D-N.Y.) and Sen. Ron Wyden (D-Ore.) introduced legislation earlier this month that would extend the $600 weekly UI boost until economic conditions improve.

"These negotiations are absurd," HuffPost senior reporter Zach Carter tweeted Monday. "The country is on fire and the chief concern for Senate Republicans is that unemployed people have too much money."

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Off the Top of My Head

Reparations and Universal Basic Income

by John Lawrence, July 14, 2020

Old Chinese proverb: Give someone a fish, and they will eat for a day. Teach them how to fish, and they will eat for the rest of their life. This is how I feel about cash payouts for both reparations and Universal Basic Incomes (UBI). I am for reparations in the sense of guaranteeing a living wage job for people who are able bodied. If not the social safety net should provide food, housing and medical care free of charge. In kind welfare is always better than cash payouts which can be squandered, gambled away, spent on drugs and alcohol or other foolish items. Besides billionaires and millionaires, black or white, don't need reparations or UBI.

I am for reparations in the sense of affirmative action for minorities and poor people in the sense of providing jobs either in the private sector or by the government as a last resort. I believe government should be the employer of last resort. In Sweden they have a national employment database which tracks every job opening in the whole country. They will do their best to hook you up with one of those jobs. This is not a bad idea. Then if no matches can be found, the government should be employer of last resort. There sure is a lot of work that needs to be done that can only be done by government like infrastructure repair and development, not only in this country but around the world.

China has exported its expertise and workers to the rest of the world to build infrastructure. This creates future trading opportunities for China, but it also guarantees that there will not be an unemployed class in China. China by virtue of its Belt and Road Initiative is a full employment society. The US could do the same. There is much to be done in terms of sanitation, health, education and job development to bring the rest of the world up to even a minimally acceptable standard of living. At the same time everyone, in both developed and developing societies needs to adopt a sustainable standard of living. The New American Dream should encompass not unlimited consumption but reasonable and sustainable consumption. Otherwise, the planet's resources will be rapidly, at least in geological terms, exhausted, and the result will be resource wars, poverty of the majority and over consumption of the few.

There is much work that needs to be done, but the private economy is not concerned with necessary work. It is only concerned with encouraging consumption that produces the most profits. It is not concerned with what is good for the environment. It is only concerned with exhausting resources if that is what produces the most profit in the shortest period of time. We need to be concerned with husbanding the earth's resources so that they are there for future generations. Renewable energy is a must instead of exhausting earth's fossil fuels. The same can be said for agriculture and other consumable items. They need to be harvested in a sustainable way. Forests need to be maintained instead of being clear cut. The environment needs to be protected. Food needs to be grown without being sprayed with chemicals. There are good practices which will sustain, maintain and renew earth's resources in such a way that everyone can be employed and everyone can benefit including future generations.

In the meantime there is much necessary and essential work to be done here at home and around the world in eliminating poverty, building housing along the Habitat for Humanity model, growing organic food, eliminating factory food operations, providing health care. China is building infrastructure, but it is not directly eliminating poverty around the world. That's a niche the US could fill. A good step would be converting the 800 military bases in various countries to hospitals, schools and affordable housing for local and indigenous people, defunding the military and reallocating resources to helping poor countries become developed in a sustainable way rather than exploiting their resources.

Off the Top of My Head

A House Built Upon Sand: the US Economy

by John Lawrence, June 26, 2020

The wise man built his house on rock, and it withstood the rains and the floods and the wind. The foolish man built his house on sand and it collapsed. An apt metaphor for the US economy in the midst of a pandemic that is only getting worse. Before the pandemic hit, it was a full employment economy in which half the people couldn't survive a $400. emergency. It was an economy built on consumerism. Consumerism was 70% of GDP. About half the economy was small business, but these jobs and this economic activity was vulnerable. Much of it was non-essential. It was bars (by the way you can drink at home); it was restaurants (by the way you can eat at home). It was travel and hospitality (by the way you can sleep at home if you're willing to make your own bed).

The essential parts of the economy continued to operate even when the pandemic hit. It isn't fair that minimum wage workers were more exposed to the coronavirus, but, be that as it may, with some exceptions these workers did not get sick in higher ratios than anyone else. If more of the jobs were essential, productive and less frivolous, there would have been fewer jobs lost and much less unemployment. The economic house was built on sand and when the pandemic hit, it collapsed. At the same time the fault line of black racism and inequality was fully exposed. It's as if the hurricane of the pandemic cut away the underbrush and exposed this situation for what it is thanks to #BlackLivesMatter.

The Homestead Act signed by President Abraham Lincoln which gave free land to white people allowed whites to build equity and wealth while blacks who were promised 40 acres and a mule after slavery were denied even that. They ended up in many cases working the same land as sharecroppers and living in worse poverty than when they were slaves. After World War II the G.I. Bill aimed to help American veterans adjust to civilian life by providing them with benefits including low-cost mortgages, low-interest loans and financial support. African Americans did not benefit nearly as much as White Americans. Historian Ira Katznelson argues that "the law was deliberately designed to accommodate Jim Crow". In the New York and northern New Jersey suburbs 67,000 mortgages were insured by the G.I. Bill, but fewer than 100 were taken out by non-whites.

Additionally, banks and mortgage agencies refused loans to blacks, making the G.I. Bill even less effective for blacks. Once they returned from the war, blacks faced discrimination and poverty, which represented a barrier to harnessing the benefits of the G.I. Bill. So whites were able to build wealth through home ownership while blacks were denied that opportunity. Wealth from home ownership is the difference between the middle class and the poor. Home ownership became the means for the intergenerational transfer of wealth for white people. Each generation of black people started out from zero. There was an intergenerational transfer of poverty instead.

Blacks who were able to get manufacturing jobs after the Second World War did fairly well, but those jobs have by and large fled the country. In the financial crisis of 2008, the Great Recession, blacks were screwed as well. While the Federal Reserve bailed out the banks and mortgage companies hundred cents on the dollar, blacks who needed help paying their mortgages did not get it and were foreclosed on. The government could have bailed them out instead, but it didn't.

So now the country is faced with not only a public health crisis but also an economic, financial and racial crisis which would be much less severe if those manufacturing jobs still existed. The economy is not coming back as it was constructed pre-pandemic. There is no way that small business based on 100% occupancy is going to survive based on 50% occupancy. Many of the businesses like professional sports, cruises and even churches are predicated on high occupancy. People will not be comfortable with high occupancy unless a vaccine is found for COBID, but finding a vaccine is not a foregone conclusion. There are some viruses for which a vaccine has never been found including HIV, malaria and tuberculosis.

It takes a lot of money to develop a vaccine, and that money has been lacking from US budgets. There are two obstacles to faster progress, said Dr. Gregory A. Poland, director of the vaccine research group at the Mayo Clinic. “One is scientific, and one is embarrassing,” he said. The embarrassing part is the lack of investment. It takes 10 years and more than $1 billion to develop a vaccine — a small fortune for a medical advance but a pittance for a weapons system. While defense research is driven by one mega-customer, the Pentagon, vaccine researchers face a confusing hodgepodge of potential backers. In short the US has spent its money on weapons of war instead of protecting its people from pandemics which are far more deadly than terrorist attacks. 405,000 Americans died in WW II. Over half that amount have already died in this pandemic, and it's getting worse due to American foolishness at the top levels.

There is a chance now for America to start out on a new path, and that path would be more or less what Bernie Sanders and other progressives have identified as their agenda: a Green New Deal would create good jobs for millions of unemployed Americans and it could give priority to black people so that they could get started on wealth building. Low cost housing loans and subsidies could give black people the same advantages they didn't get with the Homestead Act and the G.I. bill. At the same time a Green New Deal would be converting the country to renewable energy and rebuilding infrastructure, both of which are necessary if earth is to remain habitable for the human race. Medicare for All would only bring the US up to the level of most other civilized countries.

We have to reset our priorities, reduce the military-industrial complex and make peace and have cooperation with our so-called enemies. We can quibble about Russia's and China's internal affairs or we can cooperate with them as peers to forestall global warming and create a planet worth inhabiting. We can spend our money on war or we can spend it forestalling future pandemics. The solution to many of our myriad problems is clear, and it doesn't require a revolution necessarily. Reform is all that's necessary to implement Medicare for All. Reform is all that's necessary to implement a Green New Deal. But countries that do not do what's necessary and obvious to meet the needs of the people create a situation in which violence may ensue. It's no longer a question of capitalism vs socialism. Most countries of the earth including Russia and China are a combination of both. I started with a Biblical reference so I will end with one: "Blind guides! You strain your water so you won’t accidentally swallow a gnat, but you swallow a camel!" God bless the USA.

Off the Top of My Head

How Important is the Culture of Poverty as a Determinant of Criminality?

by John Lawrence

Police reform is now being undertaken to some extent because of the Black Lives Matter movement. Whether it is sufficient to solve any problems is questionable. Most of the policing activities take place in poor neighborhoods both black and white because most street crime takes places in poor neighborhoods. In some families and neighborhoods there is not only a culture of poverty, there is a culture of crime. The two of them seem to go together. If your uncle or brother or father has spent time in jail or in prison, it seems to young people growing up that this is a normal part of life. Close to six million kids in America have experienced losing a parent to prison or jail at some point in their lives. African Americans are incarcerated at more than 5 times the rate of whites. The imprisonment rate for African American women is twice that of white women. 45.8 percent of young black children (under age 6) live in poverty, compared to 14.5 percent of white children. This says it all.

There is a culture of imprisonment in predominantly black families and neighborhoods. My contention is that the solution is the elimination of poverty in the black community, and that would go a long way to eliminating the need for police enforcement in the first place. The culture of poverty and imprisonment is cultivated by both black and white artists, playwrights and musicians. For example, take the play Porgy and Bess written by a white man, DuBose Heyward about a poor crippled black man. It was developed into an opera by George and Ira Gershwin, also white. Porgy and Bess started out as a novel, was converted into a play, then an opera and finally a movie. It contains many cultural stereotypes of black people. Wikipedia reported:

Another production of Porgy and Bess, this time at the University of Minnesota in 1939, ran into similar troubles. According to Barbara Cyrus, one of the few black students then at the university, members of the local African-American community saw the play as "detrimental to the race" and as a vehicle that promoted racist stereotypes. The play was cancelled due to pressure from the African-American community, which saw their success as proof of the increasing political power of blacks in Minneapolis–Saint Paul.

The belief that Porgy and Bess was racist gained strength during the Civil Rights Movement and Black Power movement of the 1950s, 1960s and 1970s. As these movements advanced, Porgy and Bess was seen as more and more out of date. When the play was revived in the 1960s, social critic and African-American educator Harold Cruse called it, "The most incongruous, contradictory cultural symbol ever created in the Western World."

One of the characters in Porgy and Bess is Sportin' Life, a pimp and dope peddler. This emphasizes the connection between black people and a traditional role model - pimp and dope peddler. Now Sportin' Life is one of the most successful members of the neighborhood. Why is this? Because most of the people were extremely poor. The lesson is, if you want to be successful, if you want to have money, be a pimp or sell dope. Or gamble like Porgy does in jail. So all the associations of black people with dope, prostitution, police and jail are reinforced by this work of art which has been praised as a brilliant story filled with brilliant music. Even Miles Davis, a black jazz artist, recorded a much praised album with orchestration by Gil Evans: the Jazz Soul of Porgy and Bess.

In order to have street cred, even black men make up stories to make them seem bigger criminals than they really are. Then they peddle their art to make money. Take Akon. According to the Baltimore Sun:

The world of thug culture has its own perverse equivalent, in which middle-class men with minor legal transgressions exaggerate their bad behavior, claiming to be hard-core degenerates in order to impress youngsters looking for outlaw role models. In this destructive environment, the more violent and predatory you are, the more heroic you seem.

That helps to explain why a hip-hop star known as Akon wove a tall tale of malevolence and criminal activity, claiming to have spent three years in prison for running a "notorious car theft operation," a story he's been telling for years. In fact, he has apparently never served hard prison time. A Web site called The Smoking Gun recently exposed Akon as a thug wannabe, a "James Frey with ... an American Music Award.".

So the culture of criminality is perpetuated so that some black men can make money off of it, and young kids can grow up wanting to emulate them. This culture has to change in order that black and white kids grow up with more positive role models, but the root cause of this criminal culture is poverty so, if you want to change the culture, first change the culture of poverty. Give incentives for black men to stay with their families. Give them good jobs. It's not only black people who have lived in a crime culture due to poverty. Take the Mafia. White Italians looked up to the mafia dons because they were financially successful at a time when many Italians were in poverty. Black or white, poverty breeds a criminal culture. Problems with the police are going to persist as long as there is a huge amount of poverty and homelessness in the US. Progressive and enlightened government policy could start to change that for poor people, both black and white. Positive incentives to do the right thing go a long way to dispel poverty.

Off the Top of My Head

Racist Economics

by John Lawrence, June 8, 2020

Is it racism when the schools in predominantly black neighborhoods are worse than schools in predominantly white neighborhoods? Schools in many parts of the country are funded with local property taxes. It stands to reason that property values in poor neighborhoods are less than property values in rich neighborhoods, and, therefore, property tax revenues and hence school funding is less. So the worse schools are found in poor "predominantly black" neighborhoods. A word you hear often these days is "predominantly". Nothing is totally black and white, but, when black people are affected in a way that is greater than their percentage of the population, one could say it is a "predominantly black" situation. When police arrest black people at a greater rate than they do white people, we could say that the police are a racist institution.

It has been said that the only mistake that the looters at the current protests made was that they didn't form a hedge fund first before they started looting. Martin Luther King said, “The black revolution is much more than a struggle for the rights of Negroes. It is forcing America to face all its interrelated flaws—racism, poverty, militarism, and materialism. It is exposing the evils that are rooted deeply in the whole structure of our society. It reveals systemic rather than superficial flaws and suggests that radical reconstruction of society itself is the real issue to be faced.” Republicans have breathed a sigh of relief that so far the Black Lives Matter movement has had little to say about poverty, economic inequality, militarism and materialism. Some though are getting to the heart of the problems in our society that affect us all but affect black people "disproportionately."

Writing in the New Yorker Keeanga-Yamahtta Taylor said:

The [1992] uprising in L.A. shared with the rebellions of the nineteen-sixties an igniting spark of police abuse, widespread violence, and the fury of the rebels. But, in the nineteen-sixties, the flush economy and the still-intact notion of the social contract meant that President Lyndon B. Johnson could attempt to drown the civil-rights movement and the Black Power radicalization with enormous social spending and government-program expansion, including the passage of the Housing and Urban Development Act of 1968, which produced the first government-backed, low-income homeownership opportunities directed at African-Americans.

By the late nineteen-eighties and early nineties, the economy was in recession and the social contract had been ripped to shreds. The rebellions of the nineteen-sixties and the enormous social spending intended to bring them under control were wielded by the right to generate a backlash against the expanded welfare state. Political conservatives argued that the market, not government intervention, could create efficiencies and innovation in the delivery of public services. This rhetoric was coupled with virulent racist characterizations of African-Americans, who relied disproportionately on welfare programs. Ronald Reagan mastered the art of color-blind racism in the post-civil-rights era with his invocations of “welfare queens.” Not only did these distortions pave the way for undermining the welfare state, they reinforced racist delusions about the state of black America that legitimized deprivation and marginalization.

The 1990s saw Democrats agreeing with Republicans that problems in the black community were largely caused by overly generous social programs. President Bill Clinton promised to "end welfare as we know it." Senator Joe Biden jumped right on board the push to reduce welfare programs by saying, "“the culture of welfare must be replaced with the culture of work. The culture of dependence must be replaced with the culture of self-sufficiency and personal responsibility. And the culture of permanence must no longer be a way of life.” Biden championed the 1994 “crime bill” that pledged to put a hundred thousand more police on the street, called for mandatory prison sentences for certain crimes, increased funding for policing and prisons, and expanded the use of the death penalty. By the 1980s Ronald Reagan decried "welfare queens."

Taylor continues:

So, though Biden desperately wants us to believe that he is a harbinger of change, his long record of public service says otherwise. He has claimed that Barack Obama’s selection of him as his running mate was a kind of absolution for Biden’s dealings in the Democrats’ race-baiting politics of the nineteen-nineties. But, from the excesses of the criminal-justice system and the absence of a welfare state to the inequality rooted in an unbridled, rapacious market economy, Biden has shaped much of the world that this generation has inherited and is revolting against.

More important, the ideas honed in the nineteen-eighties and nineties continue to beat at the center of Biden’s political agenda. His campaign advisers include Larry Summers, who, as Clinton’s Treasury Secretary, was an enthusiastic supporter of deregulation, and, as Obama’s chief economic adviser during the recession, endorsed the Wall Street bailout while allowing millions of Americans to default on their mortgages.

Biden was chiefly responsible for the 2005 bill that took away bankruptcy protection from student load debtors (presumably disproportionately black). Credit card companies, many of whom are headquartered in Biden's state of Delaware, have been major Biden campaign contributors. Biden was known as the Senator from MBNA. Biden should just turn over the Democratic nomination to Bernie Sanders who has been on the right side of issues which are now coming to the forefront in American life.

Taylor continues:

In 1968, King, in the weeks before he was assassinated, said, “In a sense, I guess you could say, we are engaged in the class struggle.” He was speaking to the costs of the programs that would be necessary to lift black people out of poverty and inequality, which were, in and of themselves, emblems of racist subjugation. Ending segregation in the South, then, was cheap compared with the huge costs necessary to end the kinds of discrimination that kept blacks locked out of the advantages of U.S. society, from well-paying jobs to well-resourced schools, good housing, and a comfortable retirement. The price of the ticket is quite steep, but, if we are to have a real conversation about how we change America, it must begin with an honest assessment of the scope of the deprivation involved. Racist and corrupt policing is the tip of the iceberg.

We have to make space for new politics, new ideas, new formations, and new people. The election of Biden may stop the misery of another Trump term, but it won’t stop the underlying issues that have brought about more than a hundred thousand COVID-19 deaths or continuous protests against police abuse and violence. Will the federal government intervene to stop the looming crisis of evictions that will disproportionately impact black women? Will it use its power and authority to punish police, and to empty prisons and jails, which not only bring about social death but are now also sites of rampant COVID-19 infection? Will it end the war on food stamps and allow African-Americans and other residents of this country to eat in the midst of the worst economic crisis since the Great Depression? Will it finance the health-care needs of tens of millions of African-Americans who have become susceptible to the worst effects of the coronavirus, and are dying as a result? Will it provide the resources to depleted public schools, allowing black children the opportunity to learn in peace? Will it redistribute the hundreds of billions of dollars necessary to rebuild devastated working-class communities? Will there be free day care and transportation?

In short we need good paying union jobs (Green New Deal) that will deal with the issue of climate change (Green New Deal), forgiveness of student loan debt (the least Biden can do since he was largely responsible for creating the situation), Medicare for All (since hospitals in black neighborhoods compare unfavorably with those in white neighborhoods), public housing (to end homelessness and guarantee everyone the right to have a roof over their head). If we want to solve the problem of institutional racism in this country, we need to address the fundamental problems of economic inequality. Where do we get the money? Not only by defunding the police which claim the lion's share of local budgets, but by demilitarizing the bloated military-industrial complex and taxing the rich at 1955 levels (91%). The Federal Reserve can always take a few more trillion on its balance sheet; it has taken trillions on its balance sheet already and given the money to the big banks. How about Quantitative Easing for the people? Economic inequality is a problem which affects black people disproportionately (there's that word again), but the solution of which will contribute to the benefit of white people as well.

Off the Top of My Head

Black Lives Matter: Police Reforms Benefit Whites as Well

by John Lawrence, June 7, 2020

No more "carotid restraints" or chokeholds is a police reform caused by the Black Lives Matter movement, but obviously it applies to whites as well. We don't know how many of the 237 times Minnesota police used chokeholds, blacks were targeted, but probably like all police violence it was disproportionate. Police reforms such as ending "no knock warrants" also obviously apply to whites as well as blacks. The point is that what black people are demanding in terms of police reform doesn't just affect black lives. It affect all lives.

So why stop with just police reform? How about prison reform.Though African Americans and Hispanics make up approximately 32% of the US population, they comprised 56% of all incarcerated people in 2015. African Americans are incarcerated at more than 5 times the rate of whites. The imprisonment rate for African American women is twice that of white women. Although only a small percentage are in prison for minor drug offenses, marijuana possession in small quantities should be made legal on a national basis. Many are in jail awaiting trial. Every day, 465,000 people are held in local jails even though they have not been convicted; legally, they are presumed innocent. Many are there because they cannot afford bail.

Let's not stop at prison reform. How about political reform? Mail-in ballots should be legalized and encouraged in every state. How many poor people can afford to take time off from work to go and vote? These people are probably disproportionately black, but it would help poor people who are white as well. Let's make the election of President be based on popular vote and not the electoral college. Let's do away with the filibuster which prevents legislation from being passed democratically. Let's limit the power of the leader of the Senate to even stop legislation from being introduced. Make it mandatory that legislation created in the House be debated and voted upon in the Senate. Let's outlaw lobbying which lets the richest and most powerful individuals and corporations determine the political agenda.

How about economic justice? That was basically Bernie Sanders' agenda. Let's eliminate poverty and homelessness in the US. Blacks are disproportionately poor and homeless, but there are plenty of poor and homeless whites as well. Instead of spending a trillion dollars a year on the military and military-industrial complex, instead of wasting money on fruitless wars, let's have a Green New Deal and rebuild American infrastructure while at the same time creating hundreds of thousands of good paying jobs. Let's cancel student loan debt which disproportionately affects blacks, but whites will benefit too. Let's have Medicare for All instead of an outrageously expensive health care system which is twice as expensive as any other country's while producing only half as good results.

You get the picture? All the reforms which could come from the Black Lives Matter movement will also bring those same reforms for whites, browns and any other colors. Let's protest to change the course of this whole country for all citizens. Then we have to help the rest of the world with a Green New Deal if we want to create a habitable planet for our children and grandchildren. Black people are leading the way for social justice, for political and economic justice, justice which will turn this country around and help turn this planet around. Let's keep on going.

Off the Top of My Head

Explainer: Quantitative Easing for the People

by John Lawrence, April 19, 2020

Let's say a Wall Street bank has a mortgage that's been defaulted on. That qualifies as a "toxic asset" meaning the guy isn't paying his mortgage. The bank then pleads with the Federal Reserve to take it off its hands because the bank is running low on money that it thought would be coming in if the guy had made his monthly payments. So the Fed adds "liquidity" by saying to the bank, "Give me that mortgage. I will take it off your hands and pay you the full value of the amount borrowed, and then I will be the mortgage holder for the "toxic asset." So the bank is made whole, and the Fed is now the holder of the toxic mortgage. The Fed has "taken it on its balance sheet" and taken it off the balance sheet of the Wall Street bank. This is what happened during the Great Recession of 2008. It's what Quantitative Easing is all about. Theoretically, some day the Fed will sell this mortgage in the marketplace, but who wants to buy a mortgage that no one is paying either interest or principal on especially if the mortgagee is long gone. Instead the toxic asset disappears in what amounts to the Fed's black hole.

Although the Fed will do this for a bank especially for those banks that are too big too fail, they will not do this for Joe Blow. Joe blow, for instance, may have a toxic asset of $30,000 in credit card debt or $100,000 in student loan debt. Why couldn't Joe Blow approach the Federal Reserve and say please will you take this toxic asset off my hands? That would mean adding "liquidity" to Joe Blow's bank account by taking the credit card debt or student loan debt onto the Fed's balance sheet and paying off Joe's creditors. This would make the Fed Joe's creditor. Perhaps some day, when Joe is better off, the Fed might be able to move Joe's debt off its balance sheet and put it back on Joe's account. At least theoretically that could happen.

What is happening today with the coronavirus relief package and the stimulus checks is a variation on QE which amounts to QE for the people. Where is all the money coming from you say? Will it just be added to the deficit and the national debt, God forbid? Right now interest on the national debt is $479 billion. The more money the nation borrows, the more interest on the debt crowds out other items in the Federal budget like social security, Medicare and the military. But there is a neat little trick that is played between the Treasury department which issues the bonds that comprise national debt and the Federal reserve which has the aforementioned capacity to make debts disappear down a black hole.

Those toxic assets that the Fed took off of banks' balance sheets? Some of them were Treasury bonds. Now more than ever the Fed will be taking Treasury bonds off the big banks balance sheet for two reasons: 1) they can't be all sold in the open market because there are no buyers and 2) the US taxpayers will not have to pay interest on these bonds because although the government pays interest to the Fed on these bonds all profits the Fed makes are returned to the Treasury after deducting minimal expenses at the end of the year. So one hand really does wash the other or, if you prefer, the Federal government is playing a shill game with the Federal Reserve. The Federal Reserve monetizes the debt which is the same as saying that it disappears down a black hole on the Fed's balance sheet. The middleman in this whole operation is Wall Street since the Fed by law cannot buy Treasury bonds directly from the Treasury Department. So by monetizing the debt, the Fed is doing two things: 1) it is taking the pressure off of interest paid in the Federal budget and 2) it is guaranteeing that the Federal government will have whatever amount of money it needs to pay its bills without having to increase taxes.

Now this is good news for pandemic relief. Deficit hawks are muted because they know how this shill game is played, and it's no skin off their backs. The Fed essentially prints money (although it's doe with a couple of keystrokes on a computer) and bails out the whole economy. There is no inflation since unions which drove up the price of labor were essentially muted during the Reagan administration which saw most manufacturing jobs transferred to China. So then Fed can print away giving everyone a taste of a Universal Basic Income (UBI). (See Ellen Brown's accompanying article.) Since the cat is out of the bag there is no reason why this same game couldn't be played to relieve American consumers of student loan debt and credit card debt although you can get rid of credit card debt in bankruptcy. Not so for student loan debt.

Also money for infrastructure could be obtained this same way by having the Fed monetize the debt. This would create good union jobs according to Bernie Sanders. But this is exactly what the bond market and the Fed doesn't want - good union jobs - because that would create wage inflation. When wages go up prices go up, and the bond market would not be pleased because inflation eats up the yields on their bonds. What the Fed and the monied interest want is an economy in which workers are deeply indebted because that means a ton of interest going to the banks which are totally in cahoots with the privately owned Fed. If your a worker, the Fed is not really your friend. They are the banker's friend. The Fed was set up in the first place to bail out banks not American consumers. Now it is giving American consumers a taste of a bail out because the coronavirus presents a unique situation with everybody being out of work. When things get back to normal, the Fed will go back to just bailing out banks, and relieving pressure on the national debt.

Off the Top of My Head

Lowest Unemployment Rate Since 1969, But Why Can't 40% of Americans Cover a $400 Emergency?

by John Lawrence, May 4, 2019

This is a complete disconnect. On the one hand the economy has never been better. On the other, people are struggling living paycheck to paycheck. And then there's the bottom rung of the population that can't even afford to pay rent. Sure the economy is creating jobs, mostly on the low end of the pay scale, however. Three-quarters of U.S. jobs created since the 2008-'09 financial crash pay less than a middle-class income, according to an Axios analysis of U.S. Labor Department data. And the cost of housing  and medical care is out of sight. That's why Bernie Sanders should press on with his campaign of Medicare For All and a Green New Deal.

