Salaries Could Be Squeezed For Some Time To Come

A new CBS MoneyWatch article confirms what Muskegon Critic pointed out the other day: Increased productivity does not translate into prosperity for average Americans.

In fact, MoneyWatch warns that a "combination of short-term factors and long-range changes may conspire to squeeze salaries for some time to come," and annual raises "could be in jeopardy."

So how did we get to this point? It turns out real wages have actually been flat for years.

Looking back, it turns out a decade’s worth of easy credit and faux real estate wealth obscured the fact that incomes for the majority of workers weren’t keeping up. After healthy salary growth of roughly 1.8 percent annually from 1995 to 2000, for example, inflation-adjusted, or real, wages for the median worker remained essentially flat from 2000 until 2007 when the recession started, according to government data (average wages increased roughly 2 percent, but that number is skewed by huge gains at the top). In fact, after the recovery in 2002, notes Shierholz, no real wage growth occurred at all for the median worker — despite an increase in productivity of 11 percent over the seven-year time frame. [emphasis added].

In other words, we've been working our tails off and have little to show for it. So who reaped the productivity gains?

Typically, companies and their shareholders.

And what do experts point to as the reason for our declining prosperity?

Shierholz and other economists attribute the disconnect between wages and output to declining unionization and the need to keep prices low in a competitive global environment.

The "kill the unions" and "outsource everything" crowd accomplished what they set out to do - drive wages down for average Americans. And the scenario for new jobs created doesn't look any rosier.

A 2009 analysis of figures from the U.S. Department of Labor showed that sectors that expanded through this decade have paid an average annual compensation of $55,300, compared with $65,100 for industries that are shrinking. This is partly because many of the newly-created positions are in service industries, which tend to be less organized and have less bargaining power. Think home healthcare and “green” jobs versus auto manufacturing and heavy industry.

In fact, six of the top 10 fastest-growing jobs are low wage.

There are steps Washington can take to start improving living standards for average Americans, but as long as people keep voting for anti-union, globalization embracing politicians, I don't see things changing.

Poll: Let The Wealthy Pay Higher Taxes

A new Bloomberg poll shows Americans want the government to do something about the economy.

Americans want their government to create jobs through spending on public works, investments in alternative energy or skills training for the jobless.

They also want the deficit to come down. And most are ready to hand the bill to the wealthy.

A Bloomberg National Poll conducted Dec. 3-7 shows two- thirds of Americans favor taxing the rich to reduce the deficit.

Raising taxes on the rich was popular across party lines too: About half of Republicans back the idea and it is more popular among Democrats and Independents.

Steve Benen summarized the polls results best:

In other words, here's a poll showing widespread support for the Democratic economic agenda.

That's because mainstream America is rational, unlike those teabagger Republicans whose only answer for every problem is cut taxes, cut taxes...


(Cross-posted at Blogging for MI.)

The Stock Market is Up, I'd Rather Have a Job

Robert Reich has an article on the disconnect between stocks and jobs that asks a great question: How can the stock market hit new highs at the same time unemployment is hitting new highs?

Simple. The market is up because corporate earnings are up. Corporate earnings are up because companies are cutting costs. And the biggest single cost they’re cutting is their payrolls. So they let people go and, presto, their balance sheets look better and their stock prices rise.

Reich points to Caterpillar as an example. They earned $404 million in the third quarter, or 64 cents a share, yet analysts had only expected 5 cents. So how did Caterpillar manage to drive their stock up 165 percent since March? They cut 37,000 jobs.

Or consider this example from Too Much:

The latest case in point: the just-announced $4.5 billion merger deal that will fold the 99-year-old Black & Decker tool-making powerhouse — the folks who brought us the world’s first pistol-grip power drill — into its chief tool-making rival, Connecticut's Stanley Works.

“It’s a match made in heaven,” Stanley flack Tim Perra told reporters last week.

Heaven for who? Not consumers. The new “Stanley Black & Decker” may soon have enough marketplace dominance, says Morningstar business analyst Anthony Dayrit, “to raise prices” on do-it-yourself gizmos that range from power tools to window locks.

And workers won’t find much heaven in the merger either. Black & Decker and Stanley together currently employ a workforce just over 40,000. The merger the two companies announced last week will eventually cost an estimated 10 percent of those workers their jobs, starting with staff at the Black & Decker headquarters just outside Baltimore.

And here's yet another example from economically depressed Las Vegas:

Last February, Las Vegas kingpin Steve Wynn announced an across-the-board wage and hour cutback for all employees at his resort empire. The total savings for Wynn Resorts: between $75 and $100 million. Last week Wynn Resorts announced a special $4-per-share dividend. Total cost of the dividend payout to Wynn Resorts: $492 million. Total dividend check that will go to Steve Wynn: $88.6 million.

The Great Recession has been a boon for corporations and CEO's. As Reich points out, "They’re using this sharp downturn to cut payrolls even below where they were when times were good. Outsourcing abroad, setting up shop in China and elsewhere, contracting out, replacing people with software and automated machines – they're doing whatever it takes to get payrolls down so earnings bounce up."

Higher earnings may be good for Wall Street, but not so much for Main Street. More from Reich: "Yes, the economy is growing again, but the surge in productivity is a mirage. Worker output per hour is skyrocketing because companies are generating almost as much output with fewer workers and fewer hours." The bottom line: Higher productivity doesn't put money in the average worker's pocket. Since 1980, productivity has grown 70 percent, but wages only increased 5 percent.

