The clowns in Washington seem to be going out of their way to ignore the advice of respected economists as they focus on deficit reduction while ignoring the worsening unemployment crisis. The fact that mainstream news outlets are oblivious to the consequences of foolish economic policy doesn’t really help. President Obama now finds himself wedded to a policy of economic destruction, while at the mercy of his opponents, simply because he ignored the good advice he was receiving back in 2009.
The urgency of our current predicament is lost on the asshats vested with the responsibility and authority to implement a “course correction”. As I pointed out last month, bond guru Bill Gross of PIMCO made an effort to debunk the myth that balancing the budget “will magically produce 20 million jobs over the next 10 years”. More recently, Princeton economics professor and former vice-chairman of the Federal Reserve, Alan Blinder, wrote an article for The Wall Street Journal entitled, “Our National Jobs Emergency”. After discussing the most recent non-farm payrolls report from the Bureau of Labor Statistics, Professor Blinder made this observation:
The horrific June employment number made it two in a row. With the latest revisions, job growth in May is now estimated to have clocked in at only 25,000 jobs. So that’s 25,000 and 18,000 in consecutive months. Given the immense size of total U.S. payroll employment (around 131 million) and the sampling error in the survey, those numbers are effectively zero. Job creation has stopped for two months.
If we were at 5% unemployment, two bad payroll reports in a row would be of some concern yet tolerable. But when viewed against the background of 9%-plus unemployment, they are catastrophic.
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All this adds up to a national jobs emergency. Tragically, however, it is not being treated as such. When is the last time you heard one of our national leaders propose a serious job-creating program?
The operative word here is “serious.” Every day brings new proposals to slash government spending. But as I noted on this page last month, those are ways to kill jobs, not create them. As a matter of fact, despite all the cries of “big government” or even “socialism,” public-sector employment has been falling.
Fortunately, Professor Blinder had some good ideas for private-sector job creation. One such idea was a tax credit for firms that create new jobs:
As one concrete example, companies might be offered a tax credit equal to 10% of the increase in their wage bills (over 2011 levels, say). No increase, no reward.
You might think Republicans would embrace an idea like that. After all, it’s a business tax cut and all the new jobs would be in the private sector. But you’d be wrong. Frankly, I’m not sure why. Maybe it’s seen as “left-wing social engineering.”
Professor Blinder then proposed an alternative:
Suppose we allow firms to repatriate profits at some super-low tax rate, but only to the extent that they increase their wage payments subject to Social Security. For example, if XYZ Corporation paid wages covered by Social Security of $1.5 billion in 2011, and then boosted that amount to $1.6 billion in 2012, it would be allowed to repatriate $100 million at a tax rate of 5% or 10% instead of the usual 35% rate. The tax savings to the company would thus be $25 million-$30 million for raising its payroll by $100 million. That’s a powerful incentive.
Did anyone in Washington pay serious attention to Professor Blinder’s Wall Street Journal article . . . or were they all too busy shorting Treasuries to give a damn?
Oxford-educated economist Martin Wolf wrote a piece for the Financial Times, in which he lamented the antics of those entrusted with the power of managing financial and economic policy:
It is not that tackling the US fiscal position is urgent. At a time of private sector deleveraging, it is helpful. The US is able to borrow on easy terms, with yields on 10-year bonds close to 3 per cent, as the few non-hysterics predicted. The fiscal challenge is long term, not immediate. A decision not to allow the government to borrow to finance the programmes Congress has already mandated would be insane…. Yet, astonishingly, many of the Republicans opposed to raising the US debt ceiling do not merely wish to curb federal spending: they enthusiastically desire a default. Either they have no idea how profound would be the shock to their country’s economy and society of a repudiation of debt legally contracted by their state, or they fall into the category of utopian revolutionaries, heedless of all consequences.
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These are dangerous times. The US may be on the verge of making among the biggest and least-necessary financial mistakes in world history. The eurozone might be on the verge of a fiscal cum financial crisis that destroys not just the solvency of important countries but even the currency union and, at worst, much of the European project. These times require wisdom and courage among those in charge of our affairs. In the US, utopians of the right are seeking to smash the state that emerged from the 1930s and the second world war. In Europe, politicians are dealing with the legacy of a utopian project which requires a degree of solidarity that their peoples do not feel. How will these clashes between utopia and reality end? In late August, when I return from my break, we may know at least some of the answers.
At this point, those “answers” are beginning to look pretty scary. Of course, the Republicans are not the only ones to blame. Let’s take a look at the wonderful job Mike Whitney of CounterPunch did when he dropped the entire matter back onto President Obama’s lap:
How do you light a fire under Washington, that’s the question? Is Congress even aware that we’re undergoing a major jobs crisis or are they too busy bickering over tax cuts for fatcats or how much money they can divert from Social Security to Wall Street?
Look; unemployment is over 9% and rising. The states are firing tens of thousands of teachers and public employees every month because they need to balance their budgets and they’re not taking in enough revenue. The stimulus is dwindling (which means that fiscal policy is actually contractionary in real terms) And the 10-year Treasury has dipped below 3 percent (as of Monday morning.) In other words, the bond market is signaling “recession”, even while the dope in the White House is doing his utmost to slice $4 trillion off the deficits.
Does that make any sense?
Maybe if you’re Herbert Hoover, it does. But it makes no sense at all if you were elected with a mandate to “change” the way Washington operates and put the country back to work. Obama is just making a bad situation worse by gadding about in his golf togs blabbering about belt tightening. It’s enough to make you sick.
Get with the program, Barry, or resign. That would be even better. Then maybe we can find someone who’s serious about running the country.
As I pointed out on November 4, 2010 . . . someone has to challenge Obama for the 2012 Democratic nomination and I have someone in mind . . .