The fact that 40% of Americans can't cover a $400. emergency tells me that 40% of Americans have no assets or wealth whatsoever. They are renters living one paycheck from the streets or home owners deeply in debt. The economic divide between the rich and the poor is growing although most of the poor are at least working. That's a good thing, I guess. The working poor probably are in a lot of debt. Student loan debt is $1.5 trillion and rising. Auto loan debt and mortgage debt contribute to the fact that a lot of the paychecks are going to pay off debt or at least to pay on debt that may never be paid off. So it's no wonder that 40% of Americans can't come up with $400. unless they borrow the money and go into even more debt. They would probably put that $400. on their credit card adding to credit card debt. According to the Federal Reserve, Americans owe a record $1.04 trillion in credit card debt – up from less than $854 billion five years ago.

Market Watch reports:

The Federal Reserve’s Economic Well-Being of U.S. Households report released [May 22, 2018] notes that while 74% of adults said they were doing “at least OK” financially in 2017, 40% of them still don’t have enough money to cover an unexpected $400 expense. And less than two-fifths believe that they are on track with their retirement savings.

“The finding that 4 in 10 adults couldn’t cover an unexpected $400 expense without selling something or borrowing money is troubling,” Bankrate.com’s chief financial analyst Greg McBride told Moneyish. “Nothing is more fundamental to achieving financial stability than having savings that can be drawn upon when the unexpected occurs.”

One question I have is why this data which is a year old is being covered now as "news?"The second question is what's the use of having a savings account when 1) banks are paying zero interest and 2) you can always put $400 if needed on a credit card. The whole report is worrisome in that it depicts the American population merely as workers and savers rather than as people who accumulate wealth or go into debt. The emphasis should be on how much wealth Americans have accumulated. If that number is zero, then of course they will have problems with a $400 emergency. It will go right on the credit card adding to their indebtedness. If an American's assets - namely, equity in a house or the stock market - exceeds the sum of the their debts by $400, then they have the $400. If not they will have to borrow the money.

The article continued:

But good luck growing your emergency fund on the West Coast. People living in the metropolitan areas around San Jose, Los Angeles, San Francisco and San Diego have the hardest time saving for emergencies, largely due to the high cost of housing, according to a recent Bankrate report.

The study analyzed the local average cost of living in the 50 largest metro areas in the country, as well as the median after-tax household income, before calculating how much of an emergency fund a family of four would need to cover six months of expenses. And the average San Jose family didn’t even come close to breaking even (income versus bills), let alone squirreling away the $67,342 they’d need to cover six months of bills in case of an emergency.

Again it's not simply a story of income versus bills. And it's not just about "retirement savings." It's about the accumulation of wealth versus the accumulation of debt. For most middle class people, even with two incomes, the combined drain on their finances due to housing costs, auto loans, student loan debt, credit card debt and medical and pharmaceutical expenses is just too much to allow them to accumulate any wealth unless they are entrepreneurial and have started a successful business. A two earner household where both earners have middle class type jobs will for the most part never accumulate wealth of any significance in this day and age. They will be perennial debtors and form the serfs of the new financialized economy.

This corner of California is suffering economic misery despite boom all around it

From the LA Times

Parked outside a Calexico job center, Jonathan Lopez leaned against his worn SUV and took a drag from a cigarette. He was waiting, yet again, for word on his unemployment application.

“A well-paying, full-time job is impossible to find,” the 39-year-old lamented as his son played nearby. “I have a family with four children and we struggle. It is a daily battle to make ends meet.”

As California has rebounded from the Great Recession, the Imperial Valley has largely defied attempts to expand its economy beyond seasonal farming and government work, and the county continues to suffer the highest unemployment rates in the state.

According to the U.S. Census Bureau’s latest five-year estimate, Imperial County's unemployment rate stands at 16% — four times greater than the state’s overall jobless rate of 4.2%.

“It’s much better than it was in 2009, when El Centro was mentioned as the highest unemployment in the nation at almost 30%,” county Supervisor Ryan Kelley said. “This is supposed to be the recovery, and every time there is a recovery, we seem to be the least-benefiting area.”

In recent years, locals have pinned hopes of economic salvation on a variety of new industries, such as geothermal energy, lithium extraction and the growing of industrial hemp.

El Centro City Councilman Jason Jackson said the valley — which has “all the things” that should be attractive to industry, like abundant water from the Colorado River and low power rates — is on the cusp of breaking out.

“We’re a little bit isolated,” he said. “We’ve always been thought of as an agricultural community, so industry has never really taken a good, solid look at us.”

Wedged in the southeast corner of the state, between the Mexico border and the Colorado River, the valley has depended heavily on agriculture ever since the Imperial Land Co. helped to bring large-scale irrigation in the early 1900s and transformed a barren desert into abundant farmland.

Although some argue the seasonal nature of farming has inflated county unemployment figures, there is no denying Imperial County is well-acquainted with economic adversity. The median household income is $44,770, well below the state median of $71,805, and nearly a quarter of its residents live below the poverty line. Statewide, that figure is 13.3%.

The vast expanse of flat, sunny land is seen by some renewable energy developers as ideal for solar farms. And the county is home to nearly a dozen geothermal power plants, which use a naturally heated underground reservoir to churn out pollution-free electricity around the clock.

“About five years ago, we saw a sustainable-energy boom, and we thought it would develop the workforce,” said Priscilla Lopez, interim director of the Imperial County Workforce Development Board. “But once built, they didn’t create jobs. You only need five or six people to run those plants.”

Jackson remains optimistic despite such concerns, noting that home builders are coming back to the valley “to look around” for the first time since the housing boom turned into a bust.

“It’s like a dance floor. Nobody wants to be the first couple to go out and dance, but once someone does, everyone goes out,” Jackson said. “I feel like we’re just waiting for that first couple to dance. We haven’t been able to land that one big fish yet.”

Continue Reading ...

Homeless & Unemployed America

Source: MPHOnline.org

The Living-in-the-Basement Generation

The Washington Monthly / By Richard Florida

9 COMMENTS

How young adults are faring in America’s twenty-five biggest metro areas.

November 14, 2013  |  from Alternet

 

 

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With housing prices and job numbers rising, many commentators have begun to talk about the “recovery,” with the “crisis” relegated to the past. But a crisis certainly remains, according to new research by the Social Science Research Council’s Measure of America project, for our nation’s 5.8 million “disconnected youth”—the one in seven Americans between the ages of sixteen and twenty-four who are neither working nor enrolled in school. This cohort, whose numbers were stable for a decade, surged by 800,000 after the Great Recession and includes not only children from poor and minority families but significant numbers of white, middle-class youth as well.

The consequences are dire for these young Americans. They’re not only more likely to have a hard time in the job market; researchers have found that disconnection has scarring effects on health and happiness that endure throughout a lifetime. Unemployed, uneducated youth are at greater risk for criminality and incarceration, and they often go on to become unreliable spouses and improvident parents.

The costs to society are also considerable. The direct support expenses and lost tax revenues associated with disengaged young people cost U.S. taxpayers $93 billion in 2011 alone—a bill that will only compound as the years progress.

But youth disconnection differs substantially across the country. The table below, based on data from the Measure of America report, shows the shares of disconnected youth for America’s twenty-five largest metro areas. Eight of the ten areas with the highest levels of disconnected youth are in the Sun Belt, including Charlotte, Atlanta, Tampa, Phoenix, and Riverside-San Bernardino in Southern California. These cities’ economies were focused on suburban sprawl and thus were especially hard hit by the housing collapse. But that isn’t the only, or even the biggest, reason for their high levels of youth disconnection.

Share of Youth Not Working and Not in School in the 25 Largest Metro Areas

“…” Means data unavailable because there are too few 16- to 24-year-olds to allow for reliable calculations. Youth disconnection rates have been rounded to one decimal place. In several instances, the values may therefore appear to be tied but the rankings reflect the original values that result from calculation of the rate. Source: Measure of America

There is a close connection between youth disconnection and education levels or human capital, according to the study. Sun Belt metro areas have fewer highly educated adults and have tended historically to attract people with relatively lower levels of education. In contrast, the metro areas with the highest percentage of college-educated adults—places like Boston, Washington, D.C., Denver, and San Francisco—have smaller shares of disconnected youth.

This positive association between low human capital and youth disconnection stems from several mechanisms. Adults with college degrees are better able to contribute to their children’s success. College-educated parents not only provide positive role models, they also earn more money than non-college-educated parents on average. Public schools tend to be better funded in more affluent neighborhoods, and parents can afford to invest in enrichment activities outside of school. Parents with high human capital exert indirect effects on their local economies, too. Because degree holders earn more, they tend to spend more in stores, restaurants, and other businesses and thus support entry-level jobs in the local community.

Youth disconnection varies considerably by race and ethnicity, according to the report. Overall, African American youths are roughly twice as likely to be disconnected than whites, with Latinos somewhere in the middle. Asian Americans are the least disconnected.

Again the pattern varies considerably by metro area. For instance, black youth in Boston are less disconnected (14.2 percent) than white youth in San Bernardino (17.5 percent), Charlotte (16.7 percent), and Portland, Oregon (16 percent). The geographic variation in youth disconnection rates is associated with a range of factors, according to the report, including the levels of unemployment and poverty experienced by adults and the degree to which poorer neighborhoods are isolated from key institutions of mainstream society. Again, human capital or education levels play a key role.

Take Seattle and Boston, for example. Both are hotbeds of innovative industries and magnets for talent. Both have relatively low unemployment rates—Seattle is at 5.8 percent, Boston at 6.6 percent (the national rate is 7.4 percent). Both have relatively modest-sized black populations—Boston’s is 7.4 percent and Seattle’s is 6.8 percent, versus a national average of 13.1 percent. But Seattle’s overall youth disconnect rate is nearly 4 percentage points higher than Boston’s, and its disconnect rate for blacks is 7 points higher.

Though it holds its youth to some of the nation’s toughest education standards, Massachusetts does a better job of keeping its students from dropping out of high school than Washington State does. And according to Measure of America codirectors Sarah Burd-Sharps and Kristen Lewis, greater Boston has one of the nation’s highest rates of school enrollment—81.4 percent—for the population aged three to twenty-four. Seattle’s school enrollment for that group is just 75.5 percent, almost 6 percentage points lower. The gap is even larger if we look at just the African American populations in the two metro areas: 83.4 percent of African American children and young adults are enrolled in school in Boston, compared to 69.2 percent in Seattle.

What can be done? One strategy that offers considerable payback is early childhood education. Creating better entry-level jobs is also important. For that, we need to upgrade low-skill, low-wage service work. The fastest-growing job categories—and the jobs that are the most available to young people, especially those with limited education—are low-pay, low-skill service jobs, in food preparation, retail sales, and the like. Those jobs can be made better—not just by mandating higher minimum wages, but by harnessing the creativity, knowledge, and initiative of workers to boost productivity and hence wages. We also need policies that are directly targeted at youth entering the job market. The more marketable skills young people have and the more practical experience they have accumulated in actual workplaces, the better their chances of finding and keeping work over the long term.

That’s an initiative that would benefit all workers, not just young ones—and their employers as well.

Richard Florida is author of Rise of the Creative Class (recently reissued as Rise of the Creative Class Revisited), winner of the Washington Monthly’s Political Book Award for 2002. He is director of the Martin Prosperity Institute at the University of Toronto’s Rotman School of Management and Global Research Professor at NYU. He is senior editor with the Atlantic and editor at large of Atlantic Cities.

Why Democrats and Republicans Are Both Wrong About the Economy

by John Lawrence from the San Diego Free Press

The unemployment rate is 7.8%. Both parties agree that this is too high, but they propose totally different solutions to create more jobs. The Republican solution is to give more tax breaks and other advantages to the rich and to corporations because they are the job creators. Really? Then why haven't they created more jobs in the last 30 years. This historical experiment of "trickle down" economics has been tried since the time of Ronald Reagan and it has proven to be an abject failure. Yet Republicans are still pushing it as the solution to all our problems. 

Esteemed Nobel laureate and Princeton professor Paul Krugman wants to take the traditional Keynesian approach and do deficit spending to improve the economy. He says there's no reason to worry about the deficit since the US can borrow money at extremely low rates. Not to worry. He sides with Dick Cheney who famously said, "Deficits don't matter." He and Bush then went on to add trillions to the national debt by fighting two unpaid for wars, tax breaks for the rich and an unpaid for prescription drug benefit for seniors that was in reality a giveaway to the pharmaceutical companies. But now that a Democratic President is in office, Republicans are all worried about deficits. They should have been worried when George W Bush was doing the profligate spending.

However, I disagree with both Cheney and Krugman. Deficits do matter and here's why. Sure the government can borrow a lot of money, as much as it wants to, at extremely low rates. But the government has to pay interest on the national debt and that is a growing part of the budget. Interest on the debt is the fourth largest government expenditure after Defense, Medicare and Medicaid. In 2011 Federal, state and local  governments spent $454,393,280,417.03 on interest. It actually came down dramatically in 2012 to $359,796,008,919.49. That's still a lot of money. The Federal government alone spent around $220 billion in net interest on its debt in 2012, and is predicted to spend over a trillion dollars in interest by 2020. That's $1 trillion we can't spend to educate our kids or to replace our badly worn-out infrastructure.

And there's no guarantee that interest rates will continue to remain at historical lows. They are being held there right now by the Federal Reserve's policy of quantitative easing. The Fed is printing money at the rate of $85 billion a month. This money is being essentially given to the large Wall Street banks. Theoretically it's being loaned, but if someone loans you money at a zero interest rate, why would you ever pay it back? It's foolish to think that interest rates will always remain this low and that foreign nations and individuals will continue to loan us money ad infinitum.

The Fed's policy of printing money and then giving it to the big banks relies on the theory that low interest rates will get the economy moving again. The theory goes that people will be attracted to the low interest rates, borrow money and consume. It assumes that banks will actually loan out the money. Since consumption is 70% of the US economy, GDP will increase and that will create more jobs. In other words the Fed is exercising the same trickle down theory of economic growth made famous by Ronald Reagan and that has been tried for the last 30 years and failed. The Fed is essentially devaluing American currency in the hopes that this will create jobs. And it has been a big failure insofar as job creation is concerned but it has kept the US government's borrowing rates low.

So if both deficit reduction and job creation are important, how do you do both. Put simply the US government has to walk and chew gum at the same time. The Republican emphasis on cutting spending, especially spending on social programs, would lead to austerity and that would contract the economy even more. So that isn't the solution. To be fair President Obama has not been on the side of deficit spending as a way to get the economy out of the doldrums. He has been for a balanced approach of stimulating the economy and paying down the deficit. But Paul Krugman and many Democratic theorists like Robert Reich have.

The trick is to note that government spending does not have to be deficit spending. Government spending can increase without incurring greater deficits by increasing government revenues. And there are different varieties of government spending. Republicans favor just giving government money to private corporations and having them do the job. Their policy is to let the government just be a money conduit from taxpayers to corporations. Alternatively, government can spend money directly on jobs programs like rebuilding infrastructure. Instead of using the indirect approach which amounts to pushing on a string which is what the Fed is doing and which Republicans advocate, the government can actually create jobs directly in the public sector. If you want to create jobs, why not just create jobs directly instead of trying to get the private sector to create jobs. President Obama should just get up and say, "We've tried various policies to get the private sector to create jobs; they haven't worked so now the government, the public sector, is going to create jobs directly."

But here's where Democrats and President Obama have a problem. Instead of calling for more revenue by taxing the rich and corporations and government direct spending instead of spending to fund private corporations to rebuild infrastructure, Obama is reticent because he is afraid of being labeled a socialist. No worries, he's already been labeled a socialist despite his administration's being the most pro-business administration in years. And beware of the public/private partnership which is just another variation of the privatization of functions which the government can do more efficiently. We don't want to replace the military-industrial complex with an infrastructure-industrial complex replete with lobbyists, cost plus contracts and highly paid CEOs. There's no need for Wall Street to get involved.

Well, where is the money going to come from? Senator Bernie Sanders has an answer: End Offshore Tax Havens. One out of four profitable corporations pays nothing in taxes. Tax rates on profits are the lowest since 1972. Last year Facebook paid nothing despite having a billion dollars in profits. Government revenue as a percentage of GDP is lower than at any time in history. Corporate contributions to tax revenue are the lowest of any major country on earth. It is absurd for major corporations to stash huge amounts of money in countries like the Cayman Islands which have a zero tax rate. 

Bernie Sanders and Jan Schakowsky have introduced the Corporate Tax Fairness Act. The bill will raise $590 billion over the next decade. The bill will also stop giving tax breaks to corporations for shipping jobs overseas. Their bill would prevent oil companies from disguising royalty payments to foreign countries as taxes in order to reduce their taxes in the US among other things. And it has a snowball's chance in hell of passing. A financial transaction tax would bring in as much as $100 billion annually. We used to have one; Europe just recently enacted one. Let's end the "carried interest" loophole for hedge and private equity funds. Wall Street needs to start paying its fair share.

Corporations have been getting away with murder in not paying their fair share of taxes. This is from an article by Bernie Sanders:

"In 2010, Bank of America set up more than 200 subsidiaries in the Cayman Islands (which has a corporate tax rate of 0.0 percent) to avoid paying U.S. taxes. It worked. Not only did Bank of America pay nothing in federal income taxes, but it received a rebate from the IRS worth $1.9 billion that year. They are not alone. In 2010, JP Morgan Chase operated 83 subsidiaries incorporated in offshore tax havens to avoid paying some $4.9 billion in U.S. taxes. That same year Goldman Sachs operated 39 subsidiaries in offshore tax havens to avoid an estimated $3.3 billion in U.S. taxes. Citigroup has paid no federal income taxes for the last four years after receiving a total of $2.5 trillion in financial assistance from the Federal Reserve during the financial crisis."

The sad fact is that the private sector is not in the process of creating jobs but of destroying jobs through automation and robotics. Almost anything a human being might have done in a job is now being done by robots. Some say that this creates jobs for "knowledge workers." Sure if you're among the upper 1% in knowledge talent. Companies like Microsoft, Google, Apple and Facebook are not looking for the average college graduate. They're looking for the upper 1% of college graduates. Together they employ less than 200,000 people in the US. The top talent in every field are making good money. Everyone else is going downhill if they're employed at all. 50% of college graduates are either unemployed or underemployed in terms of their qualifications. In the 2009-2010 recovery, 93% of the gains in income went to the top 1%. 

Why should the private sector create jobs if they can get a robot to do the work 24 hours a day at a cost of less than $5.00 an hour? If the private sector will not create jobs, that leaves the government to create jobs directly.  Instead of pushing on a string with policies that are supposed to create jobs indirectly by encouraging the private sector to do so, government should get more involved. More government revenues plus direct job creation rebuilding infrastructure could result in growing the economy, providing good middle class jobs and paying down the debt.

Chrystia Freeman in her book Plutocracy explains this phenomenon which results in the divergence of jobs and income, creating a well to do upper 1% class and everybody else:

"This is what ecomomists call the "superstar" effect - the tendency of both technological change and globalization to create winner-take-all economic tournaments in many sectors and companies, where being the most successful in your field delivers huge rewards, but coming in second place, and certainly in fifth or tenth, has much less economic value."

We are seeing the effects of a meritocracy where the top 1% of talent merges with the top 1% in terms of income and wealth. This is great for the top 1% of graduates from elite colleges but not so much for the average graduates of average colleges with $100,000. in student loan debt and a job at Starbucks instead of a career type job in their field. In every field the chasm between the superstars and everyone else is getting bigger and bigger. Inequality increases with the acceleration of meritocracy. Meritocracy and plutocracy converge creating a democratic dystopia.

That's why the government has to step in to regulate this runaway dystopia. Taxes on corporations and the rich need to be increased in order to tamp down inequality. This revenue needs to be redistributed to the former middle class in terms of job programs. It could be redistributed in terms of welfare and unemployment insurance, but this creates a class of dependents. It would be much better to create a middle class of workers rebuilding infrastructure. And this is not a trivial job. The American Society of Civil Engineers estimates that there is $2 trillion worth of work that needs to be done just to bring roads, bridges and other basic infrastructure up to par. But there is more to infrastructure than just that. When you consider all that needs to be done to prevent and combat the changes due to global warming, there is enough potential work out there to fully employ US workers for generations. Utilities need to be hardened and undergrounded. Fossil fuel powered electric plants need to be converted to solar and wind. Buildings need to be made less energy consuming. High speed rail needs to be implemented. Housing needs to be moved back from the shorelines.

There is no lack of work that needs to be done, and this is work the private sector not only won't do but in many cases it is work that the private sector is lobbying against doing. They profit from using the atmosphere as a dump. It's crucial that the government prevent runaway wealth maldistribution, create jobs that the private sector has no incentive to create and save the planet from ecological disaster.

Full Employment Is Possible!

Published on Tuesday, July 31, 2012 by The Nation

by Laura Flanders

Prominent economists have been expounding for months on the dire consequences of this country’s unemployment crisis. As recently as this May, Dean Baker and Ken Hassett exhorted us to pay vigilant attention. In an op-ed headlined “The Human Disaster,” they described unemployment as “nothing short of a national emergency.”

Still, the election discussion plods on with barely a nod to the criminal unemployment disaster.

For bracing relief, check out the latest from economist Robert Pollin, professor at the University of Massachusetts, Amherst. Pollin’s latest book, Back To Full Employment, lays out a roadmap to recovery that wouldn’t take a miracle. It wouldn’t even require a Democratic sweep this November; merely action by the Fed and a progressive movement worth its salt.

When world leader companies like Caterpillar Inc. are putting the squeeze on their workers despite accruing record-setting profits; when banks are hoarding $1.6 trillion, money is cheap and government borrowing costs are at their lowest in history, there’s simply no excusing existing levels of poverty, and the poverty-level wages currently prevailing in the not-so-United States.

There’s no excuse for 6 million people to be living on food stamps alone or for 103 million to be not getting by on wages that barely lift them above poverty (see Peter Edelman on this, if you don’t believe it). There’s no excuse, and there’s no point simply beating up on trade unions.

The world’s best president could roll back every last anti-organizing law and set organizers free to sign up every last employed American, and still the standing pool of desperate unemployed would drain worker power away. To expect otherwise is to wait for Batman.

“it’s beyond the Democrats. It’s beyond Barack Obama,” says Pollin in this interview.

Economists know how to maintain decently full employment. Coming out of the Great Depression, says Pollin, we had some basic tools. “To run an economy at a level of fundamental decency, you try to achieve full employment.” Neoliberalism, under Thatcher and Reagan, he says, “tossed it all away.”

The last time the US saw relatively full employment wasn’t in ancient history. It was at the end of the 1990s. We can do it. Pollin lays out how. What we need is a progressive movement with full employment at the spear-tip of its agenda.

Alexander Cockburn and Pollin discussed full employment in the Nation in 1987. It’s chilling how little has changed. You can read that article here [pdf]. A full transcript of my conversation with Pollin will appear in the next print edition of CounterPunch.

© 2012 The Nation

Laura Flanders was the founder and host of GRITtv and is the author of the books BUSHWOMEN and Blue Grit. She's the editor of At the Tea Party

The Jobs Doldrums and Obama’s Future

by Robert Reich

Friday, July 6, 2012

Bad news for the U.S. economy and for Barack Obama. We’re in the jobs doldrums. Unemployment for June is stuck at 8.2 percent, the same as in May. And only 80,000 new jobs were added. 

Remember, 125,000 news jobs are needed just to keep up with the increase in the population of Americans who need jobs. That means the jobs situation continues to worsen. 

The average of 75,000 new jobs created in April, May and June contrasts sharply with the 226,000 new jobs created in January, February and March. 

In Ohio yesterday, Obama reiterated that he had inherited the worst economy since the Great Depression. That’s true. But the excuse is wearing thin. It’s his economy now, and most voters don’t care what he inherited. 

In fact, a good case can be made that the economy is out of Obama’s hands — that the European debt crisis and the slowdown in China will have far more impact on the U.S. economy over the next four months than anything Obama could come up with, even if he had the votes. 

It’s also out of the Fed’s hands. No matter how low the Fed keeps interest rates, it doesn’t matter between now and Election Day. Companies won’t borrow to expand if they don’t see enough consumers out there demanding their products. Consumers won’t spend if they’re worried about their jobs and paychecks. And consumers won’t borrow (or be able to borrow) if they don’t have the means. 

Yet Obama must show he understands the depth and breadth of this crisis, and is prepared to do large and bold things to turn the economy around in his second term if and when he does have the votes in Congress. So far, his proposals are policy miniatures relative to the size of the problem.  

The real political test comes after Labor Day. Before Labor Day, Americans aren’t really focused on the upcoming election. After Labor Day, they focus like a laser. If the economy is moving in the right direction then — if unemployment is dropping and jobs are increasing — Obama has a good chance of being reelected. If the jobs doldrums continue — or worse — he won’t be.

The Job Stall

by Robert Reich

Friday, June 1, 2012

The White House must be telling itself there are still five months between now and Election Day, so the jobs picture could brighten. After all, we went through a similar mid-year slump in 2011 but came out fine.

But however you look at today’s jobs report, it’s a stunning reminder of how anemic the recovery has been – and how perilously close the nation is to falling into another recession.

Not only has the unemployment rate risen for the first time in almost a year, to 8.2 percent, but, more ominously, May’s payroll survey showed that employers created only 69,000 net new jobs. The Labor Department’s Bureau of Labor Statistics also revised its March and April reports downward. Only 96,000 new jobs have been created, on average, over the last three months.

Put this into perspective. Between December and February, the economy added an average of 252,000 jobs each month. To go from 252,000 to 96,000, on average, is a terrible slide.  At least 125,000 jobs are needed a month merely to keep up with the growth in the working-age population available to work.

Face it: The jobs recovery has stalled.
 
What’s going on? Part of the problem is the rest of the world. Europe is in the throes of a debt crisis and spiraling toward recession. China and India are slowing. Developing nations such as Brazil, dependent on exports to China, are feeling the effects and they’re slowing as well. All this takes a toll on U.S. exports.

But a bigger part of the problem is right here in the United States, and it’s clearly on the demand side of the equation. Big companies are still sitting on a huge pile of cash. They won’t invest it in new jobs because American consumers aren’t buying enough to justify the risk and expense of doing so.

Yet American consumers don’t have the cash or the willingness to spend more. Not only are they worried about keeping their jobs, but their wages keep dropping. The median wage continues to slide, adjusted for inflation. Average hourly earnings in May were up 2 cents – an increase of 1.7 percent from this time last year – but that’s less than the rate of inflation. And the value of their home – their biggest asset by far – is still declining.  The average workweek slipped to 34.4 hours in May.