But, but, but... I can hear the Jim Kramer's of the world already. Higher stock prices=higher fund balances for all Americans. That's true. But what good does a 5 or 10 percent increase do me if I'm out of work and have to live off of that money? It buys me short-term security today but leaves me financially insecure when I retire. Instead of worrying about stock market profits, we need policies that put people back to work at decent wages and keeps them working.

Our Nation's Lost Decade

If you feel like a hamster on a wheel getting nowhere fast, there's an explanation for it according to this NYT's op-ed columnist.

For average Americans, the last 10 years were a lost decade. At the end of President George W. Bush’s eight years in office, American households had less money and less economic security, and fewer of them were covered by health care than 10 years earlier, the Census Bureau reported in its annual survey.

The poverty rate in 2008 rose to 13.2 percent, the highest in 11 years, while median household income fell to $50,303. Ten years earlier, adjusted for inflation, it was $51,295.

In fact, income for the median American household fell for the first time in four decades. The Great Recession gets some of the blame, but the decline started well before the housing and financial sectors collapsed.

Harvard economist Lawrence Katz explains what happened: "We had a plutocratic boom. Then we have egalitarian recessions. Taken together, only the top ends up growing, on average." And the top did very well indeed: "During the same period, the average income of the richest tenth of a percent increased by about $2 million, or about 35%." They can thank President Bush for his $1.3 trillion tax cuts.

How did average Americans fare? People in their prime earning years (age 45 to 54) took "the biggest hit in the last years of the Bush Administration, their median income fell by $5,000. And the region that suffered most — the South."

Income went down for all races, but "Hispanics experienced some of the biggest losses. Income declined 5.6 percent for Hispanic households, 4.4 percent for Asians, 2.8 percent for African American families and 2.6 percent for non-Hispanic whites. Hispanics and Asians also showed the biggest increases in poverty rates."

Poverty really hit children according to the EPI:

A Sept. 10 report from the Census Bureau shows that the child poverty rate rose to 19.0% in 2008, from 18% in 2007. That translates to 14.1 million children living in poverty in the richest nation on earth.

In 2008, more than one in three - 35.3% - of all people living in poverty were children. EPI projects that with the continuing deterioration in the labor market, by 2009 a quarter of all children in this country will be living in poverty and by 2010 the child poverty rate will be 26.6%.

This would represent an increase of 10.4 percentage points from 2000 to 2010 – truly a lost decade.

Speaking of the labor market, the Bush administration failed miserably on job creation according to Market Watch:

...the private sector didn't just lose jobs over the last month or the last year -- it's lost jobs over the last decade.

Yes, the very segment of the economy that was supposed to thrive under the Bush administration ended up with a net loss of 223,000 jobs since August 1999, according to the latest figures from the Bureau of Labor Statistics. Meanwhile, the nation's population has grown by 33.5 million people.

That's the worst job-creating performance by the private sector since, you guessed it, the Great Depression.

On top of that, the government created 2.1 million jobs. Wait, you say -- isn't that a positive? Well, no, because it's the worst performance by the government over a 10-year period since the last major recession of the early 1990s.

And something bad happened to young workers over the past decade too:

Since 1999, more of them now have lower-paying jobs, if they can get a job at all; health care is a rare luxury and retirement security is something for their parents, not them. In fact, many—younger than 35—still live at home with their parents because they can’t afford to be on their own.

Heckuva job, President Bush. Heckuva job, Republicans. You get credit for our "lost decade" and we get to live with the results. Some deal.

The Time for a National Manufacturing Policy was Yesterday

Employees of the Lordstown General Motors plant in Ohio are banking on the Chevy Cruze to keep them working. We should be cheering them on too. Why? Because Lordstown's story is being told in auto communities across the nation.

"The last eight months have been so chaotic," said Lordstown Mayor Michael Chaffee. "We went from the top of the world in August (2008), to treading water and praying in April."

But the Cruze gives Lordstown residents hope their plant will stay open. GM also hopes the smaller, more fuel-efficient vehicle will carry the smaller, more efficient car company through the next century.

Keeping the plant is one thing, but in an area that American industry has been leaving for 30 years, the loss of jobs from the last major manufacturing employer is huge.

Twenty miles from Lordstown is Youngstown, Ohio, a once-booming manufacturing and industrial community that relied on steel mills to sustain its middle class. When the mills downsized or closed beginning in the late 1970s, residents left to seek work elsewhere, and the standard of living declined for those who remained.

Unlike previous decades, when industry left the area for other parts of the nation, companies are now moving out of the country entirely, permanently erasing thousands of jobs. And it's not just the jobs that are fading, but also health care, pensions and other benefits that built the working middle class.

John Russo, co-director for working class studies at Youngstown State University, has been studying this erosion for years and said he finds the push for cheaper U.S. labor depressing.

"We seem to be willing to create jobs for a working people where the wages and benefits cannot support paying their basic bills," Russo said. "So, it seems to me, Youngstown's story, now Lordstown's story, is a part of America's story as we begin this next century."