Corporate profits are healthy largely because companies have found ways to keep payrolls down – substituting lower-paid contract workers, outsourcing abroad, using computers and new software applications. But that’s exactly the problem. In paring their payrolls, they’re paring their customers.

And we no longer have any means of making up for the shortfall in consumer demand. Federal stimulus spending is over. In fact, state and local governments continue to lay off large numbers. The government cut 13,000 jobs in May. Instead of a boost, government cuts have become a considerable drag on the rest of the economy.

Republicans will  have a field day with today’s jobs report, taking it as a sign that Obama’s economic policies have failed and we need instead their brand of fiscal austerity combined with more tax cuts for the wealthy.

But that’s precisely the reverse of what’s needed.

How Europe’s Double Dip Could Become America’s

by Robert Reich

Wednesday, April 25, 2012

Europe is in recession.

Britain’s Office for National Statistics confirmed today (Wednesday) that in the first quarter of this year Britain’s economy shrank .2 percent, after having contracted .3 percent in the fourth quarter of 2011. (Officially, two quarters of shrinkage make a recession). On Monday Spain officially fell into recession, for the second time in three years. Portugal, Italy, and Greece are already basket cases. It seems highly likely France and Germany are also contracting.

Why should we care? Because a recession in the world’s third-largest economy, combined with the current slowdown in the world’s second-largest (China), spells trouble for the world’s largest.

Remember – it’s a global economy. Money moves across borders at the speed of an electronic impulse. Wall Street banks are enmeshed into a global capital network extending from Frankfurt to Beijing. That means that notwithstanding their efforts to dress up balance sheets, the biggest U.S. banks are more fragile than they’ve been at any time since 2007.

Meanwhile, goods and services slosh across the globe. If there’s not enough demand for them coming from the second and third-largest economies in the world, demand in the U.S. can’t possibly make up the difference. That could mean higher unemployment here as well as elsewhere.

What’s the problem with Europe? Don’t blame it on the so-called “debt crisis.” There was no debt crisis in Britain, for example, which is now experiencing its first double-dip recession since the 1970s.

Blame it on austerity economics – the bizarre view that economic slowdowns are the products of excessive debt, so government should cut spending. Germany’s insistence on cutting public budgets has led Europe into a recession swamp.

German Chancellor Angela Merkel, who has led the austerity charge, and other European policy makers who have followed her, have forgotten two critical lessons.

First, that the real issue isn’t debt per se but the ratio of the debt to the size of the economy.

In their haste to cut the public debt, Europeans have overlooked the denominator of the equation. By reducing public budgets they’ve removed a critical source of demand — at a time when consumers and the private sector are still in the gravitational pull of the Great Recession and can’t make up the difference. The obvious result is a massive slowdown that has worsened the ratio of Europe’s debt to its total GDP, and is plunging the continent into recession.

A large debt with faster growth is preferable to a smaller debt sitting atop no growth at all. And it’s infinitely better than a smaller debt on top of a contracting economy.

The second lesson Merkel and others have overlooked is that the social costs of austerity economics can be huge. It’s one thing to cut a government budget when unemployment is low and wages are rising. But if you cut spending during a time of high unemployment and stagnant or declining wages, you’re not only causing unemployment to rise even further. You’re also removing the public services and safety nets people depend on, especially when times are tough.

And with high social costs comes political upheaval. On Monday, Netherlands Prime Minister Mark Rutte was forced to resign. U.K. Prime Minister David Cameron is on the ropes. The upcoming election in France is now a tossup – incumbent Nicolas Sarkozy might well be unseated by Francois Hollande, a Socialist. European fringe parties on the left and the right are gaining ground. Across Europe, record numbers of young people are unemployed – including many recent college graduates – and their anger and frustration is adding to the upheaval.

Social and political instability is itself a drag on growth, generating even more uncertainty about the future.

What European policy makers should do is set a target for growth and unemployment — and continue to increase government spending until those targets are met. Only then should they adopt austerity.

What are the chances that Merkel et al will see the light before Europe plunges into an even deeper recession? Approximately zero.

The danger here for the United States is clear, but there’s also a clear lesson. Republicans have become the U.S. party of Angela Merkel, demanding and getting spending cuts at the worst possible time – and ignoring the economic and social consequences.

Even if the U.S. economy (as well as President Obama’s reelection campaign) survives the global slowdown, we’re heading for a big dose of austerity economics next January – when drastic spending cuts are scheduled to kick in, as well as tax increases on the middle class. But the U.S. economy isn’t nearly healthy enough to bear this burden.

If nothing is done to reverse course in the interim, we’ll be following Europe into a double dip.

Left Behind - Youth's Poor Job Prospects

from the Economist, September 11, 2011

The harm today’s youth unemployment is doing will be felt for decades, both by those affected and by society at large

MARIA GIL ULLDEMOLINS is a smart, confident young woman. She has one degree from Britain and is about to conclude another in her native Spain. And she feels that she has no future.

Ms Ulldemolins belongs to a generation of young Spaniards who feel that the implicit contract they accepted with their country—work hard, and you can have a better life than your parents—has been broken. Before the financial crisis Spanish unemployment, a perennial problem, was pushed down by credit-fuelled growth and a prolonged construction boom: in 2007 it was just 8%. Today it is 21.2%, and among the young a staggering 46.2%. “I trained for a world that doesn’t exist,” says Ms Ulldemolins.

Spain’s figures are particularly horrendous. But youth unemployment is rising perniciously across much of the developed world. It can seem like something of a side show; the young often have parents to fall back on; they can stay in education longer; they are not on the scrapheap for life. They have no families to support nor dire need of the medical insurance older workers may lose when they lose their jobs. But there is a wealth of evidence to suggest that youth unemployment does lasting damage.

In the past five years youth unemployment has risen in most countries in the OECD, a rich-country club (see chart 1). One in five under-25s in the European Union labour force is unemployed, with the figures particularly dire in the south. In America just over 18% of under-25s are jobless; young blacks, who make up 15% of the cohort, suffer a rate of 31%, rising to 44% among those without a high-school diploma (the figure for whites is 24%). Other countries, such as Switzerland, the Netherlands and Mexico, have youth unemployment rates below 10%: but they are rising.

The costs mount up

In tough times young people are often the first to lose out. They are relatively inexperienced and low-skilled, and in many countries they are easier to fire than their elders. This all goes to make them obvious targets for employers seeking savings, though their low pay can redress things a little. In much of the OECD youth-unemployment rates are about twice those for the population as a whole. Britain, Italy, Norway and New Zealand all exceed ratios of three to one; in Sweden the unemployment rate among 15- to 24-year-olds is 4.1 times higher than that of workers aged between 25 and 54.

Not only is the number of underemployed 15- to 24-year-olds in the OECD higher than at any time since the organisation began collecting data in 1976. The number of young people in the rich world who have given up looking for work is at a record high too. Poor growth, widespread austerity programmes and the winding up of job-creating stimulus measures threaten further unemployment overall. The young jobless often get a particular bounce in recoveries: first out, they are often also first back in. But the lack of a sharp upturn means such partial recompense has not been forthcoming this time round. In America the jobs recovery since 2007 has been nearly twice as slow as in the recession of the early 1980s, the next-worst in recent decades—and from a worse starting-point. In some countries a rigging of the labour market in favour of incumbents and against the young makes what new jobs there are inaccessible.

Youth unemployment has direct costs in much the same way all unemployment does: increased benefit payments; lost income-tax revenues; wasted capacity. In Britain a report by the London School of Economics (LSE), the Royal Bank of Scotland and the Prince’s Trust puts the cost of the country’s 744,000 unemployed youngsters at £155m ($247m) a week in benefits and lost productivity.

 

 Some indirect costs of unemployment, though, seem to be amplified when the jobless are young. One is emigration: ambitious young people facing bleak prospects at home often seek opportunities elsewhere more readily than older people with dependent families. In Portugal, where the youth unemployment rate stands at 27%, some 40% of 18- to 30-year-olds say they would consider emigrating for employment reasons. In some countries, such as Italy, a constant brain-drain is one more depressing symptom of a stagnant economy. In Ireland, where discouragement among young workers has shot up since 2005 (see chart 2), migration doubled over the same period, with most of the departed between 20 and 35. This return of a problem the “Celtic tiger” once thought it had left behind is treated as a national tragedy.

It’s personal

Another cost is crime. Attempts to blame England’s recent riots on youth unemployment were overhasty. But to say there is no link to crime more generally looks unduly optimistic. Young men are already more likely to break the law than most; having more free time, more motive and less to lose hardly discourages them. Some researchers claim to have identified a causal link between increased youth unemployment and increases in crime, specifically property crime (robbery, burglary, car theft and damage) and drug offences. No such link is seen for overall unemployment. If the crime leads to prison, future employment prospects fall off a cliff.

And then there are the effects on individuals. Young people are hit particularly hard by the economic and emotional effects of unemployment, says Jonathan Wadsworth, a labour economist at the LSE. The best predictor of future unemployment, research shows, is previous unemployment. In Britain a young person who spends just three months out of work before the age of 23 will on average spend an additional 1.3 months in unemployment between the ages of 28 and 33 compared with someone without the spell of youth joblessness. A second stint of joblessness makes things worse.

Research from the United States and Britain has found that youth unemployment leaves a “wage scar” that can persist into middle age. The longer the period of unemployment, the bigger the effect. Take two men with the same education, literacy and numeracy scores, places of residence, parents’ education and IQ. If one of them spends a year unemployed before the age of 23, ten years later he can expect to earn 23% less than the other. For women the gap is 16%. The penalty persists, though it shrinks; at 42 it is 12% for women and 15% for men. So far, the current crisis has not led to these long-term periods of youth unemployment rising very much; almost 80% of young people in the OECD who become unemployed are back in work within a year. But that could well change.

The scarring effects are not necessarily restricted to the people who are actually unemployed. An American study shows that young people graduating from college and entering the labour market during the deep recessions of the early 1980s suffered long-term wage scarring. Graduates in unlucky cohorts suffer a wage decline of 6-7% for each percentage-point increase in the overall unemployment rate. The effect diminishes over time, but is still statistically significant 15 years later.

After a period of unemployment, the temptation to take any work at all can be strong. Wage scarring is one of the reasons to think this has lasting effects, and policies designed to minimise youth unemployment may sometimes exacerbate them. Spain, which has developed a scheme for rolling over temporary contracts to provide at least some chances of employment to the young, should pay heed to the experience of Japan in the early 2000s. Young people unemployed for a long time were channelled into “non-regular” jobs where pay was low and opportunities for training and career progression few. Employers seeking new recruits for quality jobs generally preferred fresh graduates (of school or university) over the unemployed or underemployed, leaving a cohort of people with declining long-term job and wage prospects: “youth left behind”, in the words of a recent OECD report. Japan’s “lost decade” workers make up a disproportionate share of depression and stress cases reported by employers.

Unemployment of all sorts is linked with a level of unhappiness that cannot simply be explained by low income. It is also linked to lower life expectancy, higher chances of a heart attack in later life, and suicide. A study of Pennsylvania workers who lost jobs in the 1970s and 1980s found that the effect of unemployment on life expectancy is greater for young workers than for old. Workers who joined the American labour force during the Great Depression suffered from a persistent lack of confidence and ambition for decades.

There are other social effects, too, such as “full-nest syndrome”. In 2008, 46% of 18- to 34-year-olds in the European Union lived with at least one parent; in most countries the stay-at-homes were more likely to be unemployed than those who had moved out. The effect is particularly notable in the countries of southern Europe, where unemployment is high and declining fertility means small families: a recent study by CGIL, an Italian trade-union federation, found that more than 7m Italians aged between 18 and 35 were still living with their parents. Since 2001 one in four British men in their 20s, and one in six women, have “boomeranged” home for a period. This sort of change will, for good or ill, ripple on down the generations which may, if young people live longer and longer at home, become more spread out.

In lieu of jobs

In some countries, particularly in southern Europe, the main focus for governments should be on opening up labour markets that lock out younger workers (see article). In countries with more flexible labour markets, the emphasis tends to be on “skilling up” young people. This is not a panacea.

Universities can be a source of skills and a place to sit out the doldrums, so students are entering and staying on at university more and more. American graduate schools have received at least 20% more applications since 2008. But as they build up debts, not all these students will be improving their job prospects. Having a university degree still increases the chances of employment, but joblessness among college graduates in America is the highest it has been since 1970.

There are dangers in vocational training, too. The Wolf report, a review of vocational education in Britain published this year, pointed out that the wrong kind of training can actually damage employment prospects. It found that almost a third of 16- to 19-year-olds in Britain are enrolled in low-level vocational courses that have little or no labour-market value. Research indicates that taking a year or two to complete schemes of this sort reduces lifetime earnings unless the schemes are combined with employer-based apprenticeships.

In Germany, seen by many as a model in this regard, a quarter of employers provide formal apprenticeship schemes and nearly two-thirds of schoolchildren undertake apprenticeships. Students in vocational schools spend around three days a week as part-time salaried apprentices of companies for two to four years. The cost is shared by the company and the government, and it is common for apprenticeships to turn into jobs at the end of the training. The youth-unemployment rate in Germany, at 9.5%, is one of the lowest in the EU. Apprentice-style approaches practised in the Netherlands and Austria have had similar results.

Germany’s export-driven economy, with its army of specialised manufacturers, may be particularly suited to the apprenticeship model. It is not obvious how easily it could be imported into more service-oriented economies. America, for example, lacks the institutions—strong unions, compliant management and a hands-on government—that have made the German model so successful. Such programmes would also have to overcome cultural obstacles. Bill Clinton’s school-to-work initiative, a nod to the apprenticeship system, was derided as second-rate education. Even in the skilled trades where apprenticeships have caught on, the model has suffered because of the collapse of the construction industry. Britain, though, seems willing to give it a whirl. Last year 257,000 positions were created.

Yet this may be of little use to the hardest-to-reach under-25s, who often come from backgrounds where worklessness is the norm and the lack of adult role models creates aspiration gaps at an early age. “Targeted programmes with one-on-one attention are what these young people need,” believes Paul Brown, a director of the Prince’s Trust. “Policies aimed at all young people will only make the neediest fall through the cracks.”

How a Little Bit of Good Economic News Can Be Bad for the President

by Robert Reich

Monday, January 9, 2012

Two years ago the unemployment rate was 9.9 percent. Now it’s 8.5 percent. At first blush that’s good news for the President. Actually it may not be.

Voters pay more attention to the direction the economy is moving than to how bad or good it is. So if the positive trend continues in the months leading up to Election Day, Obama’s prospects of being reelected improve.

But if you consider the number of working-age Americans who have stopped looking for work over the past two years because they couldn’t find a job, and young people too discouraged even to start looking, you might worry.

The Bureau of Labor Statistics, which measures the unemployment rate every month, counts people as unemployed only if they’re looking for work. If they’re too discouraged even to enter the job market, they’re not counted.

If all the potential workers who have dropped out of the job market over the past two years were counted, today’s unemployment rate wouldn’t be 8.5 percent. It would be 9.5 percent. That’s only a bit down from the 9.9 percent unemployment rate two years ago.

The genuinely good news, though, is the Bureau of Labor Statistics also tells us 200,000 new jobs were added in December. Granted, this doesn’t put much of a dent in the 10 million jobs we’ve either lost since the recession began or needed to keep up with the growth of the working-age population (at this rate we won’t return to our pre-recession level of employment until 2019) but, hey, it’s at least the right direction.

But here’s the political irony. This little bit of good news is likely to raise the hopes of the great army of the discouraged – many of whom will now start looking for work.

And what happens when they start looking? If they don’t find a job (and, let’s face it, the chances are still slim) they’ll be counted as unemployed.

Which means the unemployment rate will very likely edge upward in coming months. This will be bad for the President because it will look as though the trend is in the wrong direction again.

The Jobs Report: Don’t Break Out the Champagne

by Robert Reich

Friday, December 2, 2011

In brief: The Bureau of Labor Statistics’ household survey shows unemployment at 8.6 percent, and the payroll survey shows 120,000 new jobs in November (140,000 from the private sector, and a loss of 20,000 in the public sector). BLS also revised upward its job numbers for September and October.

What does it mean? We’re not out of the woods but we might be seeing some daylight.

Maybe. Here’s what you need to worry about:

First, this rate of job growth is barely enough to keep up with the growth in the working-age population. So we’re not making progress on the backlog of more than 13 million jobless Americans, and another 11 million working part-time who’d rather have full-time jobs.

Second, retail jobs constituted a third of new private-sector employment in November. Retail jobs tend to be unstable, temporary, and low-paying. Although the BLS is supposed to adjust for seasonal employment (i.e. Christmas), it doesn’t take account of the fact that more and more Americans have been pushing up their Christmas buying to before Thanksgiving. So some of these jobs may not be around very long.

Third, the jobless rate fell partly because around 315,000 people who had been looking for jobs dropped out of the job market in November. Remember: If you’re not actively looking, you’re not counted as unemployed on the household survey.

Fourth, hourly earnings are down, as are real wages. So to some extent Americans have been substituting lower wages for lost jobs – either by accepting lower wages at their current place of employment, or getting the boot and settling for lower wages elsewhere. A job is better than no job, of course, but a job with a lower wage isn’t nearly as good as a job with at the same or better wage.

Fifth, another reason for November’s job growth is that American consumers – whose spending accounts for about 70 percent of the economy – increased their spending. But this can’t continue because, as noted, wages are dropping. They spent more by cutting into their meager savings. Don’t expect this to last.

Finally, there’s the wild card of the rest of the global economy – the European debt crisis and the high likelihood of recession in Europe, the slowdown in China and India, slower growth in developing nations. Some of our jobs depend on exports, which will drop. Others are keyed to the financial sector, which is being hit directly.

Two final wild cards closer to home: The Fed, and Congress. The Fed meets in two weeks to decide on further monetary easing. With today’s report, the odds of easing are down, unfortunately. Believe it or not, several Fed members are worried about inflation.

And if Congress refuses to extend the payroll tax cut and/or unemployment benefits by December 30, it will create another drag on the economy. When people ask me what Congress is likely to do I always say the same thing: The odds are in favor of nothing.

So while today’s jobs report is in the right direction, it’s way too early to break out the champagne.

A Thanksgiving Reflection: Looking Beyond Election Day

by Robert Reich

Friday, November 25, 2011

Most political analysis of America’s awful economy focuses on whether it will doom President Obama’s reelection or cause Congress to turn toward one party or the other. These are important questions, but we should really be looking at the deeper problems with which whoever wins in 2012 will have to deal.

Not to depress you, but our economic troubles are likely to continue for many years — a decade or more. At the current rate of job growth (averaging 90,000 new jobs per month over the last six months), 14 million Americans will remain permanently unemployed. The consensus estimate is that at least 90,000 new jobs are needed just to keep up with the growth of the labor force. Even if we get back to a normal rate of 200,000 new jobs per month, unemployment will stay high for at least ten years. Years of high unemployment will likely result in a vicious cycle, as relatively lower spending by the middle-class further slows job growth.

This, in turn, could make political compromise even more elusive than it is now, as remarkable as that may seem. In past years, politics has been greased by the expectation of better times to come – not only more personal consumption but also upward mobility through good schools, access to college, better jobs, improved infrastructure. It’s been a virtuous cycle: When the economy grows, the wealthy more easily accept a smaller share of the gains because they still came out ahead of where they were before. And everyone more willingly pays taxes to finance public provision because they share in the overall economic gains.

Now the grease is gone. Fully two-thirds of Americans recently polled by the Wall Street Journal say they aren’t confident life for their children’s generation will be better than it’s been for them. The last time our hopes for a better life were dashed so profoundly was during the Great Depression.

But here’s what might be considered the good news. Rather than ushering in an era of political paralysis, the Great Depression of the 1930s changed American politics altogether — realigning the major parties, creating new coalitions, and yielding new solutions. Prolonged economic distress of a decade or more could have the same effect this time around.

What might the new politics look like? The nation is polarizing in three distinct ways, and any or all of could generate new political alignments.

Anti-establishment

A vast gulf separates Tea Party Republicans from the inchoate Wall Street Occupiers. The former disdain government; the latter hate Wall Street and big corporations. The Tea Party is well organized and generously financed; Occupiers are relentlessly disorganized and underfunded. And if the events of the last two weeks are any guide, Occupiers probably won’t be able to literally occupy public areas indefinitely; they’ll have to move from occupying locations to organizing around issues.

But the two overlap in an important way that provides a clue to the first characteristic of the new politics. Both movements are doggedly anti-establishment — distrusting politically powerful and privileged elites and the institutions those elites inhabit.

There’s little difference, after all, between the right’s depiction of a “chablis-drinking, Brie-eating” establishment and the left’s perception of a rich one percent who fly to the Hamptons in private jets.

In political terms, both sides are deeply suspicious of the Federal Reserve and want it to be more transparent and accountable. Both are committed to ending “corporate welfare” — special tax breaks and subsidies for specific industries or companies. And for both, Washington’s original sin was the bailing out of Wall Street.

Mere mention the bailout at any Tea Party meet-in or Occupier teach-in elicits similar jeers. The first expression of Tea Party power was the Utah Tea Party’s rejection of conservative Republican senator Robert Bennett because of his vote for the bailout. At the Republican state convention, which ultimately led to the election of Senator Mike Lee, the crowd repeatedly shouted “TARP! TARP! TARP!” The Occupiers, too, began on Wall Street.

The historian Richard Hofstadter once wrote a famous essay about the recurring strain of, as he put it, a “paranoid style in American politics” — an underlying readiness among average voters to see conspiracies among powerful elites supposedly plotting against them. He noted that the paranoia arises during periods of economic stress.

But the web of interconnections linking Washington and Wall Street over the last decade or so — involving campaign contributions, revolving doors, and secret deals — has been so tight as to suggest that this newer anti-establishment activism is based on at least a kernel of truth.

Isolationist

Economic stresses caused Americans to turn inward during the Great Depression, and we’re seeing the same drift this time around. Republican fulminations against the “cult of multiculturalism” are meeting similar sentiments in traditional Democratic precincts — especially when it comes to undocumented immigrants. Alabama and Arizona have spearheaded especially vicious laws, yet polls show increasing percentages of voters across America objecting to giving the children of illegal immigrants access to state-supported services.

Meanwhile, Americans are turning against global trade. Notwithstanding new trade agreements with South Korea, Panama, and Colombia, only a minority of Americans now believes trade agreements benefit the U.S. economy. A growing percentage also want the U.S. out of the World Trade Organization. China has emerged as a special bogeyman. The Democratic-controlled Senate recently passing a bill to punish China for under-valuing its currency, but China-bashing is becoming bipartisan. Mitt Romney accuses former U.S. leaders of having “been played like a fiddle by the Chinese.”

Neither immigration, nor trade, nor China’s currency manipulation is the cause of America’s high unemployment. All three predated the crash of 2008, before which unemployment was only 5 percent. Yet the current drift toward isolationism is not entirely irrational. As hundreds of millions of workers in emerging economies — especially in Asia — continue to enter the global workforce with steadily-improving skills and higher productivity, more and more Americans are losing ground. Meanwhile, immigration and trade are boons to top executives and professionals who gain access to cheaper labor and larger markets for their own skills and insights.

Generational

A third division likely to widen if the economy remains bad runs along a demographic fault-line. Many aging boomers whose nest eggs have turned the size of humming-bird eggs are understandably anxious about their retirement, while America’s young — whose skins are more likely than those of boomer retirees to be brown or black — face years of joblessness.

The jobless rate among people under 25 is already over 17 percent. For young people of color it’s above 20 percent. For young college grads — who assumed a bachelors’ degree was a ticket to upward mobility — unemployment has reached 10 percent. Yet these percentages are likely to rise if boomers decide they can’t afford to retire, and thereby block the jobs pipeline for younger people seeking employment.

Old and young will also find themselves increasingly at odds over public spending. In many communities retirees already resist property tax hikes to pay for local schools. Expect that resistance to grow as boomers have to live on fixed incomes smaller than they expected, and a new wave of young people swarm into the nation’s educational systems. The federal budget will also be a scene of generational conflict. Medicare and Social Security, the two giant entitlement programs for seniors that cost more than $1 trillion a year and account for about a third of the federal budget, will be traded off against programs that benefit the young: Title I funding for low-income school-age students; Head Start; food stamps; child nutrition; children’s health; and vaccines. It’s likely that Medicaid — Medicare’s poor stepchild, half of whose recipients are children — will also be on the cutting board.

After the enactment of Medicare in 1965, poverty among the elderly declined markedly. But poverty among America’s children continues to rise. Yet children don’t have nearly as effective a lobbying presence in Washington. AARP spent $9.7 million on lobbying during first six months of this year, according to the Center for Responsive Politics. By contrast, the Children’s Defense Fund spent just $48,245 last year. Yet because the future lies with the young and with an increasingly diverse America, politicians and parties looking toward the longer term will have to take heed.

Solutions?

How our political parties and leaders will cope with these three fault lines is far from clear, partly because the lines don’t all move in same direction. Young Americans tend to be more anti-establishment than older Americans, for example, but are also more open to other nations and cultures. By the same token, a generational war over the budget might be avoided if anti-establishment movements succeed in reducing corporate welfare, raising taxes on the rich, and limiting Wall Street’s rapacious hold over economic decision making.

What seems certain, however, is that continued high unemployment coupled with slow or no growth will create a new political landscape. This will pose a special challenge — and opportunity. If our political leaders don’t manage the new dividing lines effectively they could invite a politics of resentment that scapegoats certain groups while avoiding the hard work of setting priorities and making difficult choices.

On the other hand, if political leaders take advantage of the energies and possibilities this new landscape offers, they could usher in an era in which the fruits of growth are more widely shared: between elites and everyone else; between the beneficiaries of globalization and those most burdened by it; and between older Americans and young. This itself could reignite a virtuous cycle — a broad-based prosperity that not only generates more demand for goods and services and therefore more jobs, but also a more inclusive and generous politics.

There is a precedent for the second alternative. The structural reforms begun in the depression decade of the 1930s generated just this kind of virtuous cycle in the three decades after World War II. And in devising and implementing these reforms, the Democratic Party came to represent Americans with little power relative to the financial and business elites that had dominated the country before the great crash of 1929. That political realignment was the most profound and successful of the twentieth century.

Will it happen again? At this point, both parties are doing remarkably little given the gravity of the continuing jobs depression and the widening gap of income and wealth. Taming the budget deficit is the only significant issue anyone in Washington seems willing to raise yet Congress seems incapable of achieving any significant progress on this. And the budget itself is only indirectly related to the deeper questions of how to restart economic growth, how much of that growth should be allocated to public goods such as the environment or education, and how the benefits of that growth are to be shared.

Political elites are worried about thunder on the right and the left, but they show scant understanding of what these growing anti-establishment forces signify. Meanwhile, the nation drifts.

Trigger Happy: Why Deficit Cuts Should Be Triggered Only When Unemployment Drops to 5 Percent

by Robert Reich

Thursday, November 10, 2011

On planet Washington, where reducing the federal budget deficit continues to be more important than creating jobs, everyone is talking about “triggers” that automatically go into effect if certain other things don’t happen.