President Obama believes “The fight for American manufacturing is the fight for America’s future,” yet he hasn't come up with a formal plan to address the decline. Granted, he has a lot on his plate, but maybe he could find a few minutes to share a beer with Ohio Rep. Sherrod Brown who is proposing a a national manufacturing policy that aligns federal actions with the goal of strengthening our manufacturing sector.

These are the five areas Brown believes our country should focus on (click the link to read the details): Innovation, Supply Chains, Skills, Coordination, and Fair Trade.

Fact: The United States now ranks behind every industrial nation except France in the percentage of overall economic activity devoted to manufacturing. Since 2007, we've lost two million manufacturing jobs and more than five million since 2000, but even in its weakened state, manufacturing is still an essential pillar of our economy.

Manufacturing accounts for $1.6 trillion -- nearly 12 percent -- of the U.S. Gross Domestic Product (GDP). It accounts for nearly three-fourths of the nation’s industrial research and development (R&D) -- with four manufacturing industries alone (computers and electronics, chemicals, aerospace, and autos) accounting for 56 percent of private sector R&D. The industry also accounts for 35 percent of value added in world high technology product production.

Jobs in the manufacturing industry pay 20 percent more on average than service jobs. Each manufacturing job supports 4-5 other jobs throughout the U.S. economy. While employment in manufacturing has steadily declined, one in six private sector jobs is still directly or indirectly tied to manufacturing.

Stabilizing and boosting manufacturing would help our economy, put people back to work, and rebuild the middle class. Obama has been saying all the right things, but he's been sending mixed messages about manufacturing's future.

While Obama felt it necessary to distance himself from the “buy America” provisions put in the stimulus bill, China has no such compunctions. As the Times reports, “when China authorized its first solar power plant this spring, it required that at least 80 percent of the equipment be made in China. When the Chinese government took bids this spring for 25 large contracts to supply wind turbines, every contract was won by one of seven domestic companies. All six multinationals that submitted bids were disqualified on various technical grounds, like not providing sufficiently detailed data.”...

China is intent on dominating the new energy markets of the future. If its past practices are any indication, it will subsidize exports, manipulate its currency, buy China at home, force multinationals to transfer technology and partner with Chinese companies, and engage in industrial piracy to make its way.

And China is not alone: Other countries continue to erect barriers to block American goods and mercantilism and subsidies still reign supreme.

Other countries protect their manufacturing. We shouldn't expect any less from the U.S.

Auto Industry Problems Prolong Nation's Misery

The NY Times has an article about our state's efforts to remake ourselves without "King Auto" that touches on things most of know - film incentives, green jobs, battery production, and worker retraining. It also touched on the fact that our problems are impacting the country as a whole.

On a broader level, the troubles of the auto industry are having a profound impact on the overall United States economy. The industry — with Michigan as its center — now accounts for only 1.5 percent of the nation’s economic output, down from 3 percent in 2007 and 5 percent at its peak in the 1950s.

The automakers have historically played a big part in ending recessions. Car companies, in the past, would increase production and add workers to satisfy pent-up consumer demand after a downturn. But now, the industry’s troubles may be prolonging the misery.

“If not for the problems in the auto industry, this recession would have been much milder,” said Ben Herzon, an economist at Macroeconomic Advisors, in St. Louis. [emphasis added]

Okay, that's something most of us know too, but I pointed it out for all the Limbaugh and Hewitt trolls that might be reading this. Hoping that GM or Chrysler fails is not in the best interest of the country. When we lose jobs, we lose money, and in turn we stop spending. When we stop spending, businesses lose money and they're forced to layoff people or cut wages. Unless you're independently wealthy, the pain will eventually trickle down to you too. Understand?

One Corporations Way of Stimulating the Economy

They're putting more money in their employees paychecks.

Hobby Lobby Stores Inc. announced wage increases effective immediately for all full-time, hourly workers earning up to $13 an hour. For some employees, the pay hike can mean more than a $2 an hour raise.

The company also said it was raising its minimum pay to $10 per hour for full-time, hourly workers, up from whatever the minimum wage is in a state. In Michigan, it is $7.40.

Nationwide, the chain has more than 400 arts and crafts stores, with 15 in Michigan, and the increase will boost the pay of more than 6,900 employees, some by nearly $600 month. In Michigan, 75 percent of their employees are full-timers.

This is a great way to help stimulate the economy and build employee morale at the same time.

It's also nice to hear a CEO say this about his employees:

"Our employees are the backbone of our company, and we believe that giving them the opportunity to share in our success is the right thing to do," David Green, CEO and founder of Hobby Lobby, said in a statement.

"This is part of our continuing efforts to reward our employees for their hard work and integrate them into the growth of our company."

A store spokesperson said they took the action because “they have had a profitable year and want to pass that on to their employees.”

Hobby Lobby has a history of caring about their employees. When the the price of gasoline skyrocketed last year, they gave employees a permanent 25 cent per hour raise to help offset cost of living increases.

Kudos to Hobby Lobby!

Takin' It To The Streets

This goes out to DJ, who's angry with conservative ideology that favors the rich over the poor and middle-class, and to Bruce Fealk, who wonders why Republicans "want to be so unpatriotic as to think Americans shouldn't earn good wages, have access to health care and a decent pension to live on during their golden years."

Bruce also asks, "When do we take to the streets en mass and call these idiots out? When do we say, ENOUGH!"