Yet no one is talking about the most obvious trigger of all — no budget cuts until the official level of unemployment falls to 5 percent, its level before the Great Recession. 

The biggest trigger on the minds of Washington insiders is $1.2 trillion across-the-board cuts that will automatically occur if Congress’s supercommittee doesn’t come up with at least $1.2 trillion of cuts on its own that Congress agrees to by December 23. 

That automatic trigger seems likelier by the day because at this point the odds of an agreement are roughly zero.

Here’s the truly insane thing: The triggered cuts start in 2013, a little over a year from now. 

Yet no one in their right mind believes unemployment will be lower than 8 percent by then. 

The cuts will come on top of the expiration of extended unemployment benefits, the end of a payroll tax cut, and continuing reductions in state and local budgets — all when American consumers (whose spending is 70 percent of the economy) will still be reeling from declining jobs and wages and plunging home prices. Even if Europe’s debt crisis doesn’t by then threaten a global financial meltdown, this rush toward austerity couldn’t come at a worse time.  

In other words, what will really be triggered is a deeper recession and higher unemployment. 

Democrats on the supercommittee are acting as if they haven’t met an unemployed person. They’re proposing $2.3 trillion in deficit reductions — half from spending cuts (including $350 billion from Medicare), half from tax increases. To make the tax increases palatable to Republicans, Democrats want to give Congress a chance to find the new revenues by overhauling the tax code. If that effort fails, automatic tax increases would be triggered. The top tax rate won’t rise (another bow to Republicans) but top earners’ itemized deductions will be limited. 

Oh, and by the way, under the Democrats’ proposal, spending cuts and tax increases, triggered or not, would start in 2013.

The President (remember him?) is still hawking his $450 billion jobs bill, but he’s having a hard time being heard above the deficit-reduction din — in large part because he himself is simultaneously calling for deficit reduction, and most people outside Washington can’t make sense of how we do both.  

The public is confused because they don’t get it’s a matter of sequencing. We need to do more spending now in order to bring back jobs and growth, then do less spending in the future — after the economy is once again generating jobs and growth. 

That’s why it make more sense for Democrats to propose a deficit reduction plan that goes into effect only when jobs are back. The trigger should be the rate of unemployment — and a 5 percent rate would signal we’re back on track. 

True, the unemployment rate is an imperfect measure of how bad things are (it doesn’t include everyone who’s working part-time but needs a full-time job, and those too discouraged to look for work), but at least it’s a useful way of comparing how much worse or better we are than we’ve been. And it can’t be fiddled with (the Bureau of Labor Statistics guards the calculation like gold in Fort Knox). 

Deficit hawks in both parties fear if we put off the spending cuts we’ll never do them. But if we cut now, the ratio of deficit to the total economy just gets worse — because the economy stagnates and the swelling ranks of unemployed don’t pay taxes. 

So the best of all worlds is to have a big jobs plan now, and also commit to automatic cuts triggered when unemployment falls to 5 percent. 

The hawks should find this acceptable. Reasonable Republicans (if any are left) will, too. Democrats, if they still care about jobs, should lead the way.

This Labor Day We Need Protest Marches Rather than Parades

by Robert Reich

Thursday, August 25, 2011

Labor Day is traditionally a time for picnics and parades. But this year is no picnic for American workers, and a protest march would be more appropriate than a parade.

Not only are 25 million unemployed or underemployed, but American companies continue to cut wages and benefits. The median wage is still dropping, adjusted for inflation. High unemployment has given employers extra bargaining leverage to wring out wage concessions.

All told, it’s been the worst decade for American workers in a century. According to Commerce Department data, private-sector wage gains over the last decade have even lagged behind wage gains during the decade of the Great Depression (4 percent over the last ten years, adjusted for inflation, versus 5 percent from 1929 to 1939).

Big American corporations are making more money, and creating more jobs, outside the United States than in it. If corporations are people, as the Supreme Court’s twisted logic now insists, most of the big ones headquartered here are rapidly losing their American identity.

CEO pay, meanwhile, has soared. The median value of salaries, bonuses and long-term incentive awards for CEOs at 350 big American companies surged 11 percent last year to $9.3 million (according to a study of proxy statements conducted for The Wall Street Journal by the management consultancy Hay Group.). Bonuses have surged 19.7 percent.

This doesn’t even include all those stock options rewarded to CEOs at rock-bottom prices in 2008 and 2009. Stock prices have ballooned since then, the current downdraft notwithstanding. In March, 2009, for example, Ford CEO Alan Mulally received a grant of options and restricted shares worth an estimated $16 million at the time. But Ford is now showing large profits – in part because the UAW agreed to allow Ford to give its new hires roughly half the wages of older Ford workers – and its share prices have responded. Mulally’s 2009 grant is now worth over $200 million.

The ratio of corporate profits to wages is now higher than at any time since just before the Great Depression.

Meanwhile, the American economy has all but stopped growing – in large part because consumers (whose spending is 70 percent of GDP) are also workers whose jobs and wages are under assault.

Perhaps there would still be something to celebrate on Labor Day if government was coming to the rescue. But Washington is paralyzed, the President seems unwilling or unable to take on labor-bashing Republicans, and several Republican governors are mounting direct assaults on organized labor (see Indiana, Ohio, Maine, and Wisconsin, for example).

So let’s bag the picnics and parades this Labor Day. American workers should march in protest. They’re getting the worst deal they’ve had since before Labor Day was invented – and the economy is suffering as a result.

The War Against the Unemployed

A state crackdown on jobless benefits is just a warm-up for the big battle to come in Washington this fall

by Andrew Leonard, August 25, 2011, from salon.com

Unless Congress takes action, as many as 3 million Americans could lose their unemployment benefits shortly after the end of 2011, when federal unemployment benefit extensions expire. For many Republican legislators, at both the state and federal level, that day can't come a moment too soon. Who can forget Arizona Sen. Jon Kyl's famous declaration last March that "if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work"?

If anything! Never mind the hardship that the 6.8 million people thrown out of work by the great recession are suffering. Never mind the powerful stimulative effects that result from the speedy injection of unemployment benefit payouts right back into the overall economy. Never mind the gross immorality of ensuring that the rich pay as little taxes as possible while the poor are left without a safety net. The emerging conservative orthodoxy holds that paying out benefits just encourages Americans to be lazy. End of story. The fact that the United States is still reeling from the greatest economic disaster since the Great Depression and verging perilously close to a double-dip recession makes no difference. At the state level, the crackdown has already begun. A half-dozen states, with Florida leading the way, have already cut back on benefits while at the same time forcing the unemployed to jump through numerous, onerous hoops just to qualify for a check.

But what do the numbers actually say? The truth is, there is a consensus among economists that unemployment benefits do have a negative effect on the unemployment rate. But the estimates vary widely. Last August, Robert Barro, an economist considered "one of the ringleaders of the ultra free-market oriented "Chicago School," declared in a Wall Street Journal editorial that current unemployment benefits added a whopping 2.7 percentage points to the unemployment rate. Other economists have found much smaller differences. A study released by Goldman Sachs in January concluded that unemployment benefit extensions only added about .5 percent to the current unemployment rate. A study authored by three San Francisco Federal Reserve economists came up with a similar range -- 0.4-0.8 percent. In July, Berkeley economist Jesse Rothstein reviewed the most recent data and determined that unemployment benefits only added 0.3 percent to the total.

What explains the disparity? Rothstein told me that Barro looked at the number of people who currently fall into the category of long-term unemployed, compared it to the much smaller number of people who fit that category at a similar point after the 1981-83 recession and simply assumed that extended unemployment benefits accounted for all of the difference (even though the overall number of long-term unemployed had been rising long before the onset of the Great Recession.) But such reasoning ignores the substantial differences between the recession during Reagan's first administration and the current slowdown. Reagan's recession was largely artificially induced by Paul Volcker's efforts to quash inflation. Once Volcker started lowering interest rates again, the economy zoomed back up.

The Great Recession was something completely different, the result of a massive housing bust and a catastrophic financial crisis. Recovery has been slow, and even now, hampered by a wide array of global problems. Even today, there is still only one job available for every five job seekers. No matter how many hoops one makes job seekers jump through to get unemployment benefits, states are not going to be able to get their citizens to find jobs if none are available.

"It's just not plausible that anyone is going to turn down a job offer just to stay on unemployment another few months," says Rothstein.

If one accepts the much smaller figures offered by Goldman Sachs, the SF Fed, and Berkeley's Rothstein, then the resulting calculus becomes even more weighted against the conservative position. Because it only makes sense to balance the small negative impact that unemployment benefits might have on the unemployment rate with the relatively large impact unemployment benefits have as a stimulus measure. In January 2010, the Congressional Budget Office evaluated 11 policy proposals for stimulating the economy and concluded that out of all of them, extending aid to the unemployed got the most bang for the buck.

With another recession looming, extending unemployment benefits again shouldn't even be on the bargaining table. But even as winter threatens, you can bet your last dollar that Republicans will be even more unwilling, this time around, to extend a helping hand to the millions who lost their jobs through no fault of their own, and who are struggling to feed their families and keep a roof over their heads.

Compassion, anyone? Unfortunately, just doing the right thing has never been very easy to fit into a neoclassical economic model.

• Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21. More: Andrew Leonard

Profit on Wall Street, Recession on Main Street

Published on Wednesday, August 24, 2011 by The Guardian/UK

 

In America's deeply dysfunctional economy, unemployment is stuck at a 'new normal' of 9%, while corporate profits race ahead

 

by Sally Kohn

In the past few weeks alone, Bank of America, Goldman Sachs, Cisco Systems and Borders have all announced massive layoffs. Borders is closing its retail stores, auctioning off its holdings and letting go 10,000 employees as, due to online competition, the company is no longer profitable and filed for bankruptcy earlier this year. In contrast, Bank of America, Goldman Sachs and Cisco Systems have all posted profits in the last few quarters – in some cases, record highs. Alhough according to the latest data, 9.1% of Americans are unemployed, major US corporations are slashing jobs not out of necessity but out of greed.

The revived focus in Washington on creating jobs may be pointless if corporate America no longer needs workers. (photo: chantal foster)

A new report by Northeastern University's centre for labour market studies shows (pdf) that corporate downsizing, work hour reductions and the correlated growth of corporate profits directly led to the recession. Big business in America shed jobs and squeezed increased productivity from their remaining workers, but report authors Andrew Sum and Joseph McLachlan write: "None of these productivity gains was shared by wage and salary workers in the form of higher real weekly earnings." Instead, corporations increased their profits "at a higher relative rate than in any other post second world war recession."

Following the recession of the 1980s, 28% of the economic growth in recovery went to corporate profits, while 25% went to boost the wages and salaries of ordinary workers. Today, 88% of the economic recovery has gone to boosting corporate profits. As a widely cited earlier version of Sum and McLachlan's report finds (pdf), only 1% – that's one out of every $100 – has gone to wages and salaries for the folks who clearly need it most.

In the raw capitalist model, some percentage of people need to be unemployed – a point Karl Marx sharply critiqued and, later, John Maynard Keynes used to justify government's role promoting full employment. While any level of unemployment seems untenable to average Americans trying to pay their bills, economist-types have long accepted that, left to its own devices, the unemployment rate will never be zero. Ongoing 5% unemployment is considered the norm, though in February, the Federal Reserve Bank of San Francisco released a paper arguing that 6% unemployment might be the new baseline. But what if it's worse? What if we've reached a new low in unchecked capitalist greed that will perpetually drive up the unemployment rate as long as companies can keep extracting a profit?

The financial sector occupies an increasing share of America's economy. Between 1973 and 1985, the financial sector comprised 16% of domestic corporate profits. In the 1990s, it hit 30%. In the past decade, the financial industry's slice of the economy topped 41% – and it may even go higher. These businesses make money not by making things, but by making bets on other money. Employees sold separately.

Increasingly, financialisation is sweeping more traditional businesses. General Electric, which has laid off thousands of workers in the past several years, posted profit growth in the last quarter driven not by refrigerators or even missiles, but by the company's financial services arm. Even Cisco Systems, which will lay off upwards of 6,000 people this year, targets financial industry customers to buy its routers and computer networks.

Of course, companies have always played a sort of shell game with workers and revenues. The difference now may be that major players can generate profits just by playing the game, regardless of the outcome. A few blocks from where I live in Brooklyn, NY, the Maramont food manufacturing company with 150 decently paid union workers is moving operations to non-unionised Pennsylvania. The modern twist on this unfortunate but old story is that Goldman Sachs owns the small company – and if they don't make money off this scheme, they'll move the company to Bangladesh, or even get rid of workers altogether, or perhaps short their own holding and make money betting against Maramont. It's all the same to Goldman, as long as they make a buck. The workers, rather than essential parts of a productive economic engine, are now just pawns in high finance's game.

Most Americans are not Marxists. We want capitalism to work, generating earnings and opportunities – not just for Wall Street titans, but for ordinary working people. That, after all, is the essence of the American story. Yet, today's corrupt brand of capitalism would confound even Marx, who in his critique of the market's reliance on unemployment wrote, "[C]apital only increases when it employs workers." If extreme profit-making at the expense of ordinary workers continues to go unchallenged, Marx's criticism may seem more like nostalgia. If we do nothing to confront corporate greed, we will not create new jobs in America.

© Guardian News and Media Limited 2011

Sally Kohn is Chief Agitation Officer for the Movement Vision Lab

more Sally Kohn

Republican Governors Eliminate Jobs and Raise Unemployment Rate by Firing Cops, Teachers and Firemen

by John Lawrence

The private sector has added jobs in recent months, but government has lost jobs because Republican Governors are firing public workers. In July total private sector employment rose by 154,000 over the month, reflecting job gains in several major industries, including health care, retail trade, manufacturing, and mining. Government employment continued to decline mainly at the state and local levels which lost 39,000 jobs. The Federal level added 2000 jobs so the net new job creation was 117,000 jobs. At the state and local levels they are doing their level best to eliminate jobs and increase the unemployment rate at a time when the unemployment rate is approaching 10%. Republican Governors like Scott Walker in Wisconsin, Rick Scott in Florida, Rick Snyder in Michigan, Chris Christie in New Jersey and John Kasich in Ohio are doing everything they can to make the job situation worse so that Obama won't be reelected. If all those teachers, policeman, firemen and snow plough drivers hadn't been laid off, the unemployment rate would be a couple per cent lower. With the unemployment rate above 9% Obama's chances of being reelected are nil and Republicans aim to keep it that way.

Now they are going after the Post Office which is considering laying off 120,000 workers! This fiasco is being precipitated because the Republican Congress is forcing the Post Office to make overly huge payments into their pension fund thus causing a budget crisis. The fact that most U.S. citizens are using fewer USPS services due to improved electronic and computer communication, turns out not to be the main source of the problem. It turns out that the Post Office budget crsis has been totally manufactured by Republicans in Congress.

Postmaster Donahoe testified on Wednesday in the House of Representatives before the Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy on Oversight and Government Reform, a very long name for members sitting in judgment on how the USPS goes about its business. In proposing more cost cutting for fiscal year 2011, Donahoe said $2 billion more will be eliminated from the Postal Service budget. Despite that and the $9 billion from the last couple of years, USPS cannot make ends meet without deficit spending and borrowing, in a mini-version of the total federal budget woes. The fact that most U.S. citizens are using fewer USPS services due to improved electronic and computer communication, turns out not to be the main source of the problem. Congress learned from the Postmaster General that the decrease in usage and the attendant fees that they have taken out of the system rank second to “...the result of an inflexible business model due to the laws that govern the Postal Service.” Most particularly, Donahoe cited a federal regulation instituted in 2007 that "...required the Postal Service to pre-fund retiree health benefits (RHB) in amounts of approximately $5.5 billion per year." There is no other entity in the federal bureaucracy that must abide by similar rules. There is a direct correlation, said Donahoe between the Postal Services' budget woes and the institution of the rule on RHB. Audited financial results for the four years prior to RHB taking effect show the USPS running in the black. But for the requirements of the RHB, the Postmaster General insists the Postal Service would still be running within its budget and showing revenue above and beyond that. In addition to asking Congress to reconsider its decision to burden the agency in this way, Donahoe reiterated some familiar and introduced some new remedies for the budget woes.

Republicans are eliminating jobs and exacerbating the unemployment situation which dovetails very nicely with their "small government" quest. Just like Scott Walker created a budget crisis in Wisconsin by giving huge tax breaks to corporations and then attempted to balance the budget on the backs of the poor, the middle class and the unions, the Bush tax cuts are bankrupting the Federal government, and Republicans are calling for cuts in Social Security and Medicare. At all levels, Federal, State and Municipal, Republicans are creating crises and then calling for the elimination of public service jobs. It's the Shock Doctrine which they perpetrated unsuccessfully in South America, but now they're using it on their own country in order to turn the US into a banana republic just when the so-called banana republics are throwing off the yoke of neocon conservatism. The more jobs eliminated, the less the chances of an Obama reelection. God help us if a demigogue like Rick Perry gets into the White House!

Some Democrats have boldly suggested that the Federal government should create jobs directly, a move that Republicans would surely label as "socialist." Congresswoman Jan Schakowsky has a great jobs creation plan reminiscent of the Works Progress Administration and Civil Conservation Corps, plans developed by FDR during the Great Depression which Republicans are desperately trying to revisit. According to the Huffington Post:

WASHINGTON -- Rep. Jan Schakowsky (D-Ill.), a member of the Congressional Progressive Caucus, announced on Wednesday that she will introduce a progressive-minded budget outline aimed at putting more than two million people to work. Titled the “Emergency Jobs to Restore the American Dream Act,” the plan would cost $227 billion and would be implemented over two years. It would be financed by separate legislation introduced by Schakowsky called the "Fairness in Taxation Act," which would raise taxes for Americans who earn more than $1 million and $1 billion. It would also eliminate subsidies for big oil companies while closing loopholes for corporations that send American jobs overseas. The congresswoman said that her plan would create 2.2 million jobs and decrease the unemployment rate by 1.3 percent. "If we want to create jobs, then create jobs," Schakowsky said in a press release. "I’m not talking about "incentivizing" companies in the hopes they’ll hire someone, or cutting taxes for the so-called job creators who have done nothing of the sort. My plan creates actual new jobs." Schakowsky’s proposal reads more like a progressive wishlist than legislation likely to be signed into law. But it does provide a template of sorts to help Democrats frame their budget argument as lawmakers enter the high-stakes super committee negotiations. Under her plan, the following policies would be implemented: The School Improvement Corps would create 400,000 construction and 250,000 maintenance jobs by funding positions created by public school districts to do needed school rehabilitation improvements. The Park Improvement Corps would create 100,000 jobs for youth between the ages of 16 and 25 through new funding to the Department of the Interior and the USDA Forest Service’s Public Lands Corps Act. Young people would work on conservation projects on public lands including the restoration and rehabilitation of natural, cultural, and historic resources. The Student Jobs Corps would create 250,000 more part-time work study jobs for eligible college students through new funding for the Federal Work Study Program. The Neighborhood Heroes Corps would hire 300,000 new teachers, 40,000 new police officers and 12,000 new firefighters. The Health Corps would hire at least 40,000 health care providers, including physicians, nurse practitioners, physician assistants, nurses, and health care workers to expand access in underserved rural and urban areas. The Child Care Corps would create 100,000 jobs in early childhood care and education through additional funding for Early Head Start. The Community Corps would hire 750,000 individuals to do needed work in communities, including housing rehab, weatherization, recycling, and rural conservation. In addition, the bill would give priority to the longterm unemployed -- the so-called "99ers" who have exhausted both their state and federal unemployment benefits. Federally extended unemployment benefits are set to expire this year, even though nearly 14 million Americans remain out of work and it takes the average worker nine months to find a new job. “The worst deficit this country faces isn’t the budget deficit," Schakowsky said. "It’s the jobs deficit. We need to get our people and our economy moving again.”

So jobs would be created directly by the Federal government and the program would be funded by raising taxes on millionaires and billionaires. It would be a tax (on those who can afford to pay) and spend (in order to create jobs) bill. It would not add to the Federal budget deficit or national debt. What's not to like about this bill? Do you want "small government" or government which can cause an amelioration of the American peoples' lives? Do you want jobs and tax fairness or the present system of government of, for, and by the wealthy? Do you want "small government" in which swarms of lobbyists write the laws and drill holes in the tax code favoring large corporations or do you want government that provides social services like public schools, libraries, parks, post office, police and fire departments? Americans better get their heads on straight and stop voting for "political entertainers" like Michelle Bachman and Rick Perry.

If the American people demand that government should create jobs directly and tax the rich to do it, the unemployment rate will come down. The Republican controlled Congress would never pass such a bill so the only thing that can be done is to make sure that the elections of 2012 produce a Democratic controlled House, Senate and Presidency. Then maybe the US could be pulled out of its present morass and slough of despond. Otherwise, Great Depression II here we come!

PART III: U.S. FISCAL-ECONOMIC QUAGMIRE: SOME SOLUTIONS

by Frank Thomas

Parts I & II can be found here.

Deficits, Debt and Savings Impact on Growth

My concern is our GDP growth rate is far too dependent on a 70-72% of GDP consumption level in a society that has experienced a 30 year trend of stagnant wages for the bottom 80% of households and a steady 30 year decline in the rate of job growth due to rapidly changing technology, automation, robotization, outsourcing, job downgrading. Given these developments, our paradigm of promoting high consumption, inevitably made worse by consumer over-leveraging and weak regulatory credit standards, results in an ever increasing demand for relatively inexpensive foreign goods and services as well as foreign capital. This in turn expands trade deficits, absorbs national savings, and expands foreign debt.

I believe this is no longer, if it ever was, a sustainable approach to achieving stable GDP growth rates of at least 3% annually. Stagnant wages and consuming at 70-72% of GDP automatically leads to declining saving rates. Decreasing or depleting middle-class household savings is NOT a sustainable way to create stable, long-term growth patterns. The most threatening hurdle to coming out of this economic quagmire is the disastrous unemployment and underemployment of +-28 million Americans – over 60% unemployed or underemployed for 6 months or more. And those fortunate to get a job in these times must accept substantial wage cuts. This structural jobless growth and job downgrading is contributing in a big way to our budget deficits (and the prevailing national mood of financial insecurity) … budget deficits that also tend to accelerate trade and current account deficits.

After tax household income is about 75% of GDP. Thus, a household savings rate now of 6% is just 4.5% of GDP. Adding in corporate savings averaging 3% of GDP brings total private savings to +-7.5% of GDP (vs. almost double that in mature EU countries). A CBO study projects that U.S. budget deficits will average 5.2% of GDP over the next decade and 5.5% thereafter – leaving a net private savings rate of +2.5%. This borrowing level exhausts our modest savings and means that the U.S. has a continuing need for large foreign capital inflows to finance business investment. In contrast, prior to the early 1990s, household savings in excess of 8% of GDP plus corporate savings were sufficient to finance most business investments in plant, equipment and housing.

The high consumption-low savings-stagnant wages paradigm in combination with high budget deficits compounds the dependence on foreign borrowings as trade and current acccounts deficits rise to new risk levels. This is because domestic demand (under this paradigm) exceeds domestic output. The shortfall has to be met by imports, i.e., higher trade and current account deficits. The demand on the world’s credit caused by foreign borowings cannot be met by savings, nor are savings adequate to fund private investment. This is poignantly evidenced by a 40 year non-investment in decayed infrastructure and sub-par educational systems. (Of course, 5.5% of GDP Defense spending has also played a major role inducing deficits and choking off societal investment's role ). A recent CBO study concludes that our continuing budget deficits will transfer more and more U.S. income to the rest of the world the next decade, further eating away the living standard of middle-class Americans.

While trade and current account deficits have dropped from a peak of 6% of GDP in 2005 to 4.5% today as a result of the recession, most economists see this reversing in the intermediate term as consumption rises. I don't think this necessarily also means household savings will decline to pre-crisis lows of less than 3% of GDP to help spur consumption back to 70-72% of GDP. The great recession caused an enormous loss of middle class wealth, broad- scale structural joblessness, related considerable household insecurities, home foreclosures, deleveraging, and tougher credit terms. I feel all this will motivate middle-class Americans to stay in a stronger savings mode for some time. So I'm in the camp of those like Martin Feldstein who believe household savings will climb back to ±8% of GDP. A possible reduced consumption in the range of 65% of GDP could occur, stabilizing trade /current account deficits providing the dollar’s value remains weak, making exports more attractive to foreign buyers.

Obama's emphasis on exports rather than consumption is wise policy. But it won't work well until decent wages and jobs come back for working Americans. In the past, stagnant wages/salaries have driven the middle class to buy cheap imports with the domino negative deficit/debt effects. Sustainable job stimulus and training, balancing the budget in good times, encouraging greater savings (despite negative short-term effect on consumption) are the most reliable ways to stabilize U.S. foreign deficits and debt. Some related financial rules should be: net annual debt buildup not to exceed annual GDP growth; combined trade and current account deficits not to exceed 3% of GDP, as recommended by Paul Volcker; and budget deficits not to exceed 2% of GDP.

The latter also means, as noted above, the dollar's value must remain low to make U.S. products and services more attractive to foreign buyers and ultimately more attractive to U.S. buyers.

I am not saying higher savings are the cure-all to the multi-faceted economic mess we are in. They are a critical Part-Cure. (Some are saying a VAT will stimulate more savings and substantial tax revenues. But this gives the anti-tax cult a brain hemorrhage). Our low savings rate has forced us to be far more dangerously dependent on funds from abroad. According to Martin Feldstein, such funds have been financing more than 75% of U.S. net investment.

As stated, improving our national savings is a very important Part-Cure to our nation’s financial problems. Balancing the budget and controlling debt levels, investing in sustainable renewal projects are the priority needs. Seeking an economic renaissance by excessive dependence on High Consumption-Low Savings is a No-Cure approach to our problems.

In simple terms, we've got to confront the deeply rooted out-of-balance components of GDP growth in our economic model, namely excessive Consumption and Current Account Deficits that are choking Private and Public Investments … in a situation of meager net national savings, stagnant wage growth, and massive structural joblessness. The components of GDP growth are not working well together at all in our economic model:

GDP Components = Consumption plus Private and Public Investments plus Net Exports (Exports minus Imports).

The fiscal and growth strategies suggested herein and in PARTS I & II in answer to our economic breakdowns are but one citizen's challenge for America's best and brightest to get the final strategic priorities right for ALL Americans.

Frank Thomas
The Netherlands August 2011

Sources:

1) The Peterson Institute for International Economics

2) The Return of Saving by Martin Feldstein

3) America´s Saving Surprise by Martin Feldstein

4) The Dollar and the Deficits by C. Fred Bergsten

5) Recent CBO Study of Current/Projected Budget Deficits and Debt Growth

Note: Household saving is the difference between what households receive in after-tax income (including wages, salaries, fringe benefits, interest, and dividends) and what they spend on goods and services. Those savings can take the form of bank deposits (popular in Europe), purchases of financial assets such as stocks and bonds, or investments in real assets such as homes and unincorporated businesses. Contributions to individual retirement accounts (IRAs) and 401(k) plans ) as well as employer contributions to defined-benefit pension plans are also counted as household savings.

Note: EU countries spend less than 2% of GDP on Defense; have high Private Savings rates; generous social-nets; progressive tax systems, and a much, much lower disparity between high/low income and wealth classes.

Vicious Cycles: Why Washington is About to Make the Jobs Crisis Worse

by Robert Reich

Monday, July 25, 2011

We now live in parallel universes.

One universe is the one in which most Americans live. In it, almost 15 million people are unemployed, wages are declining (adjusted for inflation), and home values are still falling. The unsurprising result is consumers aren’t buying — which is causing employers to slow down their hiring and in many cases lay off more of their workers. In this universe, we’re locked in a vicious economic cycle that’s getting worse. 

The other universe is the one in which Washington politicians live. They are now engaged in a bitter partisan battle over how, and by how much, to reduce the federal budget deficit in order to buy enough votes to lift the debt ceiling. 

The two universes have nothing whatever to do with one another — except for one thing. If consumers can’t and won’t buy, and employers won’t hire without customers, the spender of last resort must be government. We’ve understood this since government spending on World War II catapulted America out of the Great Depression — reversing the most vicious of vicious cycles. We’ve understood it in every economic downturn since then. 

Until now. 

The only way out of the vicious economic cycle is for government to adopt an expansionary fiscal policy — spending more in the short term in order to make up for the shortfall in consumer demand. This would create jobs, which will put money in peoples’ pockets, which they’d then spend, thereby persuading employers to do more hiring. The consequential job growth will also help reduce the long-term ratio of debt to GDP. It’s a win-win.

This is not rocket science. And it’s not difficult for government to do this — through a new WPA or Civilian Conservation Corps, an infrastructure bank, tax incentives for employers to hire, a two-year payroll tax holiday on the first $20K of income, and partial unemployment benefits for those who have lost part-time jobs. 

Yet the parallel universe called Washington is moving in exactly the opposite direction. Republicans are proposing to cut the budget deficit this year and next, which will result in more job losses. And Democrats, from the President on down, seem unable or unwilling to present a bold jobs plan to reverse the vicious cycle of unemployment. Instead, they’re busily playing “I can cut the deficit more than you” — trying to hold their Democratic base by calling for $1 of tax increases (mostly on the wealthy) for every $3 of spending cuts. 

All of this is making the vicious economic cycle worse — and creating a vicious political cycle to accompany it.

As more and more Americans lose faith that their government can do anything to bring back jobs and wages, they are becoming more susceptible to the Republican’s oft-repeated lie that the problem is government — that if we shrink government, jobs will return, wages will rise, and it will be morning in America again. And as Democrats, from the President on down, refuse to talk about jobs and wages, but instead play the deficit-reduction game, they give even more legitimacy to this lie and more momentum to this vicious political cycle.

The parallel universes are about to crash, and average Americans will be all the worse for it.

OUR FISCAL-ECONOMIC QUAGMIRE: SOME SOLUTIONS

by Frank Thomas

John,

“Good people are out there (edit: fighting the ordinary folks fight and exposing the  financially destructive, narrow-minded Republican cut spending and taxes policy). They just aren’t getting the media exposure the other side is.”

Your words are right on, John, and reflect “the same old story” of right-wing ideological domination of the public political dialogue, mastering the indoctrination art of repeated, simplistic one-liners through media channels bought by powerful special-interests’money.

A huge inequality in income and wealth in a deregulated environment caused people to go into debt to consume or borrow against the inflated value of a house. The social-economic morass we are now in shows no light at the end of the tunnel. How do we come together finally to come out of the MESS we are in? 

PART  1

 What Is The Republican Agenda For America?

“DOWN with deficits, debt, government spending and UP with jobs by LOWER taxes mainly for the rich.”

This is the Boehner, McConnell, Cantor, Bachman Incorporated fiscal paradise shift for America … in reality, it’s an agenda to make government small by “starving the beast.” Welcome to the resurrection of Newt Gingrich’s “Contract for America” fiasco. Successor deciple Boehner has assumed the pledge of  government’s  demise with his recent words: “We need to end the job-killing binges by the federal government,…, and then we need to turn attention to killing the job-killing health care law.” The irony that passes over his head conveniently is that the Republicans did a marvelous job killing ALL jobs the last decade!

Only problem is this lean and mean paradigm will increasingly starve  what’s left of middle-class Americans in an economy where job growth, aggregate demand and private investment remain stagnant with ±28 million people unemployed or underemployed … all reinforcing a vicious circle of ever lower demand, risk of spiraling deflation, and thus more unemployment. 

Let’s bear in mind the last decade was the Lost Decade for working people with near ZERO job growth and annual GDP growth rates of 1.9%, close to 1.3% in the 30s Great Depression. We now have both private and public jobs being wiped out at all levels – a recipe for an ongoing financial relapse and continuing deficits (similar to Japan’s 1992-2004 economic stagnation).                                 

As most informed Americans well know by now, tax cuts, mainly benefiting the rich, accelerate deficits and do little to create jobs (as Reagan found out much to his surprise). The right wing never stops lying about this much proven point.

However, as stated, the Republican priority is not lower deficits but smaller government and Obama’s defeat in 2012 – no matter the disproportionate economic sacrifices inflicted on ordinary Americans.

A creative, balanced, pragmatic BLEND of austerity measures and renewal policy solutions in the interests of everyone – middle-class as well as the upper class – clearly is not a driving Republican priority. Ignored is the persistent recession middle-class squeeze (building up over 30 years) with lost jobs and lost home equity and retirement savings.

How Will A Balanced Budget Amendment To The Constitution Help?

Republicans are now proposing a tough Balanced Budget Amendment (BBA) to come to grips with the soaring repetitive federal budget deficits – presumably formulated so as not to inflict greater pain on the working class, but of course this is the million dollar question.

In my opinion, the Republican initiative for a BBA could be a good idea providing it didn’t duplicate on a national level California’s catastrophic BBA experiment passed in Reagan’s time as Governor … and providing the language didn’t mirror an anti-government mission or incorporate strictures further harming the very vulnerable middle-class.

The Amendment as now formulated will:

• Require Congress to balance the Federal Budget each year
• Prevent Congress from spending more than 18% of GDP
• Require a 2/3 supermajority vote to raise taxes 

The argument is that most states already have some form of BBA. This is true. BUT, the inevitable state and local budget shortfalls that frequently occur are by necessity greatly offset by recycled federal taxpayer funds. Without such support funds, most states would be in even more dire financial straits today (and would have been historically).

California, for example – despite federal funds support and emergency, panic implementation of other local taxes/fees – still has a ±$25 billion deficit – and  climbing under its statute enforced BBA rules. Why is this? The answer is: insuffcient tax revenues caused by the state’s BBA over the years. (Ed. note: California has a 2/3 majority requirement in order to raise taxes put in under Prop. 13 which also is driving the deficit. Despite Democratic control of all three branches of government, California could not close it's budget gap because they were a few votes short in both Houses this year to raise taxes.) So what can be done in such a situation? Simple … fire teachers, firemen, policemen, government service providers; destroy Union collective bargaining rights; reduce social net benefits, etc. Result? State deficits and social instability are rising to inhuman proportions. This self-destructive practice on a national scale under a federal Balanced Budget Amendment would be disastrous.

The EU has a simple rule for controlling state budget deficits. The rule requires that a deficit not exceed 3% of GDP, with allowances for  emergencies. When pro-actively enforced under effective warning signals – which wasn’t done for Greece, Ireland, Spain, and Portugal – it has worked reasonably well for the mature EU countries.

In short, if a federal BBA is to be given serious consideration, it should Not be based on the three key provisions noted above. Such an Amendment should incorporate the following refinements, without riddling it with loopholes:

• Require that annual budget deficits not exceed 2% of GDP


• Prohibit by statute federal government borrowing from Social Security Trust Fund to cover other deficit spending. In past years, trust fund surpluses amounting to over $2 trillion have been siphoned off by the federal government  borrowings in exchange for Treasury notes. This conceals the true nature of normal federal budget shortfalls and diverts taxpayer funds from a trust fund most Americans assume is for their minimum old-age pensions. 


• Prevent Congress from spending more than 20% of GDP in any year which could be waived in times of recession, environmental disasters, war or military conflict. The 18% of GDP cap is far too low. It would have our country – with its no-holds barred, winner takes all political infighting culture – frequently meshed in enduring controversial budget storms. Result? The Supreme Court starts to run the country’s business.
  
  Federal spending as a % of GDP in past decades was as follows: 17.8% in 1960; 19.5% in 1970 (Vietnam War); 21.7% in 1980; 22.8% in 1985 (Reagan’s increased Defense budget and lower taxes for rich); 21.9% in 1990 (Iraq War); 18.2% in 2000 (under Clinton); 19.9% in 2005 (under Bush Jr. with 2 wars); 25.4% in 2010 (under Obama with 2 wars, a nation still suffering from the Great Recession depressing GDP growth, tax revenues).


• It is felt that a supermajority requirement for Congress and each state to raise federal taxes will hamstring flexibility of central and local government initiatives in running operations with a minimum of paralysis from extended infighting (as happens in California). Moreover, a 2/3 supermajority requirement would give an even greater advantage and incentive to the wealthy (e.g. Kochs) and corporate special interests to buy political and media influence to prevent the 2/3 majority from happening -- bringing our democracy that much closer to an oligarchy  "of the rich and powerful, by the rich and powerful, for the rich and powerful."

How Much Has Our National Debt Grown In Past Decades?

The ultra-right especially and media pundit sensationalists tend to play on the public’s fear or preconceptions by manipulating and often misrepresenting government financial performance data. The lying machine is alive and speeds up in times of crisis. This has been occuring lately in discussions around raising the debt ceiling. It has occured when discussing the origins of our $13.8 trillion national debt, yearly deficits, and “Who is responsible.”  

While the evidence shows both parties are responsible, it also shows that almost 70% of the $12.9 trillion increase in the national debt – after Pres. Carter’s last year office in office in 1980 – has happened on the watch of Republican Administrations (see TABLE 1). Below is a factual statement of origins of past debt growth … typical data so often used in a distorted blame game to misguide or dumb down the general public’s understanding.

________________________________________________________________
TABLE  1                                     National Debt       Increase       %+-

DOLLARS IN BILLIONS                   (Year Ending)

1980: Pres. Carter                        $909                          

_________________________________________________________________
1984: Pres. Reagan                        $1,565                 $656          72%

1988: Pres. Reagan                        $2,602                 $1,037       66%

1980-1988: Pres. Reagan            $2,602                $1,693     186% 

_________________________________________________________________

1989-1992: Pres. Bush. Sr.         $4,065                $1,463      56%

_________________________________________________________________

1996: Pres. Clinton                         $5,182                 $1,117       27%

2000: Pres. Clinton                         $5,674                 $492          9.5%

1993-2000: Pres. Clinton             $5,674               $1,609     29.5%

_________________________________________________________________

2004: Pres. Bush Jr.                        $7,355                $1,681       30%

2008: Pres. Bush Jr.                        $10,025               $2,670      36%

Plus: Tax revenues                                                    $1,250(a)
reduced by Bush
tax cuts: 2001-08(a)

2001-2008: Pres. Bush                 $11,275             $5,601      99%

_________________________________________________________________

2009-2011: Pres. Obama              $13,800             $2,525      22%

Less: Tax revenues                                                    -$450 (b)
Reduced by Bush
tax cuts: 2009-11

Net Debt Increase: Pres. Obama                               $2,075      18%

 

NOTE: The $2,075 net debt increase under
Obama was caused by recession, saving
financial institutions, stimulus package,etc.

_________________________________________________________________

1980-2011 TOTAL                            $13,800            $12,891 (c)

 

DEBT GROWTH UNDER REPUBLICANS:                   $  8,757  = 68%   

DEBT GROWTH UNDER DEMOCRATS  :                   $  4,134  = 32% (d)

 

SOURCE: U.S. Federal Budget Reports, CBO 2011 Study: Bush Tax Cuts                                                    

__________________________________________________________________________

FOOTNOTES:

(a) CBO 2011 study result Bush tax cuts reduced fed. tax revenues $2.8 trillion between 2002-11; $1,250 figure is 50% of CBO study

(b) Fed. tax revenues reduced by Bush tax cuts per CBO study reduced 50%

(c) June ending debt of $13,800 minus 1980 $909 ending debt under Carter

(d) $4,134 excludes 2009-2011 $450 billion debt increase caused by Bush tax cuts  

So much for the Republican double talk that those profligate liberals, with Obama in the vanguard now, are the BIG SPENDERs causing most of the expansion in national debt over the last 31 years. In fact, the really big Republican spenders and deficit producers were Reagan, Bush Sr., Bush Jr.

Reagan to his great credit saw that “tax decreases don’t pay for themselves” as debt and deficits rose steeply in his first term of office, not helped by sharply increased Defense spending. Reagan got caught up in the “Trickle Down” political-economic con game that lowering taxes for the rich reduces deficits and increase jobs. Reagan ended up Raising Taxes 11 times. Bush Sr. also saw the need to increase taxes.

Tragically, Bush Jr. (and Greenspan) didn’t respect the junk economics of “Trickle Down” calling for reducing taxes largely for the wealthy because this increases jobs – a line Boehner robotically repeats to the party faithful. The truth is that the modest 2001-07 economic expansion  period produced lackluster tax revenue growth and an anemic 6.2 million jobs.(see study: U.S. Pattern of Structural & Long-Term Joblessness ).                                                       

The meager 6.2 million job increase over 7 years evaporated when ±8 million jobs were lost in the 2008-09 Great Recession. After 2009, the Great Recession was thought to be finis, but the job and growth crisis is still unfolding. No need to worry though, the deficits and debt will magically disappear by firing government workers at all levels and lowering taxes to expand jobs. If you believe this financial math wizardry, you're drinking too much wine.

 

PART  II

How Is Our Economic Development Affected by the Global Economy?

There are critical structural challenges to our economic system in a technically fast-evolving, tightly integrated global economy. An economy where emerging nations with lots of cheap labor and sustainable +8% GDP growth rates are placing severe competitive pressures on existing scarce natural resources, on the income, wealth and job opportunities of advanced nations. Our national debt escalation is but a serious symptom of these underlying global changes affecting future growth dynamics.

Some of these structural factors are:

• U.S. Consumption at 70-72% of GDP (vs. 60% in Europe) is not sustainable with huge trade deficits. This dependence combined with stagnant wages inevitably exhausts savings, accelerates credit levels (i.e. living beyond one’s means) to buy cheap imports offsetting stagnant wages, drives up trade deficits to new astronomical levels, and reduces system liquidity for desperately needed societal improvements. With a national debt structure approaching 100% of GDP, this economic vicious circle will only lead to repeated social-economic crises. Lower consumption patterns will be an increasingly negative factor affecting future aggregate demand and our economic model. More on this later.


• New labor-saving technology, automation, robotization, outsourcing, job downgrading, also means relatively fewer decent jobs in coming years – particularly job opportunites for the less well-educated in a world favoring high-value-added jobs. The Wall Street Journal recently reported that the top U.S. firms cut 2.9 million jobs in the last decade – a Zero job growth decade – while hiring 2.4 million overseas.


• A structurally slower rate of job growth started in the 80s, slowed  down substantially to less than 1% in 2001-07 and peaked to below zero in the 2007-09 crisis bubble. Recently, there has been a slowdown in the low-value-added service job sector – retail, hotel, restaurant, construction, health-care, government jobs – providing  over 90% of all new jobs in the past two decades. This slowdown cannot be regained by the much smaller high-value-added job sector of the well-educated in computer science and design, finance, consulting services, engineering and production of products. Manufacturing activities have declined considerably the last 30 years. They now provide jobs to less than 8% of the workforce  vs. 22% in 1980 and vs. +20% in Germany today – expanding Germany’s job opportunities, technical knowhow and breadth as well as trade surpluses. Meanwhile, U.S. jobs are growing less in both low-tier and high-tier job sectors adding other pressures on the nation’s ability to continue Consuming  at 70-72% of GDP.


• Our economic model is structurally out-of-balance, relying far too much on consumption for GDP growth with stagnant wages driving cheap imports  and massive trade deficits made worse by polluting fossil fuel imports. Under our economic model, high trade deficits reduce GDP so much we are forced into an abnormal dependence on consumption triggering irresponsible debt expansion and the next financial crisis.

We are in a losing battle with the GDP formula for growth: GDP = Consumption + Private Investment + Public Investment + Net Exports.

                                                                                                     
Our GDP growth rate is greatly depressed by huge trade deficits, which in turn depress private and public investments, which in turn drive our economy into a high consumption dependence with all the negative consequences. The current jobless GDP growth may comfort the few winners, but it’s a bankrupted development.  The GDP components of growth are relatively much more in balance in mature EU countries with low net exports (trade deficits), higher private and public investments, much lower consumption (+-60% of GDP) and thus far higher savings (10-12% of GDP), adding more liquidity and stability to the entire social-economic system. 

Until we learn how to get our economic model in better balance  with the GDP components of growth, we are systemically destined to social-economic manic depression Ups and Downs, testing the barrier of an eventual complete breakdown!                                        

• The economic model puzzle is how can the mature EU countries, where annual GDP growth averages about 10% less than ours, still  have a decent living standard, no excessive trade deficits, lower unemployment levels (excepting the weaker countries under great stress now), stabilizing social-nets, active innovation and entrepreneurship … and do this with higher marginal tax rates?

Some answers are: higher household savings supporting private investment, VAT and ample tax funds for public investments, getting something  concrete and valuable back for higher  taxes, low college education costs, excellent health care coverage, constantly updated and state-of-art infrastructure, quality of life, e.g., vacations,  a much, much flatter disparity between high-low income /wealth classes contributing to a spirit of equity and cohesion.

• Propagandists like to say that redistributing existing wealth by progressive taxation does not create wealth. Only low taxes spur economic growth and net tax revenue growth. Reagan found such claims to be completely FALSE; as did Bush Jr. but would never admit it; false also to the Germanies, Hollands, Swedens, Denmarks, Norways, etc., of this world; false also according to CBO study showing that tax cuts replace 22% of lost tax revenue the first 5 years, rising to replace 32% of lost tax revenue the second five years. In layman’s language: a $1 million tax cut would generate a $780,000 deficit in each of the first 5 years and a 680,000 deficit in each of the second 5 years!   

TABLE 2 shows that the compositions of federal tax receipts from individuals, corporations, retirement receipts (Social Security), excise and other taxes have been getting Smaller or Stagnant in recent decades: 

______________________________________________________
TABLE  2        PERCENTAGE COMPOSITION OF FED. TAX RECEIPTS

                        1960s        1970s        1980s        1990s           2000s    

Individual             44.1%       45.4%          45.8%        45.7%        44.7%
Taxes 

Corporate            20.7%       14.6%            8.9%        10.6%        10.1%
Taxes 

Retirement          19.9%       28.8%           35.2%        35.3%        37.6%
Taxes

Excise                  10.8%       6.0%             4.8%          3.9%         3.2%
Taxes

Other                    4.5%        5.2%             5.3%          4.5%          4.4%
Taxes

Individual taxes are extremely significant and stable contributing about 45% of all federal taxes. About 70% of all individual taxes are paid by the top 10% income bracket. This group earns +-48% of all reported income and owns 70% of all household wealth. Of course, conservative propagandists focus only on the 70% of individual taxes paid figure, ignoring the top 10% group's remarkably high absolute growth in income and wealth at the modest effective tax rate of +-20% -- of course,after exploiting all the tax loopholes, including 15% capital gains tax.

Hey, Mr. Boehner, do you hear me? The upper 1%-5%-10%  income earners pay more taxes because of the huge increases in their income and wealth. Consider this FACT Mr.  Boehner: Over the past three decades, 34.6% of all income growth went to the top 0.1% of all earners! In contrast, 90% of all earners have collectively seen only 15.9% of all income growth over the same period  (Source: Economic Policy Institute, Feb. 2010). Republican propaganda that the rich are overtaxed is the party’s lie machine working overtime. Conclusion on individual taxes? Any dropping of the top income earners' taxes, besides increasing federal deficits and further exploding the income/wealth gap, will endanger the critically important, stable tax contribution of these taxes.                                                                      

Same applies to corporate taxes which have declined  50% from 21% of all taxes  in the 60s to 10% the last decade. Republicans and some Democrats, to please their election financiers, propose dropping the statutory corporate tax rate from 35% to 25%, knowing that the current corporate effective tax rate is at 25%.  So, with all the loopholes and special deductions, this means the proposed 25% statutory rate will drop to a new low effective rate of +-18% range! This would have a disastrous effect on the already tiny, tiny percentage contribution of all taxes corporations already make to the nation's tax revenues. It would also raise pressure to increase individual taxes, add to deficits and intensify existing make-shift panic practices of many states to find other taxes in all directions to compensate for insufficient local revenues and federal funds.

Retirement receipts  (Social Security) have been stagnating as a percentage of all taxes the past 30 years. In combination with the aging population and people living longer, this  points to the need to improve the contribution of retirement receipts and/or reduce outflows by resetting retirement age to 67, doing away with benefits for millionaires, discontinuing the government practice of borrowing from the trust fund, and starting to refund the over $2 trillion accumulated government borrowings from trust fund (though legally done).

Excise taxes have all but vanished as a % of all federal taxes, dropping from 11% of all taxes in the 60s to 3.2% the last decade. Besides contributing to the extraordinary wealth gap in America, this is just another factor squeezing our nation's overall tax revenue base to the primary benefit of the rich.

Conclusion: It's financial suicide  to be recommending reducing marginal tax rates on the rich unless compensated for by serious tax reform that removes tax loopholes and special deductions. New taxes having no notable negative effects on deficits and aggregate consumer demand are still a critical  (tax reform or not) dire need to reduce deficits/debt while also investing in our society’s renewal. It’s impossible to just cut our way out of deficits and debt!

What Blend of Balanced Solutions Deserve Consideration?

A balanced strategy mix around which to design a prudent tax and financing policy should embrace the following goals:

• Take needed austerity measures to remove wasteful spending
• Reform (not privatize) Social Security and Medicare
• Invest in human capital, technology, infrastructure
• Focus aggressively on renewables, eliminating fossil fuel imports
• Reduce debt and deficits under some form of balanced budget rules
• Fund programs by 50% self-financing (new taxes and cost cutting) and 50% debt financing

As opposed to a cut,cut,cut strategy  with no tax increases, making things worse  –  a blend of financing actions to fund above goals might include:

(1)  Implement a financial transaction tax on all stock, bond, large currency transactions – potential annual savings $100 billion

(2)  Remove tax subsidies for large firms, e.g., the oil firms – potential annual savings $50 billion

(3)  End tax havens and tax loopholes  – potential annual savings $75 billion                                                                                                         

(4)  Reduce tax loopholes and simplify a tax structure so complex that even Warren Buffet stated recently he had a lower tax rate than his secretary

(5)  Limit deductibility of interest on residential real estate (as the Netherlands is now planning to do) especially on second homes

(6)  Reduce unaffordable Defense spending back to 3.5% to 4% of GDP over next 5 years – potential annual savings $200 billion (Obama Administration's recent $50 billion savings target is a joke. This out-of-control cost center contributes at least three times that amount to our annual deficits.                                               

(7)  Re-examine unfair trade practices as our current account deficits are no longer sustainable. Financing $40-65 billion a month trade deficits robs liquidity for investments in our society. Furthermore, it’s going to be increasingly difficult, if not impossible, to finance trade deficits even at a higher interest rate for Treasury notes. The sheer scale of trade deficit growth is nothing but ominous, rising from $132 billion in the 70s, to $940 billion in the 80s, to $1,457 billion in the 90s, to $5,636 billion in the 2000s (i.e., $5.6 trillion).

(8) Provide incentives for aggressive expansion of  worker-manager owned Cooperatives that place profit and concern for people and communities on a more equal plain. Cooperatives bring money circulation closer to communities, reduce trade deficits, and expand jobs by more buying and producing of products at home.

SUMMARY

Let's not forget there's a minimum safety net in the U.S. The whole society has always been based on the assumption that new work is around the corner. We are in a dramatically changing world where such hopes are getting far more difficult to realize. Structural unemployment and underemployment sends too many people into a descending spiral: job degraded, health care coverage lost, auto lost, home lost, job lost, family lost … FOOD STAMPS!

The human challenge can't be better portrayed than in this painful job debacle picture (TABLE 3) that omits the ugly trend of a permanent drop in wages for those lucky enough to find work.

TABLE  3        UNEMPLOYED AND UNDEREMPLOYED IN MARCH 2011

 

A.     Officially defined as unemployed (a)                      13.5 million

B.    Persons not in the labor force but wanting a job      6.5 million

C.    Working part time but desiring full-time work            8.4 million

       TOTAL                                                                     28.4 million                                    

(a)  Revised to 14.1 million June 2011

SOURCE: U.S. Dept. Of Labor, Bureau of Economic Research

When all is said and done, the U.S. challenge is to find a sound fiscal and human balance in our nation’s renewal process that benefits ALL Americans.

Purist ideology and orthodoxy must be set aside … if we are to recapture those unique American creative, pragmatic, dynamic skills. This requires courage to try new initiatives such as reducing the number of jobs exported that should stay at home … such as getting our house on a solid financial footing while investing in renewal … such as getting off the fossil fuel cocaine. These goals need not be mutually exclusive.

I want to be optimistic that our broken, polarized political climate will step up, come together to make the necessary changes … while at the same time recognizing this may only be possible by the common folk finally fighting back to get justice, the true facts, the development options, and a fair share of the pie in a more level playing field.    

Frank Thomas
The Netherlands
July 2011

Cut the Crap and Create Jobs

Published on Friday, July 8, 2011 by The Hill

by Brent Budowsky

I have recently written a series of columns about jobs with titles such as "An angry dissent," and today's disastrous numbers are a political game changer. All incumbents of both parties are threatened if jobs are not created in large numbers by Election Day 2012.

This is one of the great outrages in political history. Neither party is now proposing a major jobs program. While the Republican Party at the national and state level is doing everything it can to destroy jobs, the Democratic Party is failing to fight for jobs with the intensity that Democrats have historically done. Meanwhile, the Democratic president does photo-ops, Twitter events and mini-jobs programs of the magnitude of school uniform trivia.

It is an outrage, a crime, a sin against decency and a defamation against everything I personally believe that nobody, I repeat nobody, in the high councils of politics gives a damn about those who have been jobless for 99 weeks. This violates my faith as a Christian, where we are supposed to help those in need. It violates my values as a Democrat, where we are supposed to fight for jobs. It violates the most common-sense economics, which proves that help for 99ers provides more stimulus than tax cuts for the wealthy, but since the 99ers would have to spend the money from assistance, to live.