That day may be coming soon if Europe is any indication. Large demonstrations sparked by the economic crisis broke out recently in France, Greece, Iceland and Russia, and only a couple of weeks ago thousands of people marched in Dublin.

MORE than 120,000 workers surrounded the Dail, or Irish Parliament, to protest against bail-outs for wealthy bankers, soaring unemployment and the Fianna Fail government's attempts to force public-sector workers to take a pay cut. [...]

"There is anger, because everybody knows that this crisis is not our fault, that a business elite has destroyed our economy and has as yet to be made accountable for it," Mr Begg told the huge rally at Merrion Square in the heart of Dublin.

Workers are angry because the government plans on docking 7 percent from the paychecks of 350,000 Irish workers "amid revelations of shady dealings and irresponsible lending at banks now getting taxpayer's help." Sound familiar?

The Irish Times labeled it "a case of the bankers’ billions versus the worker’s mite."

The General Secretary of the Irish Congress of Trade Unions, David Begg, said "those involved in what he called corruption had done huge damage to Ireland and described their actions as economic treason." Addressing the rally, Begg also added that "there is anger, because everybody knows that this crisis is not our fault, that a business elite has destroyed our economy and has as yet to be made accountable for it."

And Patricia McKeown, president of the ICTU, decried the "casino capitalism that has brought this country to its knees."

"An economy cannot be built on shady financial deals, privatisation of public services and the ever insatiable greed of the very, very wealthy," she insisted.

"But we face a government which wants the workers who built the economy to now sacrifice while it protects and bankrolls those who wrecked it. We are not prepared to live in that type of society," Ms McKeown declared.

Ironically, John McCain bragged about Ireland's economy on the campaign trail last year, pointing to their low business taxes as an example of what they can do for a country. Just like DeVos missed indications that Michigan wasn't the only state showing signs of economic stress, McCain missed signs that Ireland was having problems too.

The roots of Ireland’s fall date to more than 20 years ago, when a clutch of economists, politicians and civil servants put their heads together in this very pub and planted the philosophical seeds for the Irish economic miracle. ....

Known widely as the “Doheny & Nesbitt School of Economics,” these beery musings soon became government policy that chopped taxes in half, sharply reduced import duties and embraced foreign investment...

So how is Ireland's economic miracle working out? Their housing prices have fallen by as much as 50 percent, bank shares have plummeted by more than 90 percent, and unemployment is approaching 10 percent. No wonder one of London's senior police officers is warning that law-abiding middle-class individuals who would never have considered joining demonstrations may now seek to vent their anger through protests this year.

The public's rage with the banks and the Government is growing by the day. Thousands are losing their jobs through no fault of their own ... Homes are being repossessed across the country, but not the penthouse flats and country piles of bank bosses who thought nothing of taking home vast seven-figure bonuses, and consider £1 million a year a modest income.

The innocent are being punished while the guilty continue to lead affluent lives.

British police are preparing for a "summer of rage" as people protest the growing economic crisis. Europeans have had enough. Americans have had enough too, and as David Sirota says, "It is only going to get worse if genuine change doesn't happen in short order."

(Cross-posted at BFM.)

Creating jobs in America is the whole point

Following up on my earlier post about the "Buy American" provisions in the stimulus package - provisions designed to stop the bleeding of jobs and to create new jobs here in America - is a post from Robert Reich that admonishes us not to "confuse American companies with American jobs."

The new stimulus bill, for example, requires that the money be used for production in the United States. Foreign governments, along with large U.S. multinationals concerned about possible foreign retaliation, charge this favors American-based companies. That's not quite true. Foreign companies are eligible to receive stimulus money for things they make here (as long as the nations where they're headquartered have signed the WTO procurement agreement). [...]

I'm not defending the "buy American" provisions of the stimulus bill. I'm just saying they're not the same as "buy from American companies." And although these provisions skate close to protectionism and risk foreign retaliation, at least a case can be made that if American taxpayers are footing the bill in order to create American jobs, the jobs should be created, well, here in America.

I added that emphasis because it's an important distinction. If we buy steel slabs produced in Canada or China, jobs will be created or maintained over there and fewer jobs will be created here, which defeats the whole purpose of the stimulus plan.

Reich also applied this line of reasoning to the auto bailout:

I’m not arguing against an auto bailout. But it ought to be focused on helping American auto workers rather than helping global auto companies headquartered in America. [And he points out that the Big Three themselves are global.] Why pay the Big Three billions of taxpayer dollars to stay afloat when, even after being bailed out, they cut tens of thousands of American jobs, slash wages, and shrink their American operations into small fractions of what they used to be?

That’s backwards. The auto bailout should help American autoworkers keep their jobs or get new ones that pay almost as well.

We're between a rock and a hard place place in this country. I agree with E.J. Dionne's opinion that "there are no good solutions for fixing the auto industry," but I also agree with USW President Leo Gerard who said...

Saving the domestic auto industry is crucial to the economic renewal of the U.S. The steel, glass, auto parts, tires, and paper industries produce products for this industry and employ a quarter million of our members alone.

Our livelihoods are all interconnected, and as Reich concluded, "Whether it’s stimulus or bailout, policy makers must remember that American companies aren’t the same as American workers – and our first responsibility is to the latter."

Absolutely. That's why spending money from the stimulus bill on products created here is so important. It keeps Americans working, helps restore our economy and may save our domestic auto industry. Isn't that the whole point?

Buy American, Buy Local

In spite of the U.S. Chamber of Commerce's opposition to the "Buy American" provisions in the stimulus bill, the progressive movement (i.e. unions, consumer groups, the blogosphere) won according to David Sirota.

First, the Buy America provisions survived the conference committee and remain in the stimulus package. These provisions, which were vehemently opposed by multinational corporate lobbyists, encourage government agencies to purchase American-made goods in spending the stimulus money, so as to make sure the money creates as big an economic multiplier effect for our economy as possible.

Second, I'm told by Capitol Hill sources that the Sanders-Grassley amendment prohibiting bailed-out banks from using taxpayer money to outsource jobs remains in the final bill. The amendment followed the Associated Press's report that many banks were using the cash in conjunction with their ongoing efforts to abuse the H-1B program and outsource information sector jobs.

Of course, you won't hear the Mackinac Center, Republicans, or conservative mouthpieces like Lesley Stahl singing the praises of Buy American. They argue we're being protectionists and other countries will look upon these provisions as hostile. That's garbage according to this CEO who told 60 Minutes...

"The whole purpose of your stimulus package, and it's the right purpose, is to stop the bleeding of jobs and to create new jobs here in America, not overseas, not in China, not in Europe," Dan DiMicco, the CEO of Nucor ...

DiMicco said that the counter argument - trade retaliation by other countries - is not true. "It's all garbage," he told Stahl. "People can say what they want. What we have around the world, all right, is a trade war against the United States that we have not showed up for."

DiMicco denied he is a protectionist. "I am a person who says there's no such thing as free trade. Free trade is an academic luxury the real world doesn't enjoy. If you want to study it at Harvard, study it at Harvard. It doesn't work in the real world. It has no application."

The EPI agrees: "These companies are self-interested, simply wanting unlimited access to imports, many of which are illegally subsidized and unfairly traded."

Our economy is badly crippled and people are hurting. Taxpayer money should be used to help Americans and put our own house in order first, and that means the government has to make sure the money isn't used to widen the trade deficit, not if it wants to create and preserve jobs.

Suppose the government spends, say, $100 billion on bridges and buildings, and that $500 million of that is used to buy steel. If it is used to buy imported steel, and if that $500 million doesn't come back to the United States in the form of demand for its exports, then you can subtract $500 million from the stimulus. And you can be pretty sure--given our current trade deficit--that something like that would happen. So, without a requirement that these government projects use domestic steel (with mills currently running at 43 percent capacity!), there is a very great possibility that the government would be throwing away money rather than doing anything about the problem. [emphasis added]

Republicans are hoping Obama fails. What better way to make sure that happens than to push to use the stimulus money to buy materials from foreign countries?

How do most Americans feel about the "Buy American" provisions? A national poll found that 84 percent favor the requirements and only 4 percent strongly oppose them. The overwhelming support was consistent regardless of gender, age, income level, education, or region, proving once again that Republicans are out of touch with mainstream America.

Republicans are out of touch with local Michigan communities too. A group in Genesee County says it's important to think about the American economy, and they're going even further with a campaign to buy local. A series of business leaders in Grand Blanc, Swartz Creek, Flint and other communities recorded a series of messages that play regularly on four radio stations that are part of the local Cumulus Radio Group.

Jet Kilmer, President of the Grand Blanc Chamber of Commerce, recorded one message that explains how 83% of money spent with a local merchant stays in the community vs. 43% spent outside. The message urges people to consider buying local, or to hire local contractors to do needed work.

And according to Crain's Detroit, "the state Agriculture Department projected that if Michigan households earmarked $10 a week in their grocery purchases to made-in-Michigan food products, it would generate $30 million a week in economic impact."

What's good for big business isn't always good for Americans. If we don't have jobs and decent wages, we won't be able to buy what they're selling no matter how much they mark it down. That's why we need to keep the stimulus money in this country. Americans should come first. Period.

Americans approve of Obama's handling of the stimulus bill

Republicans are feeling pretty smug about their Taliban-like disruptive tactics in opposing the president's stimulus package, but it turns out a majority of Americans see things differently. h/t Gallup

The American public gives President Barack Obama a strong 67% approval rating for the way in which he is handling the government's efforts to pass an economic stimulus bill, while the Democrats and, in particular, the Republicans in Congress receive much lower approval ratings of 48% and 31%, respectively.

Americans understand the seriousness of this situation because they're living with the results of eight years of Republican trickle down economics. The bottom line:

President Obama would appear to have the upper hand in the current focus on Congress' efforts to pass a major economic stimulus bill. Not only does Obama get much higher approval ratings for the way in which he is handling the stimulus issue than do either the Democrats or, in particular, the Republicans in Congress, but a majority of Americans agree with him that passing such a bill is critically important for improving the nation's economy.

Critical is the key word. Americans want action, Republicans want to play games with our lives.


(Cross-posted at Blogging for MI.)

We have inherited a deep and dire economic crisis

The bad news just keeps on coming. The Labor Department reported today that the number of laid-off workers seeking jobless benefits rose to 626,000, from last week's figure of 591,000.

As President Obama put it in an editorial in today's WaPo:

By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression.