The president's political brain David Plouffe now suggests that voters will not vote based on the jobless rate. This is ridiculous, absurd, delusional and symptomatic of a president far out of touch with the realities of working-class Americans who is clueless in confronting Republicans who believe in firing police, firefighters, teachers and librarians.

The jobless rate is a scandal.

The plight of the 99ers is a moral outrage.

The disastrous jobless numbers today will add to the political earthquake of a nation that demands jobs and is outraged by Washington power brokers who show no signs of caring, understanding or acting.

Shame on the president. Shame on the Republicans. Shame on the Democrats. Shame on the media. Shame on them all.

It is time to cut the crap, create the jobs and fight like hell for what Americans want: jobs.

I continue my angry dissent today.

The horrendous and disastrous jobs numbers announced this morning are a thunderbolt reminder of the jobless plague that grips our nation.

If the jobs are not created soon there will be more incumbents, from both parties, who will join the jobless after the next change election in 2012.

© 2011 The Hill

Brent Budowsky is a columnist for The Hill.

As Unemployment Spikes, Obama's Got a Bigger Problem Than the Debt Ceiling

Published on Friday, July 8, 2011 by The Nation

by John Nichols

The big story out of Washington—and rightly so—is the debt-ceiling fight that President Obama seems to be coming very close to losing. If the president abandons his 2008 campaign promise to be an absolute defender of Social Security, Medicare and Medicaid, he will have very little indeed to run on in 2012.  

But that won't be what beats him.

Because the biggest story in America is a different one from the biggest story in Washington. Americans are not that into the debt-ceiling debate. Polling has suggested that less than a quarter of Americans are "closely following" the fight. Those numbers will rise a bit as the deadline gets closer and as the media hypes the issue.

The issue that Americans have been following closely, and will continue to follow straight through the 2012 election cycle, the issue that tops the polls on the list of concerns, is the jobs crisis. Americans are worried about unemployment and underemployment.

And on Friday they got a lot more worried.

The Los Angeles Times headline was stark: "Dismal Jobs Report Shows Unemployment Rising to 9.2%."

The New York Times headline was, if anything, bleaker: "Job Growth Falters Badly, Clouding Hopes for Recovery."

The 9.2 percent official unemployment rate—up from 9.0 percent two months ago and 9.1 percent a month ago—is only a pale shadow of the real rate. Categorized in official terms as the "U6" unemployment, the real rate includes the offically unemployed as well as Americans who are underemployed and those who have given up on the search for work. It stands at more than 16 percent nationally. And in depressed states, such as Michigan (which Obama carried handily in 2008 but where his approval ratings are now troublingly low), it is well over 20 percent.

The official and the real unemployment rates are devastating. These numbers are some of the worst since the Great Depression. But they are not getting the response that high unemployment rates got from Democrats in the Depression era of other periods of economic downtown in the years since.

President Obama and his team have never focused on job issues with the intensity that is needed. And now they  are simply being ridiculous.

David Plouffe, the president's political czar, said on the eve of the release of Friday's dismal jobs numbers that he does not believe that the high unemployment rate poses a threat to President Obama's 2012 reelection campaign.

Speaking to reporters this week, Plouffe said, “The average American does not view the economy through the prism of GDP or unemployment rates or even monthly jobs numbers. People won’t vote based on the unemployment rate, they’re going to vote based on: ‘How do I feel about my own situation? Do I believe the president makes decisions based on me and my family?’ ”

The almost 10 percent of Americans who are officially unemployed probably don’t feel all that great about their situation. The same goes for the the tens of millions of additional Americans who are underemployed or who have fallen off official radar because they have given up on the search for work in communities where there are simply no jobs to be had.

The unemployed, the underemployed and the abandoned add up to almost one in five Americans. And an awfully lot of them live in battleground states such as Indiana, Michigan, Ohio and Pennsylvania —all of which President Obama won in 2008, all of which President Obama needs to win in 2012.

Now, let’s be clear, no one in their right mind thinks that Republicans who would be president are any more concerned about jobless Americans than is the Obama administration.

But neglecting unemployment as an issue—or presuming, as Plouffe does, that Americans will give Obama the benefit of the doubt—is political madness.

When unemployment reaches the level that it has nationally, and the even higher levels that it has in battleground states,  potential Obama voters start losing faith that "the president makes decisions based on me and my family."

Some of the disappointed may still vote for Obama out of fear of the Republicans, some will find social issues that draw them to the Republicans, but millions will simply stay home —as they did in 2010.

That's the danger heading into the 2012 race, and it is more profound today that at any time in Barack Obama's presidency.

Obama is toying with the notion of running for reelection as the president who did what George Bush could not: cut Medicare, Medicaid and Social Security.

That calculus suggests that Obama and his team really are out of touch with the electoral dynamic.

But that is not the most politically tone deaf scheme to come out of the president's camp this week.

While the president's apparent willingness to take the best argument available to Democrats going into the 2012 election cycle—the promise that they will defend Medicare, Medicaid and Social Security—suggests that Obama learned nothing from the Democratic party's devastating electoral experience in 2010, his top political aide's statements with regard to unemployment suggest that his team has learned even less.

No president since Franklin Roosevelt has won reelection when the unemployment rate was over 7 percent. And Roosevelt won because he ran as a candidate who was fully willing to use the power of the federal government to create jobs —and programs like Social Security.

The notion that a Democratic president can win reelection with an unemployment rate that is edging upward—perhaps toward double digits—and talk of cutting Social Security is not merely unrealistic. It is evidence of a disconnect that could devastate not just Obama's reelection campaign in 2012 but Democratic prospects for years to come.

Copyright © 2011 The Nation

How Racism, Global Economics, and the New Jim Crow Fuel Black America's Crippling Jobs Crisis

Published on Tuesday, July 5, 2011 by TomDispatch.com

by Andy Kroll

Like the country it governs, Washington is a city of extremes. In a car, you can zip in bare moments from northwest District of Columbia, its streets lined with million-dollar homes and palatial embassies, its inhabitants sporting one of the nation's lowest jobless rates, to Anacostia, a mostly forgotten neighborhood in southeastern D.C. with one of the highest unemployment rates anywhere in America. Or, if you happen to be jobless, upset about it, and living in that neighborhood, on a crisp morning in March you could have joined an angry band of protesters marching on the nearby 11th Street Bridge.

They weren't looking for trouble. They were looking for work.

Those protesters, most of them black, chanted and hoisted signs that read "D.C. JOBS FOR D.C. RESIDENTS" and "JOBS OR ELSE." The target of their outrage: contractors hired to replace the very bridge under their feet, a $300 million project that will be one of the largest in District history. The problem: few D.C. citizens, which means few African Americans, had so far been hired. "It's deplorable," insisted civil rights attorney Donald Temple, "that... you can find men from West Virginia to work in D.C. You can find men from Maryland to work in D.C. And you can find men from Virginia to work in D.C. But you can't find men and women in D.C. to work in D.C."

The 11th Street Bridge arches over the slow-flowing Anacostia River, connecting the poverty-stricken, largely black Anacostia neighborhood with the rest of the District. By foot the distance is small; in opportunity and wealth, it couldn’t be larger. At one end of the bridge the economy is booming even amid a halting recovery and jobs crisis. At the other end, hard times, always present, are worse than ever.

Live in Washington long enough and you'll hear someone mention "east of the river." That's D.C.'s version of "the other side of the tracks," the place friends warn against visiting late at night or on your own. It's home to District Wards 7 and 8, neighborhoods with a long, rich history. Once known as Uniontown, Anacostia was one of the District's first suburbs; Frederick Douglass, nicknamed the "Sage of Anacostia," once lived there, as did the poet Ezra Pound and singer Marvin Gaye. Today the area's unemployment rate is officially nearly 20%. District-wide, it’s 9.8%, a figure that drops as low as 3.6% in the whiter, more affluent northwestern suburbs.

D.C.'s divide is America's writ large. Nationwide, the unemployment rate for black workers at 16.2% is almost double the 9.1% rate for the rest of the population. And it's twice the 8% white jobless rate.

The size of those numbers can, in part, be chalked up to the current jobs crisis in which black workers are being decimated. According to Duke University public policy expert William Darity, that means blacks are "the last to be hired in a good economy, and when there's a downturn, they're the first to be released."

That may account for the soaring numbers of unemployed African Americans, but not the yawning chasm between the black and white employment rates, which is no artifact of the present moment. It's a problem that spans generations, goes remarkably unnoticed, and condemns millions of black Americans to a life of scraping by. That unerring, unchanging gap between white and black employment figures goes back at least 60 years. It should be a scandal, but whether on Capitol Hill or in the media it gets remarkably little attention. Ever.

The 60-Year Scandal

The unemployment lines run through history like a pair of train tracks. Since the 1940s, the jobless rate for blacks in America has held remarkably, if grimly, steady at twice the rate for whites. The question of why has vexed and divided economists, historians, and sociologists for nearly as long.

For years the sharpest minds in academia pointed to upheaval in the American economy as the culprit. In his 1996 book When Work Disappears, the sociologist William Julius Wilson depicted the forces of globalization, a slumping manufacturing sector, and suburban flight at work in Chicago as the drivers of growing joblessness and poverty in America's inner cities and among its black residents.

He pictured the process this way: as corporations outsourced jobs to China and India, American manufacturing began its slow fade, shedding jobs often held by black workers. What jobs remained were moved to sprawling offices and factories in outlying suburbs reachable only by freeway. Those jobs proved inaccessible to the mass of black workers who remained in the inner cities and relied on public transportation to get to work.

Time and research have, however, eaten away at the significance of Wilson's work. The hollowing-out of America's cities and the decline of domestic manufacturing no doubt played a part in black unemployment, but then chronic black joblessness existed long before the upheaval Wilson described. Even when employment in the manufacturing sector was at its height, black workers were still twice as likely to be out of work as their white counterparts.

Another commonly cited culprit for the tenaciousness of African-American unemployment has been education. Whites, so the argument goes, are generally better educated than blacks, and so more likely to land a job at a time when a college degree is ever more significant when it comes to jobs and higher earnings. In 2009, President Obama told reporters that education was the key to narrowing racial gaps in the US. "If we close the achievement gap, then a big chunk of economic inequality in this society is diminished," he said.

Educational levels have, in fact, steadily climbed over the past 60 years for African Americans. In 1940, less than 1% of black men and less 2% of black women earned college degrees; jump to 2000, and the figures are 10% for black men and 15% for black women. Moreover, increased education has helped to narrow wage inequality between employed whites and blacks. What it hasn't done is close the unemployment gap.

Algernon Austin, an economist for the Economic Policy Institute in Washington, D.C., crunched data from the Bureau of Labor Statistics and found that blacks with the same level of education as whites have consistently lower employment levels. It doesn’t matter whether you compare high-school dropouts or workers with graduate degrees, whites are still more likely to have a job than blacks. Degrees be damned.

Academics have thrown plenty of other explanations at the problem: declining wages, the embrace of crime as a way of life, increased competition with immigrants.  None of them have stuck. How could they? In recent decades, the wage gap has narrowed, crime rates have plummeted, and there's scant evidence to suggest immigrants are stealing jobs that would otherwise be filled by African Americans.

Indeed, many top researchers in this field, including several I interviewed, are left scratching their heads when trying to explain why that staggering jobless gap between blacks and white won't budge. "I don't know if there's anybody out there who can tell you why that ratio stays at two to one," Darity says. "It's a statistical regularity that we don't have an explanation for."

Behind Bars, the Invisible Unemployed

So what keeps blacks from cutting into those employment figures? Among the theories, one that deserves special attention points to the high incarceration rate among blacks -- and especially black men.

In 2009, 7.2 million Americans -- or 3.1% of all adults -- were under the jurisdiction of the U.S. corrections system, including 1.6 million Americans incarcerated in a state or federal prison. Of that population, nearly 40% percent were black, even though blacks make up only 13% percent of the American population. Blacks were six times as likely to be in prison as whites, and three times as likely as Hispanics. For some perspective, consider what author of The New Jim Crow Michelle Alexander wrote last year: "There are more African Americans under correctional control today -- in prison or jail, on probation or parole -- than were enslaved in 1850, a decade before the Civil War began."

Incarceration amounts to a double whammy when it comes to African-American unemployment. Rarely mentioned in the usual drumbeat of media reports on jobs is the fact that the Labor Department doesn't include prison populations in its official unemployment statistics. This automatically shrinks the pool of blacks capable of working and in the process lowers the black jobless rate.

In the mid-1990s, academics Bruce Western and Becky Pettit discovered that the American prison population lowered the jobless rate for black men by five percentage points, and for young black men by eight percentage points. (Of course, this applies to whites, Asians, and Hispanics as well, but the figures are particularly striking given the over-representation of blacks in the prison population.)

Even that vast incarcerated population pales, however, in comparison to the number of ex-cons who have rejoined the world beyond the prison walls. In 2008, there were 12 million to 14 million ex-offenders in the U.S. old enough to work, according to the Center for Economic and Policy Research (CEPR). So many ex-cons represent a serious drag on our economy, according to CEPR, sucking from it $57 billion to $65 billion in output.

Of course, such research tells us how much, not why -- as in, why are ex-cons so much more likely to be out of work? For an answer, it’s necessary to turn to an eye-opening and, in some circles, controversial field of study that may offer the best explanation for the 60-year scandal of black unemployment.

Twice as Hard, Half as Far

In 2001, a pair of black men and a pair of white men went hunting for work in Milwaukee, Wisconsin. Each was 23 years old, a local college student, bright and articulate. They looked alike and dressed alike, had identical educational backgrounds and remarkably similar past work experience. From June to December, they combed the Sunday classified pages in the Milwaukee Journal Sentinel and searched a state-run job site called "Jobnet," applying for the same entry-level jobs as waiters, delivery-truck drivers, cooks, and cashiers. There was one obvious difference in each pair: one man was a former criminal and the other was not.

If this sounds like an experiment, that's because it was. Watching the explosive growth of the criminal justice system, fueled largely by ill-conceived "tough on crime" policies, sociologist Devah Pager took a novel approach to how prison affected ever growing numbers of Americans after they'd done their time -- a process all but ignored by politicians and the judicial system.

So Pager sent those two young black men and two young white men out into the world to apply for perfectly real jobs. Then she recorded who got callbacks and who didn't. She soon discovered that a criminal history caused a massive drop-off in employer responses -- not entirely surprising. But when Pager started separating out black applicants from white ones, she stumbled across the real news in her study, a discovery that shook our understanding of racial inequality and jobs to the core.

Pager's white applicant without a criminal record had a 34% callback rate. That promptly sunk to 17% for her white applicant with a criminal record. The figures for black applicants were 14% and 5%. And yes, you read that right: in Pager's experiment, white job applicants with a criminal history got more callbacks than black applicants without one. "I expected to find an effect with a criminal record and some with race," Pager says. "I certainly was not expecting that result, and it was quite a surprise."

Pager ran a larger version of this experiment in New York City in 2004, sending teams of young, educated, and identically credentialed men out into the Big Apple's sprawling market for entry-level jobs -- once again, with one applicant posing as an ex-con, the other with a clean record. (As she did in Milwaukee, Pager had the teams alternate who posed as the ex-con.) The results? Again Pager's African-American applicants received fewer callbacks and job offers than the whites. The disparity was particularly striking for ex-criminals: a drop off of 9 percentage points for whites, but 15 percentage points for blacks. "Employers already reluctant to hire blacks,” Pager wrote, “appear particularly wary of blacks with known criminal histories."

Other research has supported her findings. A 2001-2002 field experiment by academics from the University of Chicago and the Massachusetts Institute of Technology, for example, uncovered a sizable gap in employer callbacks for job applicants with white-sounding names (Emily and Greg) versus black-sounding names (Lakisha and Jamal). They also found that the benefits of a better resume were 30% greater for whites than blacks.

These findings proved a powerful antidote to the growing notion, mostly in conservative circles, that discrimination was an illusion and racism long eradicated. In The Content of Our Character (1991), Shelby Steele argued that racial discrimination no longer held black men or women back from the jobs they wanted; the problem was in their heads. Dinesh D'Souza, a first-generation immigrant of Indian descent, published The End of Racism in 1995, similarly claiming racial discrimination had little to do with the plight of black America.

Not so, insist Pager, Darity, Harvard's Bruce Western, and other academics using real data with an unavoidable message: racism is alive and well. It leads to endemic, deeply embedded patterns of discrimination whose harmful impact has barely changed in 60 years. And it cannot be ignored. As the old African-American adage puts it, "You've got to work twice as hard to get half as far as a black person in white America."

Is There a Solution for Black America?

Tracing black unemployment in America since World War II, there are two moments when, briefly, the gap between black and white joblessness narrowed ever so slightly -- in the 1940s and again in the late 1960s and early 1970s. For example in 1970, unemployment was at 5.8% for blacks and 3.3% for whites, a sizeable gap but significantly better than what followed in the Reagan era. Those are moments worth revisiting, if only to understand what began to go right.

According to University of Chicago professors William Sites and Virginia Parks, those periods were marked by a flurry of civil rights and anti-discrimination activity on the federal level. A series of actions ranging from the creation of the Fair Employment Practice Committee in 1941 to the passage of the Civil Rights Act of 1964 (which mandated the Equal Employment Opportunity Commission), the Voting Rights Act of 1965, and the Equal Employment Opportunity Act of 1972, write Sites and Parks, had "dramatic impacts on employment discrimination."

But those gains of the 1970s were soon wiped out. The thinning of union membership and the dwindling power of organized labor didn't help either, after decades of pressure on employers to end discrimination against workers of color.

Today, in terrible times, with the possibility of social legislation off the table in Washington, the question remains: What, if anything, can be done to close the jobless gap between blacks and whites? When I asked Devah Pager, she called this the "million-dollar question." This form of discrimination, she pointed out, is especially difficult to deal with. As she noted in 2005, many employers who discriminate don't even realize they're doing so; they're just going with "gut feelings." "It's not that these employers have decided that they are not going to hire workers from a particular group," Pager told me.

What won't work is relying on discrimination watchdogs to crack down more often. The way federal anti-discrimination law works, it's up to the person who was discriminated against to raise an alarm. As Duke's William Darity points out, that’s a near impossibility for a job applicant who must convincingly read the mind of a person he or she doesn’t know. Worse than that, the applicant who wants to lodge charges of discrimination also has to prove that the discrimination was intentional, which, as Pager’s experiments make clear, is no small feat. Under the circumstances, as Darity told me, perhaps no one should be surprised to discover that blacks "grossly underreport their exposure to discrimination and whites grossly overreport it."

Of course, fixing a problem first requires acknowledging it -- something the nation has yet to do, says the Economic Policy Institute's Algernon Austin. To put blacks back to work, lawmakers should invest federal money directly in job creation, especially for black workers. Other avenues for putting people back to work, like a payroll tax credit won't do the trick. "We've spent billions in trying to build jobs overseas" in war zones, Austin told me. "But if we invested that money here in our cities, we wouldn't have this racial gap."

But how likely is that at a moment when, in a Washington gripped by paralysis, any discussion of spending in Washington begins and ends at how much to cut? The painful reality of permanent crisis for black workers is here to stay. That’s how it seems to blacks in D.C., especially those who live east of the river. In April, another group of protesters took to the 11th Street Bridge to demand more D.C. hires, and the following month, the group D.C. Jobs or Else took their complaints to City Hall. But progress is slow. "We're being pushed out economically," said William Alston El, a 63-year-old unemployed resident who grew up in D.C. "They say it’s not racism, but the name of the game is they have the money. You can’t live [in] a place if you can’t pay the rent.”

© 2011 Andy Kroll

Andy Kroll is a reporter in the D.C. bureau of Mother Jones magazine and an associate editor at TomDispatch.com. He will never again sleep on the frigid stone floor of a state capitol.

The US Does Not Need Workers; It Needs Consumers

by John Lawrence

Why is unemployment so high? Simply put it's because corporations and businesses can produce a surfeit of consumer goods without the need for additional human labor. Since 125,000 new faces enter the work force every month, there should be new jobs created for these people if they are to make a living since most people, but not all, make their living through work. Some, however, the rentier class, make their living from stocks, rent, dividends and interest, but not very many. But the American and even the world - since we're in a global economy - production machine doesn't need additional workers; it needs more consumers. Everything can be produced with a diminishing number of workers. Why? Consider automation, robotization, computerization. In short today machines do most of the work. You only have to watch one of those shows on the Science Channel to appreciate this: "How Stuff is Made." You see that most industrial processes have been completely automated.

Back in the old days production was very labor intensive. Stuff was made by hand. Machines were very primitive or non-existent depending how far you go back. The land was tilled and crops planted by hand whereas today huge tractors and automated farm machinery mean that one man can do the work that was done by hundreds a hundred years ago. What little labor is needed in today's world can easily be outsourced to wherever labor is cheapest. We have gone from an economy which was very labor intensive, one that required a lot of hands for the production of goods, to one that requires very little labor to keep the machines and robots humming. And the process of mechanizing and automating production processes continues. Robots are getting ever smarter.

So where does that leave the average person who is trying to make a living? Not in a very good position with the current economic model. It essentially leaves him or her in the position of a serf begging for a job and competing with thousands of others for work. The serfs were even better off because at least their labor was needed. Today's industrial reserve army is not really needed by the capitalists and corporatists who control the economy. That means two things: 1) the value of labor is depreciated because so much of it is available and unneeded and 2) there is a growing percentage of the population that must either be sustained by some form of welfare or unemployment compensation or cast to the wolves to beg, borrow and steal.

What is needed is a new economic paradigm which recognizes that very little labor is needed and machines can do most of the work. What would that new economic model look like? There would need to be a much larger leisure class than now exists. The wealthy are very few in number as a percentage of the population as a whole. They don't have to work because they have a steady stream of income which represents a return on their assets. Ownership of real estate produces a return in the form of rent. Ownership of stock produces a return in the form of dividends. Interest income is at an all time low because interest rates are so low, but when they go up again, people will be able to make a living if they have enough money in money market, CD and savings accounts. Unfortunately the distribution of wealth is way out of whack. Those in a position of being able to make a living off of so-called unearned income are very few. Those in the position that their only recourse is to make a living from their labor are the vast majority. What is needed is to turn this situation around so that the vast majority can make a living off of return on assets and only a small minority, whose labor is actually necessary for the functioning of society, will be necessary to make money from work. Or the work could be spread around so that everyone might work a few hours a week and make their living mainly on the return on assets or acquired wealth and a small portion of their living off their labor.

This is effectively what advanced societies (not including the US) have done. A large portion of the wealth of the society is held publicly. This does not preclude the private acquisition of wealth, but insures that the distribution of wealth is not as skewed as it is in the US. This makes it possible for the less fortunate, the less able and the unemployed to make a living as a return on public wealth. The fortunate do not need public assistance, but the unfortunate do. Public wealth can provide for free health care, free education and free unemployment compensation among other things. By taxing the rich, money is redistributed to the poor so that the processes of production and consumption can continue. Or public wealth in the form of natural resources can be sold and the profits divided evenly among the people. Many countries use their oil assets as a form of public wealth. Otherwise, all the money ends up in the hands of the wealthy and production stops because the vast majority of people have no money to consume. When money is redistributed or recycled from rich to poor, the production and consumption processes can hum merrily along. So taking money from the rich in the form of taxation and redistributing it to the poor is very important for the healthy functioning of society especially in advanced societies where most of the work is done by robots and human labor is increasingly unnecessary.

So all this banter about the rich being job creators is a bunch of hooey. The rich are not job creators; they are robot acquirerers and job destroyers. They make capital investments of a nonhuman variety because they are more efficient in the production process than are humans. For one thing machines can whiz and hum 24 hours a day. Humans need their rest. Safety standards for machines are more lax than they are for humans. Maintenance is simpler. Machines don't get sick or disgruntled. All in all if a capitalist can replace a human with a machine, he will do it. Capital investment in machines is more desirable than an investment in human capital.

So what does that say about the value of education? Essentially a college education is of diminishing value. Sure some will chase the fantasy of more and more education in order to better compete for fewer and fewer jobs. In the long run the student loan debt required to obtain a credentialization in some field will not be worth it. Since more and more people will be left to their own devices instead of hired, the sensible thing is to prepare for a life of self-employment. Instead of preparing to participate in the global economy with its attendant risks of outsourcing and downsizing, prepare to participate in the local economy in a job from which you cannot be fired and which cannot be outsourced. A college education prepares one mainly to be a servant of a corporation. It shows that one was docile and compliant enough to follow years and years of instruction, sit in classrooms and take tests successfully. It shows the employer that a potential hiree has the requisite qualities of docility and compliability to make a good employee, one who won't make waves or criticize the corporation, one who will adopt the ethos and become enculturated in corporate values, one who, in other words, will sell his soul to the corporation.

Another way to fight back against the job destroyers (not creators) is to form cooperative work enterprises such as the Mondragon corporation which is wholly employee owned. The employee, in addition to acquiring a paycheck, acquires a share of the profits as well. So the worker becomes an owner and makes part of his living from a return on assets just like the wealthy do. Wealth, therefore, is more widely distributed and can be further distributed by reducing the work week, hiring more employees and distributing wealth even more widely.

In an age in which there is a diminishing need for human labor and most work in the production process is done increasingly by machines, the rational thing to do is to distribute the necessary work more widely (i.e. reduce unemployment), reduce the work week and create a situation where each individual makes a portion of their living off of acquired public wealth. In Norway, for instance, the old age pension system is entirely funded by profits from a publicly owned asset: oil. These profits then are invested conservatively so they will be available to future generations.

 

Why Washington Isn’t Doing Squat About Jobs and Wages

by Robert Reich

  Saturday, June 4, 2011

The silence is deafening. While the rest of the nation is heading back toward a double dip, Washington continues to obsess about future budget deficits. Why?

Republicans don’t want to do anything about jobs and wages. They’re so intent on unseating Obama they’d like the economy to remain in the dumps through Election Day. They also see the lousy economy as an opportunity to sell Americans their big lie that government spending is the culprit — and jobs will return if spending is cut and government shrinks.

Democrats, meanwhile, don’t want to admit the recovery has stalled.  They worry such talk will further undermine consumer confidence or spook the bond market. They don’t want to head into the election year sounding downbeat. And they don’t think they have the votes for anything that will have much effect before Election Day anyway. 

But there’s a third reason for Washington’s inaction. It’s not being talked about — which is itself evidence of the problem.

The unemployed are politically invisible. They don’t make major campaign donations. They don’t lobby Congress. There’s no National Association of Unemployed People.

Their ranks are filled with women who had been public employees, single mothers, minorities, young people trying to enter the labor force, and middle-aged men who have been out of work for longer than six months. You couldn’t find a collection of people with less political clout.

Women who had been teachers, public health professionals and social workers have been hit hard. These jobs continue to be slashed by state and local governments. Public schools alone accounted for nearly 40% of the nation’s total public sector job losses in the last year. From March 2010 to March 2011, women lost 214,000 public sector jobs, compared with a loss of 115,000 public jobs by men.