Because each day we wait to begin the work of turning our economy around, more people lose their jobs, their savings and their homes. And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.

At some point we may not be able to reverse the crisis. Do the Republicans bent on obstructing the stimulus package understand the seriousness of our situation? It doesn't appear they do, or why else would they keep pushing tax cuts that major economists have already discredited? They're playing Russian roulette with our country and hoping Obama fails so they can score political points. Are the lives and livelihoods of millions of Americans that inconsequential to them?

And it's not just Republicans putting our country in danger. The media shares a lot of the blame too. They promote Republican talking points as the truth and focus on stories that seem rather inconsequential compared to what's going on around us.

As John Cole put it:

Our media is simply failing us. Why have they not asked the Republicans how tax cuts are going to provide jobs? Why are they not laughing openly when the Republicans bring up capital gains tax cuts as part of a stimulus package. Why are they not asking the Republicans to explain how infrastructure spending is not stimulus? Why are they pretending this woman’s minor tax oversight is on par with outing a CIA agent or letting tens of thousands of people soak for a week in New Orleans. Why are they gleefully reporting about Joe the Plumber giving economic advice to the House republicans while their colleagues are writing about the Republicans being unified in opposition to the stimulus and putting two and two together and realizing that the opposition to the stimulus from Republicans is based on the deep thoughts of a drug addled radio host and a guy who installs toilets?

And why is the media not reminding people that President Obama voted against the war in Iraq, a war that likely will cost us $3 trillion dollars? He had the intelligence to look at the facts and do the right thing then, so we should be trusting him to do the right thing now.

Time is of the essence. Asking the right questions and doing the right thing might not be popular or sell many television ads, but it just might save our country from a crisis we may not be able to reverse. Is that a chance the media and Republicans are willing to take?

We supported their war, tell them to support us

Conservatives are busy calling Congress trying to block Obama's stimulus plan. The word on the street is that calls are running 100 to 1 against the plan. We know Michigan Senators Levin and Stabenow support creating jobs for Americans and setting our country on the road to economic recovery, but they still need to hear from you. As someone commented on another blog yesterday, "Repubs are calling into our "safe" states also, we need to make our voices heard."

Please call 1-866-544-7573 (toll-free) and ask as many senators as you can reach to pass the American Recovery and Reinvestment Act. Be prepared to try several times. The lines are busy.

If you don't have to worry about using a toll-free number, you might have better success getting through with these:

Sen. Carl Levin at (202) 224-6221
Sen. Debbie Stabenow at (202) 224-4822
Via the Senate Switchboard at (202) 224-3121 (for people in other states)

What's at stake? Under the Senate version of the stimulus plan, this is what Michigan stands to gain:

Total - $19,975,801,863
School Modernization - $642,876,538
Higher Educ. Repair and Modernization - $125,670,301
Home Investments Partnership Program - $64,794,416
Highway Infrastructure Investment - $790,185,174
Mass Transit - $170,947,191
Public Housing Capital Funds - $53,135,372
Neighborhood Stabilization Program - $151,279,933
Homeless Prevention Fund - $55,062,292
Clean Water State Revolving Fund - $171,560,760
Drinking Water Revolving Fund - $69,200,000
State Fiscal Stabilization - $2,145,703,599
Title I Grants - $522,337,187
IDEA, Part B State Grants - $461,265,518
Pell Grants - $472,621,650
Training and Employment Services - $200,786,089
Weatherization Assistance Program - $148,292,700
State Energy Program - $13,775,009

And don't forget the thousands of jobs this spending will create in Michigan (and across the country).

We supported Republican's spending on their unnecessary and ill-begotten war in Iraq. Tell them to support economic recovery and jobs for Americans.

Denying the New Deal contributions

Andrew Leonard at Salon has an interesting article criticizing the WSJ for their "increasingly shrill declarations that the New Deal absolutely, positively did not work," and he took particular exception with economists, Harold L. Cole and Lee. E. Ohanian, who made the following claim.

The goal of the New Deal was to get Americans back to work. But the New Deal didn't restore employment. In fact, there was even less work on average during the New Deal than before FDR took office.

Leonard questioned how they could make this claim since unemployment, which reached 25 percent in the Great Depression, fell steadily until World War II. The answer: They didn't count as employed those people in temporary jobs in emergency programs via the Works Progress Administration (WPA) or Civilian Conservation Corps (CCC), or any other of Roosevelt's popular New Deal workfare programs.

Three and a half million people were employed through these programs, which helped them buy food, pay for shelter and maintain some self-respect. My grandfather was one of those people, as I commented here earlier, and a stretch of pine trees he helped plant along US-41 between Houghton and Calumet (in Michigan) still stands today.

These workers made phenomenal contributions to our country. (h/t economist Marshall Auerback via James Galbraith)

The government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York's Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown.

It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country's entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.

Not too shabby for a bunch of unemployed people who didn't count, eh?

Republicans turn their backs on the middle class

Joe Biden is right. It's time to put the middle class front and center. That's the goal of the Obama administration which seeks to put people back to work immediately and create economic growth, and long-term make sure the benefits of that growth reach the people responsible for it - the lower and middle class workers.

I have a question for Republicans. Why are you treating us like the enemy? Some of you are threatening to filibuster the recovery bill and others are complaining the plan is too expensive and could be done cheaper (ergo, the middle class is only worthy of crumbs). Meanwhile, Sen. Jim DeMint (R-SC) offers an alternative plan that would actually cost 3.5 times as much as Obama's. I guess it's okay to spend trillions more if corporations and the rich are the main beneficiaries, eh?

The only comprehensive alternative being offered by Senate conservatives is DeMint’s “American Option: A Jobs Plan That Works,” a series of permanent tax breaks for corporations and wealthy Americans. A new analysis from the Center for American Progress Action Fund finds that the DeMint plan would cost over $3.1 trillion over ten years — more than three times the amount of President Barack Obama’s plan — and be largely ineffective at creating jobs.

The DeMint plan includes permanently cutting the corporate tax rate, totally eliminating the Alternative Minimum Tax, lowering income tax rates for the wealthiest Americans, and eliminating scores of tax deductions that help students pay for college, sick families pay medical bills, and teachers purchase supplies for their classrooms.

How many times does this need to be repeated?

Permanent tax cuts are one of the least effective ways of stimulating the economy according to both Moody’s Economy.com and the Congressional Budget Office. Furthermore, slashing government revenues this permanently would leave deep structural deficits for generations to come.

The whole purpose of DeMint's plan is to make the tax policy changes of 2001 and 2003 permanent. Let's revisit that era, shall we?

"The economy has slowed down, in which case we need to accelerate tax cuts," Bush said in a March 2001 radio address. "You see, tax relief will put money in people's pockets, which will help give the economy a second wind." "By ensuring that Americans have more to spend, to save and to invest, this legislation is adding fuel to an economic recovery," announced Bush in 2003, as he signed his tax cut legislation.

That's not how ten Nobel Laureates saw it. They signed a letter saying the Bush tax cuts were wrong, and 450 economists across the nation agreed.

They were right and Bush and the Republicans were wrong. Bush's tax cuts didn't work.

As Center for American Progress Senior Fellows Christian Weller and John Halpin noted in 2006, the outcome of the 2001 tax cuts was "the weakest employment growth in decades." The 2003 tax cuts didn't fare much better, resulting in job creation that was "well below historical averages." When Bush's White House proposed the 2003 cuts, they promised that it would add 5.5 million new jobs between June 2003 and the end of 2004. But "by the end of 2004, there were only 2.6 million more jobs than in June 2003." As Paul Krugman has pointed out, the belief that Bush's tax cuts successfully stimulated the economy is a form of mythology. CAP's Michael Ettlinger and John Irons wrote in September, "Economic growth as measured by real U.S. gross domestic product was stronger following the tax increases of 1993 than in the two supply-side eras" that followed Reagan's 1981 tax cuts and Bush's 2001 tax cuts. Indeed, employment growth was much stronger post-1993 than post-2001. The average annual employment growth was 2.5 percent after 1993 and just 0.6 percent after 2001. Unfortunately, the supply-side myth that tax cuts cure all still lives on today, as conservatives complain about progressive approaches to fixing the mess left by Bush.

Middle class misery is real. We need real solutions, not mythological ones of the sort being pushed by Republicans. If they really cared about the pain being felt by families across America, they'd stop the games, grow up and get serious about helping us. That hasn't happened and leads me to believe they don't give a damn.

Jobless rolls climb, Republicans don't care

Unemployment rolls continue to soar.

The number of people remaining on the benefits roll after drawing an initial week of aid, or continued claims, rose 159,000 to a higher-than-forecast 4.776 million in the week ended January 17, the most recent week for which data is available.

The Labor Department said this was the highest reading since its records on this series began in 1967.

Jobs. People need jobs. Last Monday saw 77,000 layoffs in one day alone, and it seems as though no profession is safe:

IBM workers are shocked at job cuts straight after the company issued glowing fourth quarter financial results, says employee union Alliance@IBM.

The first cuts of an expected 16,000 layoffs have been made in the Software Group and Sales and Distribution in the US and Canada.

And four U.S. Bureau of Labor Statistics analysts predict that recent telecommunications advances, especially the internet, could theoretically put more than 30 million U.S. jobs at risk of being exported overseas.

The 160 occupations considered capable of being performed in other countries account for some 30.3 million workers, one-fifth of total U.S. employment and cover a wide array of job functions, pay rates and educational levels.

More than half of the vulnerable jobs in the BLS study are professional and related occupations, including computer and mathematical science occupations and architecture and engineering jobs, and many office and administrative support occupations also are considered susceptible.

Whether blue-collar or white-collar, President Obama and Democrats understand the gravity of our situation and devised a plan that would save or create more than 3 million jobs. House Republicans voted unanimously against that plan. Will Senate Republicans vote against jobs too?

UPDATE: Following the Republican's unanimous no vote, economist Lawrence Mishel said it's time to rescind the wasteful business tax cuts from the stimulus package.

The Wednesday night vote in the House on the economic recovery package is astonishing in that no Republicans voted for the legislation. This, despite there being large scale, and wasteful, business tax cuts in the legislation that were seemingly included solely to attract Republican votes.

The lesson that might be drawn is to not water down your own program in the hopes of attracting a bi-partisan coalition. It only makes sense now to remove those tax cuts from any Senate legislation to make the recovery effort more effective. It could matter a lot. The amount of stimulus in this fiscal year and next (through the end of September 2010) is $525 billion and the Senate bill provides for $107 billion of business tax cuts with limited effectiveness, leaving only $418 billion of real stimulus over the next eighteen months.