Unmarried mothers are having a particularly difficult time getting back jobs because their work was heavily concentrated in the retail, restaurant and hotel sectors. Many of these jobs disappeared when consumers reduced their discretionary spending, and they won’t come back in force until consumers start spending more again.

According to a new report by the California Budget Project, the recession erased more than half the jobs single mothers in California had gained from 1992 to 2002. The result has been a drop in the share of unmarried mothers in jobs, from 69.2% in 2007 to 58.8% in 2010. Unmarried mothers who still have jobs are working fewer hours per week than before.

Blacks also continue to be hard hit. Their unemployment rate here in California reached 20% this past March, up 5% from a year ago. That’s more than double their rate before the downturn. Some of this is because of the comparatively low education levels of many blacks, and their weak connections to the labor market. Some is due to employer discrimination. Blacks were among the last hired before the recession and therefore among the first to be let go in the downturn. That means they’ll be among the last hired as the economy recovers.

Many young people who have never been in the job market are unable to land a first job. Employers with a pick of applicants see no reason to hire someone without a track record, particularly those without much education. Unemployment among high school dropouts is hovering around 30%. Even recent college graduates are having a much harder time than usual finding a job. Many are settling for jobs that don’t ordinarily require college degrees, which pushes those with less education even further back in the line.

Older workers who have lost their jobs are at the greatest risk of continued unemployment. Employers assume they aren’t as qualified or reliable as those who are younger and have been working more recently. According to research by the Urban Institute, once you’re laid off, your chance of finding another job within a year is 36% if you’re under the age of 34. But your odds drop the older you get. If you’re jobless and in your 50s, your chance of landing another job within the year is only 24%. Over 62, you’ve got only an 18% chance.

What do these jobless have in common? They lack the political connections and organizations to get the ears of politicians, and demand policies to spur job growth.

Obama's Lack of Ideology Leading to Job Creation Debacle

by Frank Thomas and John Lawrence

Obama seems to be counting on the fact that the economy will recover on its own after the initial stimulus package. It's starting to look like this was a bad bet. The Republicans of course have their job creation plan in place: lower taxes especially on the rich, less government spending and more deregulation or, in other words, the continuation of the transfer of wealth from the poor and middle class to the rich. However, this is precisely what has ruined the economy. As Robert Reich, Bernie Sanders, Paul Krugman and others have been saying repeatedly, the government has to spend more to create jobs and raise the money to do so by a variety of mechanisms like a financial transaction tax, doing away with subsidies for oil and agriculture, closing tax loopholes for corporations, raising taxes on millionaires and billionaires etc. Obama is in the weak position of not having an ideological counter to the Republican ideology. The Democrats need to develop an ideological position based on Keynesian economics to counter the Republicans. Obama's "Republican lite" philosophy will probably result in his losing the next election if the economy continues to sputter and stagnate. His position seems to be the Republican position only not quite as severe. What is needed is a complete repudiation of trickle down economics, union busting, the "small government" mantra, and the wealthy as "job creators." The Democrats need an ideological consistency to counter the Republicans who are extremely ideologically consistent.

 

Most of the jobs being created are temp jobs and lousy jobs at less than a living wage. The Democrats are not addressing this and they need to. The Democrats need to state loudly and clearly that the government needs to be the job creator of last resort. If private enterprise cannot create the jobs to provide for a full employment economy, then government must step in and fund infrastructure repair projects and even a WPA style work program. We need to get over the notion that the only legitimate government job creation program is in the military.

 

Obama's Administration and the Republicans are either brain mute or unwilling (out of fear of increasing America's indebtedness now with CONSTRUCTIVE PUBLIC DEBT financed investments ) to recognize the deeply structural character of our nation's declining rate of job generation shown in Frank's 30 year trend summary (The U.S. Ongoing Structural Unemployment Calamity).           

 

The 50,000 job generation in May doesn't surprise us. In the 80s and 90s decades about 36-38 million jobs  were created (averaging 18-20 million per decade: see Advance and Rutgers study). In the first decade of the 21st century, depending on which study numbers one uses, U.S. job generation was either a shockingly negative -0.4 million up to -2.1 million including labor force growth. 

To summarize again this disastrous trend based on Advance & Rutgers 1982-2009 and BLS 2010-11 data:

 

                                                ANNUAL AVE. JOB GROWTH      TOTAL

 

Nov.1982-July 1990 Expansion            2,401,800                     18.4 Mil.

                            

Mar. 1991-Mar. 2001 Expansion          2,150,000                     21.5 Mil.

 

Nov. 2001-Dec. 2007 Expansion          1,020,550                       6.2 Mil.

 

Jan. 2008-Dec.2009 RECESSION      - 4,600,000 (a)              -9.2 Mil. (a)

  

Jan.2010- Dec. 2010 RECOVERY              850,000                       0.9 Mil.

 

Jan. 2011- May 2100 RECOVERY              700,000                       0.7 Mil.

 

(a) Includes unfulfilled job need of 1.7 million to meet labor force growth.

                                                                  

 

As everyone has learned a few thousand times over by now, we have 14 million officially unemployed and another 8-10 million underemployed (the latter at below-subsistence wage levels). As was reported in a recent writing, this overall situation is far worse than that of the better performing, mature European countries (excepting the high jobless levels in Spain, Ireland, Greece and Portugal). 

 

AUSTERITY (get rid of waste), REFORM  (Medicare, Soc. Security, Defense Spending, Tax System/Avoidance)  and INVEST (in high-return projects, training) to produce jobs should be Obama's no-holds-barred leadership call. We are on the path of being mired in a long lasting economic malaise similar to Japan's experience during 1992-2002  -- where their debt as a % of GDP rose from 62% to 174% in 2004 and even higher now. Japan covered their explosive annual debt cost with exceptionally strong net export surpluses up to 2008. Now, with sharply deteriorating net export balances, their high debt level is becoming an unquestionably dangerous financial burden.

 

If we migrate to a Japan 10 year stagnant-type malaise, we will be in BIG financial trouble because we have no trade surpluses, only enormous annual trade deficits simultaneously with a mountain of public debt escalated in the Great Recession bubble of Bush's Presidency and by the government's costly rescue efforts of selected financial institutions.

 

As repeated many times, our economic growth model of extreme dependence on CONSUMPTION (70% of GDP vs. 60% in Europe) with almost Zero Savings (vs. 10-12% in Europe) and net export deficits of $45-60 billion a month, along with low PUBLIC and PRIVATE Investments (vs. higher infrastructure and R&D investment levels in Europe) is NOT SUSTAINABLE. European countries, like Holland, Germany and others, realize that Public investment spending, joint private-public ventures and  sensible, affordable military spending (+-1.7% of GDP vs. +-5.5% in U.S.) much more significantly and effectively increase GDP, jobs, incomes and tax revenues in the short and long term. All this means that we need new ideas to get our social-economic model structurally as well as fiscally balanced to improve societal well-being ... to stop the destruction of human capital through impoverishment of the middle-class.

The Democrats need to fine tune their ideological stance and confront the Republican ideology head on. They can't just be pragmatic. Pragmatism looks a lot like wishy-washiness when confronted by an aggressive, confrontational ideology like the Republicans espouse. And Obama cannot simply cross his fingers and hope that the "experts" are right when they say that the American economy will just recover by itself and on its own without any further efforts on his part.

It Takes a Movement

by Robert L. Borosage

Huffington Post, June 3, 2011

This is a classic "small d" democratic moment. The economy is in deep trouble -- immediate and long term. Washington is oblivious, compromised by moneyed interests, knotted by ideological divides. It will take an angry and aroused citizens' movement to demand the debate worthy of a great nation in deep trouble.

The dismal jobs numbers only punctuate the reality of an economy that isn't producing sufficient jobs. The crisis is both immediate and long-term. The so-called recovery hasn't begun to recover the jobs lost in the Great Recession. 25 million people are in need of full time work. Home values continue to fall. 25 percent of 17- to 25-year-old high school graduates not in college are out of work. Much of a generation is at risk.

The immediate is only an expression of more profound problems. The middle class was losing ground before the Great Recession. Good jobs are being shipped abroad. Wages aren't keeping up with the costs of basics. The broad middle class that made America exceptional is disappearing. The American dream seems ever more like a nostalgic memory. The nation continues to run unsustainable trade deficits, and must dig out of a mountain of debt -- both public and private. For the first time, an increasing majority of Americans fear their kids won't fare as well as they have.

We need action to put people to work. But short term fixes aren't enough. Americans are looking for a serious strategy that will get us out of the mess we are in.

The Beltway Bloviating

But inside the beltway, Washington is clueless. It's the only major city in the country where housing prices are going up. A flood of corporate lobby money insures that the tables are full at the high end restaurants. Entrenched corporate interests buy a lot more than lunches with their dough. They block vital reforms on health care, energy, trade, Wall Street. They feed off taxpayers, protecting their subsidies and tax dodges, avoiding taxes, while deficits rise and essential programs like nutrition for infants get cut.

The politicians prefer posturing to bold action, "message" and "spin" to leadership. Republicans even with the majority in the House are focused on obstruction. They vote for more tax cuts for the wealthy and corporations, paid for by ending Medicare and Medicaid, hiking costs for those least able to pay -- seniors, the disabled, the dying. They vow to blow up the economy if they can't get a deal on trillions in domestic spending cuts, accompanied by more tax breaks for the wealthy. They're lining their campaign coffers carrying water for the big banks against even minimal reforms.

The adult Republican presidential candidates like Mitt Romney claim they can get the economy going and create jobs. But they only recycle old and failed nostrums. More tax cuts for corporations who are already sitting on over a trillion in cash waiting for customers. More tax cuts for the wealthiest, who already have the most concentrated income and wealth since the eve of the Great Depression. More corporate trade deals that ship goods jobs abroad, undermine wages at home, and force up to borrow over a billion a day from abroad to balance the deficits. Less regulation when we haven't recovered from the catastrophe caused by the excesses of deregulated Wall Street. They pretend they can balance the budget and put people to work by cutting domestic spending, cutting taxes, increasing spending on the military, and not dismantling basic promises like Medicare and Social Security. They and everyone else knows that is a lie.

The White House offers no clear way out. The president wants to hail the successes of an economy that isn't working for most people. Yes, his policies saved us from free fall -- thanks, but we're worried about what we face, not where we've been. He sensibly calls for "winning the future" -- making investments in areas like education, innovation and infrastructure. But he's locked himself into austerity, focused on cuts, and offering no big vision of how we move forward. He's more sensible than the tea party zealots, but remains unwilling to tell Americans what needs to be done and that fight for it.

The Democrats in the Senate are a babble, too divided to deliver a message. The House Democrats are cowed by the losses in 2010, too worried about being accused of being "big spenders" to lay out a course to get the economy going and put people to work.

And few seem ready to put out a strategy that necessarily will take on the interests that are strangling the dream. A national trade strategy that isn't controlled by multinationals. Affordable health care not catering to private insurance and drug companies. Fair taxes that shut down the tax havens, the dodges, the obscene subsidies that drain our resources. An investment strategy that generates vital public and private investment, not more Wall Street speculation, or CEO incentives for laying off workers and plundering their own companies.

It will take a popular uprising to get Washington even to begin to focus seriously on jobs and the economy. We've seen this before. There was a bipartisan consensus on the Iraq War until a growing movement forced first Democrats and then the Bush White House to face reality. The Washington establishment was drunk on slashing Social Security and Medicare to address deficits, and Republicans embraced gutting Medicare, until popular disapproval expressed both in the polls and in the special election in upstate New York sobered them up a bit. The anger expressed by the Tea Party minority still has Republicans in Washington reeling.

Now we need the people to speak again. This time for the American majority. We aren't buying the old conservative elixirs. The New Dem-Republican lite embrace of half measures and conservative cross dressing isn't acceptable.

Washington has to hear a clear message. We elected you to get this economy going, not gut Medicare. We want to know how you will create jobs. We don't want to be served the old tired babble. We know we can't simply cut our way to prosperity. We know we need a major change in our global strategy. We know we've got to make investments vital to the future -- in education and in innovation. We know this economy needs major reforms. Anyone not willing to challenge the corporate interests that are strangling change isn't serious. We know it is hard to focus on creating jobs when deficits are this high. We know we'll have to sacrifice, but we're not broke -- we don't have to break promises to our kids or our parents. And don't ask the victims of this economy to sacrifice when those making out like bandits are given a pass. We know once the economy is moving, taxes have to go up and spending has to be brought under control. So stop the nonsense of no tax hikes. Tell us what you will cut and why. Don't pretend choices don't have to be made.

So lay it out. How do you put people to work, change our economic strategy so we begin once more to make things in America and create good jobs, not poverty wage jobs? How does that relate to getting our books in order and our priorities straight? Give us a debate worthy of a great nation in deep trouble.

In August, after Washington reaches an inevitable deal on lifting the debt limit after weeks of posturing and bluster, of an idiotic debate focused on what to cut rather than how to get the economy going, legislators will return home for recess. They need to hear from us.

 

Follow Robert L. Borosage on Twitter: www.twitter.com/borosage

Jarring Disconnect: If Joblessness and Hopelessness Undermine Democracy in the Middle East, What About Here at Home?

Published on Saturday, May 28, 2011 by This Can't Be Happening

by Dave Lindorff

In his latest speeches on the Middle East, President Obama, both at the State Department and at the G8 meeting in France, has pledged billions of dollars in economic aid to Middle Eastern countries, drawing a direct connection between the unrest and demonstrations that brought down the dictators in Tunisia and Egypt, and the joblessness and hopelessness felt by the young people in those two countries.

His adviser on international economics, David Lipton, has been more specific, saying that, “We believe that these two pillars go hand in hand. Without economic modernization, it will be hard for governments trying to democratize to show people that democracy delivers.”

Unemployment in Egypt among young men and women is about 30%. In Tunisia, it is over 40%. The White House claims that with figures like that, the future for democracy in those countries is tenuous.

But wait a minute. What about the US? Unemployment and underemployment here is still up around 20% overall, and it is much higher among young people. Black youth unemployment fell so far in 2011 to an official rate of 44% from 50% last year (because so many young workers just gave up trying to find work)! Among Latino youth, the official unemployment rate is stuck at around 30%. Overall, youth unemployment, according to the official Labor Department figures, is 20%, but remember, the official rate does not count those who are working part time who want full-time work, and does not count those who have given up looking for work. Among young people, it may be that many who work part-time (those who live at home or who are in school or college) actually are not looking for full-time work, so that upward adjustment may not be as great as for older workers, but at the same time, there are certainly more young people who give up looking for jobs than is the case with older workers who have families to support. In any event, it is clear that all these youth unemployment figures are actually too low by a significant amount.

If the official rate of unemployment for all Americans of 9% is actually less than half of the actual rate of 20%, then even if we took a conservative estimate, simply eliminating the adjustment of those working part-time who want full-time work from the youth unemployment figure, and just keeping the adjustment for those who have dropped out of the labor force (stopped looking for work) because it is fruitless, we would still see actual unemployment figures for young people in the US at staggering Egypt-like levels: 30% for all young people, 45% for young Latinos, and as high as 66% for black youth!

So why is the president so concerned about providing economic support to boost jobs in countries like Tunisia and Egypt, in order to “support democracy,” while in here in the US, he has basically thrown in the towel on job creation efforts, and is just talking about cutting the deficit--a Republican theme?

Cutting the deficit, even as economists are increasingly warning that the so-called “recovery” is sputtering, is a recipe for even worse unemployment.

The answer can be found by looking at the way the young have reacted to joblessness in Egypt and Tunisia on the one hand, and in the US on the other.

In Egypt and Tunisia, they took to the streets and stood down police and soldiers, ultimately bringing down their governments.

Here in the US, young people, like their parents, are largely quiescent. Their reaction to the frustrations of joblessness tend to be either self-destructive (drugs and alcohol) or anti-social (gang activity or crime).

If they were to band together and take over city squares to demand action by government to give them jobs, to provide them with access to college funding, etc., they would get the same kind of attention and help from local and state governments and from the White House and Congress that Egyptian and Tunisian youth are getting from the G8 countries.

Sure, they’d have to face down police armed with tear gas and batons, just like their compatriots in Tunisia and Egypt had to do, but once aroused, motivated and organized, young people have the stamina and courage to do that.

What is lacking is any real effort to organize these frustrated and angry young people, and to get them out into the street. The traditional groups that would have done this in the past--the labor movement, civil rights organizations, and political groups on the left--have been somehow neutered. Their focus, such as it is, is on now on elections, on recall campaigns, and on the coming 2012 presidential contest. It is not on organizing unemployed young people.

Expecting the White House to act on this crisis of long-term joblessness and diminished expectations for the future among young workers is foolish. The Obama administration knows what the problem is. It just doesn’t care.

As an “unnamed White House official” put it at a press briefing recently, 
“I think it’s important to note that the political movements of nonviolent protests that we’ve seen are rooted in part in a lack of opportunity in the region.  You have very large populations of young people, many of whom -- too many of whom cannot find a job.  You have a history not just of political rights being restricted but of economic corruption that has also frustrated opportunity.
 
 “So we think it’s important to note that some of the protests in the region are deeply rooted in a lack of individual opportunity and economic growth, as well as a suppression of political rights.
 
  “We also know from our study of the past that successful transitions to democracy depend in part on strong foundations for prosperity, and that reinforcing economic growth is an important way of reinforcing a democratic transition.”

That analysis clearly applies equally to the impoverished inner cities of the US, and indeed increasingly to the entire population of young Americans, who are seeing national policies, state policies and corporate lobbying -- all focused on cutting taxes and boosting corporate profits -- rob them of their futures.

And so it will be, unless and until the youth of America do what Bob Marley long ago advised: “Get up, stand up, stand up for their rights.”

Copyright © 2011 This Can't Be Happening

Dave Lindorff is a Philadelphia-based journalist and columnist. He is author of Marketplace Medicine: The Rise of the For-Profit Hospital Chains (BantamBooks, 1992), and his latest book "The Case for Impeachment" (St. Martin's Press, 2006). All his work is available at www.thiscantbehappening.net

Thoughts and Pics of the San Diego Teachers’ Rally

by Frank Gormlie on May 14, 2011 from the OB Rag

 
The huge crowd of a couple thousand, as viewed from the stage. The pink flags represent pink slips received by over 4100 teachers from Southern California. (All photos by Frank Gormlie.)

Since Andy Cohen covered the meat and potatoes of the teachers’ “State of Emergency” rally already, I wanted to share some other thoughts about the event and display a sampling of the  numerous photos I took yesterday, Friday the 13th while at the Embarcadero in downtown San Diego.

 
Crowd bound for the rally.

When I heard that the rally was going to be at the Embarcadero, I told Patty that parking would be horrendous downtown and next to impossible, so we agreed to take the trolley from Lemon Grove.  She wrapped up our banner, we gathered our camera and notepad, and we hopped the 3:44 pm trolley (although by time it got to us, it was 3:50). After grabbing our seats, we looked around and saw several women wearing red T-shirts that spelled out “STOP” – Students and Teachers Our Priority.  And during the ride downtown, we heard several guys who were standing up having quite an intellectual conversation – even hearing the name “Chomsky” come bouncing out. Are these teachers? we wondered on their way to the rally.

Sure enough, once the trolley pulled up to the Seaport Marina station, the entire car stood up and got off.  And everyone began heading to the Embarcadero. This was great! I thought.  An entire trolley from east county going to the same rally. As we crossed the tracks and Harbor Drive, we were a march in and of ourselves.

 
The "counter-demonstration" just a few minutes before they were to begin. The woman in red is the Koch brothers' rep.

As our little parade moved into the park, I took a right turn and headed over to the counter-rally.  I had heard the Koch brothers’ Americans for Prosperity, the Young Republicans, and some tea party types were going to be holding a nearby demonstration against us and the teachers.  A protest of the protest.  As I approached this sideshow, I noticed almost more video cameras than people.  Once in their midst, I did count twelve actual counter-demonstrators.  A red-suited woman was bouncing around, saying she represented Americans for Prosperity. I asked her when her rally was going to begin.  At 5 she said.  One guy asked who I was – I had an OB Rag T-shirt on and was taking photos, and he showed me his sign.  Later, I heard that their gig attracted somewhere between several dozen (U-T estimate) and about a hundred (estimate from a reporter).

Moving away from the tea partiers, I approached the main event and witnessed streams of folks – many in red shirts – pouring into the green east end of the Embarcadero.  On the way there were small tables with mountains of water bottles and snacks being given away.  Nice touch, I thought.

I also noticed there was about a dozen Harbor Patrol and City police in the vicinity.  Just then, a police lieutenant walked up to me, and profusely thanked me for providing “the only information out there” about this event.  That was kind of weird but I politely thanked him for that.  And when I reunited with Patty who was holding our banner, she told me that one of the rally organizers had told her that the police were asking about us. “OB Rag – who are they?” It’s always good to be noticed.

Patty found a small hill just west of the main stage and planted herself and the banner.  I went about taking photos and attempted to do a head count.  This was very difficult as people were still moving into the park and rally area. I gave up after counting 1500.

There was a steel drum trio pounding out music, while the 4100 tiny pink flags fluttered in the wind.  Two dozen students held signs with large letters proclaiming their opposition to ed cuts standing toward the crowd.  I climbed up on the stage to take some more crowd shots.

 
Bill Freeman, head of the San Diego teachers' union.

I found Bill Freeman, head of the teachers’ union. I asked him how many people were expected, and he said 3 thousand. I then asked him why the Embarcadero had been chosen as the rally point.  He replied that if it had been up to him, he would have gone for a more public site, but that CTA had chosen this particular one.

Finding Patty once again atop her hill, most of the crowd in that area were sitting on the grass. I joined them for the duration. Some OBcians joined us as well and took their positions on the green along side us.

There were a hell of a lot of people at this event. Many wore red-shirts, some light-blue ones as well.  “We are one” was a favorite slogan on many of them. Many teacher groups sat together and whenever their school was mentioned from the podium, they would let out a holler.  This gathering should really send a message.  It was a rare occasion that this many teachers from all over the counties of Southern California were coming together.

Once the speakers started, there much applause, although only a few chants. Teachers are great, I thought, but they sure are subdued, even the many younger ones who were there.  I compared them with the more militant Labor Council rally we attended back in late February, in front of the County building.  But still, it was a wonderful showing overall.

Our good friend Gregg Robinson was one of the last speakers.  Gregg wrote for this blog when we first began, and is known for being a good speaker.  And today’s performance was not disappointing.  He by far gave the most fired up speech of the rally.  “Don’t let anyone tell you there’s no money for education!” he yelled out from the stage to an appreciative audience.

 
Gregg Robinson - at podium with arms folded - waiting to speak.

As the rally broke up, we headed back to the trolley and got on it. Our car was loaded with participants from the event all the way back east to the hinterlands.  Trolley regulars looking for seats in a usually empty early evening Friday car must have freaked out. I didn’t know there was a Padres game, they probably thought.

There is a state of emergency – in education – but not just in education. It’s all over.  One way to look at it, is that it’s so bad, even teachers are rallying.  Teachers up and down the state were heard this week.  Over two dozen were even arrested up in Sacramento, including their state union president.

Teachers have to continue to reach out, and stand with their fellow public union colleagues. We must continue to develop a genuine community-labor coalition for San Diego, and this was one more step – a giant step – in that direction.

For Many Graduates, the Old College Try Falls Short

 

By Alejandra Cancino / Chicago Tribune

Published: May 01. 2011 4:00AM PST

‘Mal-employment,' a term from the '70s, has surfaced again to haunt grads

CHICAGO — Tiffany Groene is waiting tables.

Erin Crites is making lattes and iced coffees.

And Anna Holcombe is buying and selling gold.

These three Chicago women share more than just scraping by with low-paying jobs: They all have master's degrees and are unable to find work in their specialty areas.

There's even a name for their situation. They are referred to as mal-employed, a term coined in the '70s for college graduates who could not find jobs that require a degree. Instead, they settle for low-skilled jobs.

Even in rosier economic times, people with college degrees sometimes can't find jobs in their fields. But their numbers and the trend show no sign of easing during the slow and bumpy recovery from the recession.

Nationwide, about 1.94 million graduates under age 30 were mal-employed between September and January, according to data compiled by Andrew Sum, director of the Center for Labor Market Studies at Northeastern University.

Sum said mal-employment has significantly increased in the past decade, making it the biggest challenge facing college graduates today. In 2000, Sum said, about 75 percent of college graduates held a job that required a college degree. Today that's closer to 60 percent.

Uphill struggle

Though the economy is growing and new jobs are being created, Sum said, those graduating in June are not likely to see major improvements. About 1.7 million students are projected to graduate this spring with a bachelor's degree and 687,000 with a master's, according to the U.S. Department of Education.

“We are doing a great disservice by not admitting how bad it is for young people (to get a job),” Sum said.

And the longer college graduates go without working in their field, the harder it is to land interviews for jobs where they would use their degrees.

“It's hard to convince people that what I am doing is relevant,” said Groene, 27, who has tended bar and waitressed during the two years she's looked for a job related to her master's degree in public administration.

In that time, she's had one offer in her field. It came in 2009 from Chicago Public Schools but disappeared before she could start, due to budget cuts. Desperate, she took a job as a bartender. She said she quit six months later, upset by the sexual advances of bar patrons.

With no income, she moved back to her father's house in Rockford, Ill. At times, she found it difficult to leave her bedroom because she felt depressed.

She said she wasn't used to not succeeding. An avid soccer player, Groene was drafted to go to college and drafted again to become an assistant coach at Columbus State University in Georgia, where she earned her master's degree.

“You feel so down,” Groene said.

With the support of her family, she ventured out again last month and took a job as a waitress in Chicago. She said it's the best job she's had in two years. She also slowed down her job search and is back in school pursuing a master's in education.

“I can't find anything anyway,” she said, adding that more schooling allows her to start from scratch.

Experts say Groene's situation is hardly unique. When everything else fails, graduates are more likely to go back for more education. Those with a bachelor's sign up for a master's, and so on. Some take a step back, either to look for new opportunities or retool their fields of interest.

Bill White, for example, is pursuing a second bachelor's degree. He looked for a job for about six months before graduating in December with a master's in public relations and advertising. Unable to land one, the 28-year-old has shifted his focus to mechanical engineering.

While college graduates are still more likely to land a job than those without degrees, the fact that so many are not finding jobs in their fields has raised questions about the payoff of a college education.

Since he got his bachelor's degree last May, Kirk Devezin II has worked full-time a little more than six months and has freelanced. He has never made more than the $10.36 an hour he earned as a barista at Starbucks when he was a student at Eastern Connecticut State University.

“I apply to jobs constantly, constantly, constantly,” he said.

He has interviewed for positions related to his communications degree, but lately, all the interviews have been for barista and cook jobs, and one at a carwash. Sensing that employers in low-wage industries might think he is overqualified, he has left his college degree off the applications.

“It just seems like it was just a big waste of time,” said Devezin, 24, who still lives in Connecticut. “And I'm $20,000 in debt.”

The numbers show that he's wrong — experts say earning a college degree is still the best way to avoid unemployment.

Smaller value, but still value

“The value of the degree is still there; it is just not returning as much in investment as it would a few years ago,” said Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University.

In fact, those who land a job in their field do well, but those who are mal-employed earn just slightly more than high school graduates, according to Sum's research. For example, the mean wage for those mal-employed is $476 a week, while those with a job that requires a degree earn $761. By comparison, a high school graduate earns $433.

Erin Crites, 27, makes $10.55 an hour as a barista at a coffee shop in downtown Chicago. She is struggling to pay her bills and has considered cutting her health insurance — a situation she was hoping to avoid by earning a master's degree.

Crites graduated in June from Dell'Arte International, a theater school based in California. She sought a master's degree in ensemble-based physical theater, figuring that such a specialized degree would make it easier for her to land a job. But Crites graduated as schools cut back art programs and arts-based nonprofits struggled to secure grants.

“You can get as close as you can to work solely as an artist without a source of secondary income ... but it's almost impossible,” she said.

Still, Crites is determined to make it in her field. As long as she keeps her passion, she will find a way in, she said.

Though barely getting by, Crites is lucky. Nationwide, there were about 2 million unemployed people older than 25 with at least a bachelor's degree — nearly 1.3 million more than in March 2007, according to the U.S. Labor Department.

On a small plaza near the DePaul University College of Law, a group of students about to graduate were socializing when a reporter approached. Most said they didn't expect to land a law-related job. One student said he was told by a potential employer that there was no reason to hire him when the firm could hire an experienced lawyer for the same salary.

That situation is becoming more commonplace.

Anna Holcombe, who has a master's degree in public relations and advertising, said she's often competing for jobs against people who only have bachelor's degrees or are willing to work for free just to get their foot in the door.

“It's a struggle,” she said, adding that at age 31 she doesn't have the luxury of being able to work for free. She has responsibilities, including bills due at the end of the month.

Until she gets a position in her field, Holcombe is holding on to her job as a sales associate at a retail store. She got the job to pay bills while at school, never thinking it would be so difficult to let it go.

Homeless Middle Class

 

U.S. ONGOING STRUCTURAL UNEMPLOYMENT CALAMITY

by Frank Thomas

Last July 2010,  I summarized in a writing “The U.S. Pattern of Structural & Long-Term Joblessness: The Big Picture.” Key data  came from a report by Advance & Rutgers entitled, “America’s Post- Recession Employment Arithmetic.”

My research told me that, despite the strong job growth development during President Clinton’s term, the annual rate of job growth in the 1991-2001 economic expansion still showed a decline from prior job growth rates in the 80s and 70s. Thus, like our structural budgetary deficits, we have had structurally declining job growth rates since the 80s, reaching a never-before experienced negative growth rate during the 2008-2009 Great-Recession. 

In the 80s, 90s, and 2001-07 economic expansions, the rate of  private-sector job growth fell to an average of 2.7%, 2.2%, and 0.9%, respectively – compared to annual average job growth rates above 3% in the 70s and 60s. Here’s a 30-year disturbing factual summary:

_______________________________________________________________________________

TABLE 1a: U.S. Private-Sector Employment Growth in Last Three Economic Expansion Periods Covering Nov. 1982-Dec.2010
_______________________________________________________________________________

A. Nov. 1982-July 1990 Expansion

(7.67 Years)

Total Job Growth                   18,422,000   = 200,150/month  

Ave. Annual Growth                2,401,825  

Ave. Annual % Increase             2.7%

 

B. March 1991-March 2001 Expansion   (10 Years)

Total Job Growth                   21,508,000    = 179,235/month

Ave. Annual Growth                2,150,800         

Ave. Annual % Increase            2.2%                                             

C. Nov. 2001-Dec. 2007 Weak Expansion

(6.1 Years)

Total Job Growth                 6,208,000    = 84,800/month

Ave. Annual Growth              1,020,549            

Ave. Annual % Increase           0.9%

________________________________________________________

The average annual rate of increase in jobs fell steadily during the expansion periods of Reagan’s, Bush Sr.s’ and Clinton’s terms … and then tanked further in the weaker 2001-07 economic expansion of Bush Jr.s’ term.                                                                                          

Then came the severe 2008-09 economic crash causing the loss of over 7.5 million jobs plus another job need of 1.7 milllion to meet labor force growth. The result? For the first time since the Great Depresssion, the U.S. had an absolute private-sector job loss over the decade … ± 1.7 million fewer jobs than when the decade started.                                                                                                            

In effect, the first decade of the 21st century has rightly been called, “The Lost Employment Decade,”—where job-less economic growth became the modus vivendi. To understand the “Big Picture” of this job-less structural calamity, our nation created 35.5 million private sector jobs in the final two decades of the 20th century. During the first decade of the 21st century we lost more than 1.7 million jobs!  These are ominous precedents reflecting the scale and structural character of job losses.  

Since January 2010, we have seen approximately 1.5 million new jobs generated, including ± 650,000 net new jobs in Jan.- April of  2011.  or about 160,000 a month – of which 125,000 jobs are required for the annual ± 1.5 million growth in the labor force. So we have a long way to go to bring unemployment down 8 million from current ± 14 million to ± 6 million or a 5% unemployment rate, excluding the 8-10 million underemployed. Many consecutive years of sustained job growth – as opposed to the job-less growth of the last decade – are needed to eliminate the employment deficit of ± 8 million … again, excluding the 8-10 million now underemployed.                                                                                         

It’s clear that structural obstacles to job development are much DEEPER and more sinister than both sides of the political spectrum recognize. The ugly phenomenon of outsourcing, robotisizing, automating, downsizing,  downgrading jobs, eliminating low-skill jobs, etc. are all factors contributing to the permanent destruction of middle-class jobs at a faster clip than they can be replaced by creative, sustainable investments, industry-focused training, better education, etc.                                                            

So far in 2011, the average job generation performance of 160,000 comes closer to the 90s performance when economic expansion was much stronger and not limited by a hugely destructive financial-casino bubble. Assuming 250,000 net new jobs are created every month for the next 7-9 years, the 8 million lost jobs (excluding the 8-10 million underemployed) plus 1.5 milllion added jobs needed to cover the labor force growth will not be employed until at least 2018-20.  

Last March 30th, the Bureau of Labor Statistics (BLS) reported some telling trend data entitled: “International Comparisons of Annual Labor Force Statistics.” It further dramatizes just how shockingly deep the U.S. declining structural job generation and unemployment situation has become … for adults above 25 and for younger adults 20 to 24.

________________________________________________________

Table 1b:  OVERALL COMPARATIVE UNEMPLOYMENT RATES

________________________________________________________

                                                  2000           2010           % Change

 

U.S.                                           4.0%           9.6%           +140%

Canada                                      6.1%           5.2%           -   15%

UK                                             5.5%           7.9%           +   44%

France                                       8.6%           9.4%           +    9%

Germany                                   7.8%           7.2%            -    8%

Italy                                          10.2%          8.6%           -   16%

Netherlands                              3.1%           4.5%           +  45%

Sweden                                      5.8%           8.3%           +  43%

________________________________________________________

It’s clear that America has had by far the greatest increase in its overall unemployment rate in the last decade. A long process of significant destruction of manufacturing jobs between 1980 and 2000 has now also started to include the destruction of service jobs in the last decade.                                  

________________________________________________________

Table 1c:  UNEMPLOYMENT RATES FOR ADULTS 25 OR OLDER

________________________________________________________

                                                  2000           2010           % Change

 

U.S.                                           3.0%           8.2%           +173%

Canada                                      5.0%           5.9%           +  18%

UK                                              4.2%           5.8%           +  38%

France                                        7.8%           7.9%           +    1%

Germany                                    7.7%           6.9%           -  10%

Italy                                            8.0%           7.2%           -   10%

Netherlands                              2.5%           3.7%           +  48%

Sweden                                      5.0%           5.9%           +  18%

_____________________________________________________

America has had by far the greatest increase in its unemployment rate for those 25 or older. The Great Recession has caused vastly  more serious unemployment problems in U.S. than in Europe. People with no high school, only high school, some college, or a college degree are all hurting.                                                                              

The pervasively poor quality of pre-college education and practical, in-depth training programs continue to dim job prospects for U.S. young and middle-aged workers. Little wonder the Great Recession has hit poorly educated people extremely hard. David Autor of MIT points out that those between 24 and 34 are less likely to have a degree and to have completed college than their similar age-group in the UK, Denmark, France , the Netherlands. and Spain.

________________________________________________________

Table 1d:  UNEMPLOYMENT RATES FOR YOUNG ADULTS 20 TO 24

________________________________________________________

                                                  2000           2010           % Change

 

U.S.                                           7.2%           15.5%         +115%

Canada                                       9.4%           10.7%         +  14%

 

UK                                             9.7%           15.0%         +  55%

France                                      16.0%           23.2%         +  45%

Germany                                    8.9%             9.9%         +  11%

Italy                                          25.5%           25.1%         -    2%

Netherlands                              3.9%             6.7%         +  72%

Sweden                                      9.6%           20.3%         +111%

________________________________________________________

These are truly disastrous unemployment segment-trends for the U.S. and UK, France, Italy, and (quite surprisingly) Sweden. When young people in such large numbers are failing to find work in a reasonable time frame, this leads to:  intensified social-net cost problems and protections;  greatly disproportionate job discrimination towards some ethnic groups; loss of skills forcing millions of Americans to accept minimum wage survival Wal-Mart or fast food jobs … fostering a race-to-the-bottom for both young adults 20-24 as well as for adults 25 or older.

And here come the Hoover Republicans recommending deeper cuts in government jobs, teachers, firemen, and policemen … even in training programs for the long-term unemployed, the less educated, the high school dropouts, the older-age discarded. Programs to get people back to work are underfunded and ineffective compared to those of the best performing countries in Europe, for example, like the Netherlands.                                                                                             

And here come the Hoover Republicans saying this is not the time to Invest, Cut Waste, Reform Social-Nets and wisely Raise Taxes. Rather, it is a time only to CUT All Spending (except Defense) and PRIVATIZE Social Nets (Medicare, Social Security), etc. Republican fiscal math is the same old “trickle-down fraud” on the American public, making the rich and powerful richer and more powerful at the expense of the middle-class – talking reform rather than reducing huge budget deficits and encouraging broad-based job growth. Without adequate, decent jobs for the middle class, tax revenues will decline, social costs and instability will escalate. Lower taxes for the rich  and corporations – with already Low effective tax rates  – will simply redistribute money to the Few and expand the flight of capital abroad for better returns causing further losses in tax revenues … insuring continuing high budget deficits. The Paul Ryans and their elitist anti-government paradigm discouraging public direct investing/investment incentives for education, worker retraining, upgrading infrastructure, achieving green energy independence will also insure prolongation of high budget deficits and unemployment. Result? Continued imbalance between income distribution and economic growth with more and more middle-class Americans numbering in the millions left behind.                                                   

In this regard, the Republican lie machine is in full display when one reads carefully some typically wily words recently spoken by the anti-government polemicist, Paul Ryan. According to him:                       

“The Democrats’ narrative story line is: if you go to the Republicans they’re going to feed you to the wolves in a ‘dog-eat-dog society’ (writer’s note: which is exactly what’s been happening the past 30 years of which 20 years were Republican administrations). This narrative of ‘shared scarcity’ (writer’s note: Why not also ‘shared prosperity,’ i.e., a fair playing field and broad-based participation in society’s progress and failures?) will be  ‘trumped’ by the Republican story line: we want to have growth. (writer’s note: Who doesn’t? What growth and whose growth is Ryan talking about? Middle-class wages in 80% of households have gone up 12% after inflation the last 30 years while income and wealth growth/concentration of top 1%, 5%, 10% has mushroomed ). We want an ‘upwardly mobile society.’ (writer’s note: Who doesn’t? But what we have is a middle-class and state-by-state race-to-the-bottom dynamic of stagnant wages, bare-bones social services, and jobless growth – while the rich get richer).

Anyone claiming to understand such double-talk is hyping a “Market Government” free-for-all democracy over the people, by the people, for the people.” We’ve had quite a 30-year taste of this ultra-right ideological distortion of our nation’s founding governmental principles. Look where it has landed us!  And still the Ryans march on embracing divisive social issues: cutting and privatizing Medicare, lowering taxes on wealthy, defending non-tax paying companies like the oil and banking industries, turning brain-dead on ideas for selective, sustainable future job-growth investments/incentives and taxes to pay for them.   

Conclusion

So, the vicious deficit circles and societal inequities become self-perpetuating and selfulfilling …  fed by this fiscal fantasy farce of cutting  taxes, government jobs and spending, while destroying unions to solve deficits. Let’s face it. We have Lost the Way and Connection to our core egalitarian values. Cool, balanced, respectively open, creative minds are desperately needed to represent fairly and constructively the interests of ALL Americans. 

It’s time we bloody WOKE UP to the sheer structural magnitude of our nation’s 30 year declining job growth rates … and a middle-class race-to-the-bottom that is financially impoverishing 80% of family households and dangerously dividing our country into a democracy for the HAVES with TIDBITS for the HAVE NOTS. 

Frank Thomas
The Netherlands
May 8, 2011

Fears and Failure

by Paul Krugman

Published by the New York Times, May 5, 2011

From G.D.P. to private-sector payrolls, from business surveys to new claims for unemployment insurance, key economic indicators suggest that the recovery may be sputtering.

And it wasn’t much of a recovery to start with. Employment has risen from its low point, but it has grown no faster than the adult population. And the plight of the unemployed continues to worsen: more than six million Americans have been out of work for six months or longer, and more than four million have been jobless for more than a year.

It would be nice if someone in Washington actually cared.

It’s not as if our political class is feeling complacent. On the contrary, D.C. economic discourse is saturated with fear: fear of a debt crisis, of runaway inflation, of a disastrous plunge in the dollar. Scare stories are very much on politicians’ minds.

Yet none of these scare stories reflect anything that is actually happening, or is likely to happen. And while the threats are imaginary, fear of these imaginary threats has real consequences: an absence of any action to deal with the real crisis, the suffering now being experienced by millions of jobless Americans and their families.

What does Washington currently fear? Topping the list is fear that budget deficits will cause a fiscal crisis any day now. In fact, a number of people — like Erskine Bowles and Alan Simpson, the co-chairmen of President Obama’s debt commission — have settled on a specific time frame: terrible things will happen within two years unless we make drastic spending cuts.

I have no idea where that two-year deadline comes from. After all, what we do in the next couple of years hardly matters at all for U.S. solvency, which mainly depends on what we’ll do in the long run about Medicare and taxes. And, for what it’s worth, actual investors — people putting real money on the line — are notably unworried about any near-term fiscal crisis: the Treasury Department continues to have no trouble selling debt and remains able to borrow very cheaply, indicating high confidence on the part of investors that debts will be repaid in full.

Do the scare-mongers even believe their own stories? Maybe not. As Jonathan Chait of The New Republic notes, the politicians most given to apocalyptic rhetoric about the deficit are also utterly opposed to any tax increase; they argue that debt is destroying America, but they’d rather let that happen than accept even a dime of higher taxes. Yet the inconsistency and probable insincerity of their fear-mongering hasn’t stopped it from having a huge effect on policy debate.

The deficit isn’t the only unfounded fear. I’ve written before about misguided inflation fear, but, for now, let me focus on a new issue that has suddenly begun to loom large in opinion pieces and remarks on talk shows: fear of a disastrous plunge in the dollar. (Who sends out the memos telling people what to worry about, and why don’t I get them?)

What you would never know from all the agitated dollar discussion is that the recent dollar slide is actually tiny compared with big drops in the past, notably under the administration of George W. Bush and during Ronald Reagan’s second term. And you’d also never know that those earlier dollar slides, far from hurting the economy, were beneficial, because they helped U.S. manufacturing compete on world markets.

Which brings me back to the destructive effect of focusing on invisible monsters. For the clear and present danger to the American economy isn’t what some people imagine might happen one of these days, it’s what is actually happening now.

Unemployment isn’t just blighting the lives of millions, it’s undermining America’s future. The longer this goes on, the more workers will find it impossible ever to return to employment, the more young people will find their prospects destroyed because they can’t find a decent starting job. It may not create excited chatter on cable TV, but the unemployment crisis is real, and it’s eating away at our society.

Yet any action to help the unemployed is vetoed by the fear-mongers. Should we spend modest sums on job creation? No way, say the deficit hawks, who threaten us with the purely hypothetical wrath of financial markets, and, in fact, demand that we slash spending now now now — which might well send us back into recession. Should the Federal Reserve do more to promote expansion? No, say the inflation and dollar hawks, who have been wrong again and again but insist that this time their dire warnings about runaway prices and a plunging dollar really will be vindicated.

So we’re paying a heavy price for Washington’s obsession with phantom menaces. By looking for trouble in all the wrong places, our political class is preventing us from dealing with the real crisis: the millions of American men and women who can’t find work.

Having A Job May Not Be Enough To Make Ends Meet

Published on Friday, April 1, 2011 by Consumer Affairs

Millions 'underemployed,' group claims

by Mark Huffman

The nation's unemployment rate dipped slightly in March to 8.8 percent, as the economy added more than 200,000 jobs during the month.

People rely on food banks, like the Community Food and Outreach Center in Orlando, Fla. But despite the improvement, a new report says millions of Americans are struggling to make ends meet, and we're talking about people who have jobs. (Todd Anderson for The New York Times)

But despite the improvement, a new report says millions of Americans are struggling to make ends meet, and we're talking about people who have jobs.

A group called Wider Opportunities for Women (WOW) has developed a formula that suggests the average single worker needs to earn $30,012 a year - nearly twice the federal minimum wage - to cover basic expenses. Single parents require nearly twice the income ($57,756) to support two children, while dual-income households with children require $67,920.

A family of four earning $22,050 a year is living below the federal poverty line. And many, in fact, are. Data from the U.S. Census bureau found 14.3 percent of Americans in that category in 2009.

"Too few American families are living in economically secure households, with most workers unable to stretch their incomes over basic expenses and savings," said Joan Kuriansky, WOW's Executive Director. "The American Dream of working hard to support your family is being re-written by the growth of low-paying industries and rising expenses."

Inflation and deflation

In other words, the U.S. is struggling against both inflation and deflation at the same time. Prices of commodities like gasoline and food are rising rapidly. Salaries - at least those outside certain industries like financial services and health care - are going down.

WOW's Basic Economic Security Tables for the United States report includes the comprehensive BEST Index that calculates the monthly income necessary for families to cover their basic expenses, including childcare, housing, health care, transportation, savings and retirement.

The report suggests things won't change anytime soon. The report finds that jobs created in the coming years will not provide economic security wages to the majority of workers who do not have four-year college degrees.

© 2011 Consumer Affairs

How Germany Manages to Have an Export Economy and Provide Plenty of Jobs While the US is Engaged in a Race to the Bottom

by John Lawrence

Germany's economy is doing just fine while the US economy languishes. There are many reasons for this, but one that predominates is the Value Added Tax (VAT). At each stage in the production process, when a product or service changes hands, it is taxed at 19%. So if you're manufacturing a car, for example, when you buy a component like a transmission from another manufacturer, that manufacturer has to pay the VAT before that product can be sold to you. Some products and services like food and doctors pay a lower VAT.

The VAT must be paid on all imports in one fell swoop as they enter the country whereas the VAT was paid in stages by different business entities at each stage along the supply chain within the country. This tends to discourage imports, and make it more profitable to manufacture and sell (and thus provide jobs) within the country of Germany itself. Contrast this with America in which there is no tax on imports (thanks to free trade) so it is cheaper to manufacture abroad and import products into the US thus creating jobs abroad. The VAT acts as a tariff on imports and also provides a loopholeproof source of revenues for the government. In the US many major corporations like GE and Exxon Mobil, for example, pay no income tax even though they make tens of billions of dollars in profits. In fact many of them actually get tax refunds or subsidies! This process defunds the government, frays the safety net for the middle class and the poor and results in the budget being balanced, to the extent that it is, on the backs of the poor and middle class.

For German exports, the VAT is refunded thus encouraging exports at the expense of imports. No wonder Germany has a healthy export economy. This acts like a tariff in reverse. So imports are subjected to a 19% VAT at the border and exports are given a 19% refund at the border. American exports are given no such incentive. In short the US is letting foreign countries eat their lunch and running up their trade deficit in the process because of an antiquated approach to taxation which favors American multinationals while shortchanging American taxpayers.

The following is from an article, "The Foreign Value Added Tax: Making Our Exports Uncompetitive:"

Unknown to most Americans, the United States is losing the ability to compete in global trade because of the little known foreign Value-Added Tax (VAT). Foreign governments use this tax against United States producers as a means to prevent the importation and consumption of U.S. goods, while providing incentives for their countries to export their goods to the U.S. The foreign VAT was a subsidy created after World War II to speed up beneficial other countries' recovery. However, it is still used today by 149 countries to exploit this advantageous position against American trade. We have not used it domestically to off set theirs as a benefit to ourselves. The foreign VAT gives the companies of other nations and their exports the upper-hand by providing incentives in the form of rebates equal to the indirect tax on the exported product. For example, the VAT rate is 19 percent in Germany; therefore the Germans receive a 19 percent rebate from their government on each product exported to the U.S. This acts as a subsidy for a product while encouraging the exportation of products to the U.S. However, the VAT imposes a punishment on U.S. exports by placing a VAT equivalent to the Value Added Tax rate of the importing country. This means all U.S. exports that enter into Germany are taxed 19 percent on top of another 19 percent for the transportation fees of the goods into the country. The VAT destroys American industries’ ability to promote exports, while encouraging foreigners to sell their products to Americans – it must be amended or eliminated. In 2001, European countries had a VAT rate of 19.2 percent. By 2005, 94 percent of U.S. exports received a VAT. In the same year, foreign governments received rebates of $239 billion from the tax while collecting $131 billion from U.S. producers of goods and services. It is not surprising that the U.S. has become a nation promoting imports over exports under these unfair and harsh tax conditions. It can be seen why some companies choose to move overseas to produce their product abroad to avoid this monstrous tax and gain the advantage of it in some cases. Because of this detrimental tax, American firms cannot compete worldwide. Numerous attempts have been made by Congress to offset the tax – in 1974 the Nixon administration was urged to negotiate the tax during the Tokyo Round of global trade talks – only to be ignored by the other countries. In 1972 and 1984, Congress changed the tax system to exempt between 15 and 30 percent of an exporter’s income from U.S. taxes to offset the disadvantage of the VAT. The European Union (EU) complained to the World Trade Organization (WTO) in 1998, saying the U.S. tax exemption, acting as a tax subsidy, was a direct violation of the WTO agreement. In 1999 the WTO ruled in favor of the EU, giving the U.S. one year to change its tax exemption law or face penalties from the WTO. Again in 2000, Americans enacted new tax legislation to offset the VAT, which resulted in yet more EU complaints and another WTO case. The WTO decided in favor of the EU, leading to a ruling in 2002 allowing the EU to impose retaliatory tariffs of $4 billion each year on U.S. imports. By this time 25 European nations enacted the VAT to usurp America’s ability to trade. In 2004 Pres. Bush created new legislation again to offset the VAT. This again led to complaints from the EU – again filing a case with the WTO – arguing export subsidies were provided by the new legislation. In 2006 President Bush and Congress stopped enacting the tax provisions to U.S. exporters, demonstrating how the EU and WTO had successfully usurped the U.S. of its power to promote fair and free trade. During the battle between the WTO and the U.S., all nations were provided full VAT privileges, usurping the U.S. of fair trade. The WTO and EU do not serve in the best interest of the U.S. They are acting to support and promote continuance of this debilitating tax. The only way the WTO will allow us to offset the VAT is to have one of our own. We could feasibly do this if we were to lower our income tax. Until we do get a VAT of our own, our companies and our nation will continue to suffer against this unfair disadvantage.

While the US is straitjacketed by partisan bickering and paralyzed by insane trade policies, Germany and other countries are surging ahead with enlightened, rational thinking which gets translated into effective policies that keep the German government in a position of solvency and keep German factories humming. Meanwhile, the US engages in a race to the bottom encouraging the export not of products but of jobs and defunding the government by giving tax breaks to corporations and the rich.  Another informative article is the following:

In a June 28, 2010, economist Ian Fletcher said “Germany, like the U.S., is nominally a free-trading country.  The difference is that, while the U. S. genuinely believes in free trade, Germany quietly follows a contrary tradition that goes back to the 19th-century German economist Friedrich List …  So despite Germany’s nominal policy of free trade, in reality a huge key to its trading success is a vast and half-hidden thicket of de facto non-tariff trade barriers.” Fletcher quoted from a report by the Heritage Foundation: “Non-tariff barriers reflected in EU and German policy include agricultural and manufacturing subsidies, quotas, import restrictions and bans for some good and services, market access restrictions in some services sectors, non-transparent and restrictive regulations and standards, and inconsistent regulatory and customs administration among EU members.” Another opinion of Germany’s export success as reported in The New York Times, is “the roots of Germany’s export-driven success reach back to the painful restructuring under the previous government of Chancellor Gerhard Schröder.  By paring unemployment benefits, easing rules for hiring and firing, and management and labor’s working together to keep a lid on wages, ensured that it could again export its way to growth with competitive, nimble companies producing the cars and machine tools the world’s economies – emerging and developed alike – demanded.” The same article reported that Germany’s Chancellor Angela Merkel resisted the use of government stimulus spending that the United States and some European partners used to handle the recession.  Instead of extending unemployment benefits like the United States has done several times since the recession began, Germany “extended the “Kurzarbeit” or “short work” program to encourage companies to furlough workers or give them fewer hours instead of firing them, making up lost wages out of a fund filled in good times through payroll deductions and company contributions.  At its peak in May 2009, roughly 1.5 million workers were enrolled in the program,” and the Organization for Economic Cooperation and Development estimated that   “more than 200,000 jobs may have been saved as a result.” As a result, Germany’s unemployment rate at the height of the global recession was 9.0 percent in contrast to the 10.2 percent of the United States.  The German jobless rate in October 2010 was down to 7.0 percent in contrast to the 9.6 percent of the United States.  Germany is one of the few economies experiencing a solid recovery and one of the even fewer economies without a substantial deficit crisis on its hands.  Germany’s exports surged month by month in 2010, but year-end data hasn’t been released yet.

The US model of free trade has largely worked to create a trade deficit in the US, encourage a consumer based economy based on cheap imported products and undermine American workers. While the US encourages the offshoring of US corporations and unlimited imports into the US economy, it gives no incentives for corporations based in the US to export to other countries. As a result it is at a competitive disadvantage, and is losing out in the struggle to supply its government with cash and its workers with jobs. But instead of a rational assessment of this situation and a resolve to do something about it, the US argues about the President's birth certificate and engages in pointless, meaningless culture wars tantamount to arguing about how many angels can dance on the head of a pin.