Filling the space taken by the business tax cuts with infrastructure and other spending that will create jobs could make the effort 25% more effective. The best economic and political logic now seem aligned.

Not so smart Republican economic calls

Time Magazine looks back at what they see as Bush's biggest economic mistakes, adding that "by almost every measure — GDP growth, jobs, median incomes, financial-market performance — he stacks up as probably the least-successful President on the economic front since Herbert Hoover. ... As the decider in the White House for the past eight years, George Bush made some economic calls that don't look smart today. Here are eight of them."

The Big Picture clicked through the list so we wouldn't have to.

1. The Return to Deficits: Bush’s tax cuts and spending increases — and clear disdain for the pay-as-you-go approach that had brought deficits down in the 1990s — brought a return to permanent deficits.
2. Iraq: Even if you think the war did bring benefits to the U.S., they would have to be pretty gigantic to justify the costs of $1-3 trillion dollars;
3. Tax Cuts for the Rich: Bush came to Washington facing almost diametrically opposing economic conditions, yet he offered up the same solutions as Reagan.
4. Financial Regulation: What is true is that most Bush-era financial regulators were less than enthusiastic about the very act of regulating, and that Bush’s “ownership society” push glossed over a lot of potential dangers.
5. Telling Us to Go Shopping: After the 9/11 terrorist attacks, President Bush didn’t call for sacrifice. He called for shopping.
6. Energy Policy: Not much to say here, except that there wasn’t an energy policy.
7. A State of Denial: Every Administration spins and sugarcoats the economic truth. But the Bush White House took this disingenuousness to new levels.
8. The Muddled Bailout: The main problem has been the ambivalence with which both Paulson and the White House have approached the financial rescue.

Bush was the decider, but Republicans were the enablers. They rubber-stamped every idea Bush threw their way, and questioning or discussing the merit behind his plans was verboten or "unpatriotic." After all, Republicans must not be challenged or questioned. They know best.

It turns out they weren't so smart after all, so why do they feel they deserve to be heard?

Republicans, who said they were receptive to Obama's call for a "unity of purpose," promptly tested the day-old administration. They criticized Democratic spending initiatives and requested a meeting with the president to air their tax-cutting plans.

There they go again! Tax cuts, tax cuts, tax cuts. I hope Obama politely listens and then tells them don't let the door hit you "thanks, but no thanks." Why? I'll let this economist speak for me:

Tax cuts won't build schools, or any other public good.

And right now, with so much of our infrastructure in need of attention, we need public goods.

We tried the tax cut approach to stimulating the economy once, we had no choice since Bush and the Republicans would not have passed any other type of stimulus package.

Guess what? It didn't work very well, and we have little to show for it. Had we, say, rebuilt water systems instead, at the very worst we'd have better water.

Republicans, please go back and read #7 above. You don't deserve to be heard as long as you continue to sing the same old song.

Oh, My God

That was House Minority Leader John Boehner's reaction yesterday after Democrats unveiled their $825 billion stimulus plan, which includes twice as much money for spending vs. tax cuts. He's not happy with the all the spending and told PBS NewsHour's Margaret Warner "that we need more in tax relief."

Oh, my God. Is that the only answer Republicans have for every problem? In this case, their answer is wrong according to Joseph Stiglitz (Nobel Prize in economics in 2001) who warns we should not squander America’s stimulus on tax cuts.

What is clear is that tax cuts will not help much. ...

Tax cuts have increased our national debt. They encouraged America to live beyond its means, increasing our liabilities without commensurate increases in assets. Further tax cuts would do the same. Good accounting looks at assets and liabilities. Spending on infrastructure, education and technology create assets; they increase future productivity.

Some of the spending in the stimulus serves multiple ends. Increased unemployment benefits have the largest multiplier effects – cash-strapped families spend every cent given – and meet vital social needs. It is imperative to provide health insurance to the unemployed: without that, a single serious incident can push a family into bankruptcy. Helping the unemployed meet house payments reduces foreclosures, addressing one of the underlying causes of the crisis. There are thus triple benefits.

We are in uncharted territory in this crisis. But household tax cuts, except for possibly the poorest, should have no place in the stimulus. Nor should business tax breaks, except when closely linked with additional investment. The one tax cut that should be included is a temporary incremental investment tax credit; it provides a big bang for the buck, encouraging companies to invest now when the economy needs the spending. Increased investments in infrastructure, education and technology, relief to states, and help to the unemployed need pride of place.

Stiglitz has some expert advice for state Republicans who also see cutting taxes as the only solution to budget problems.

Joseph Stiglitz of Columbia University, and Peter Orszag, until recently director of the Congressional Budget Office and now the nominee to direct the federal Office of Management and Budget — wrote during the last recession that spending cuts could actually be more harmful for a state’s economy during a recession than tax increases. ...

“The conclusion is that, if anything, tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run. Reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.

And if Republicans think they're appealing to voters with their continual tax cut rhetoric, they're wrong again. By a nearly 2-to-1 ratio, people preferred government spending to create jobs over tax cuts to give Americans more money to spend.

Tax cuts for people who don't have jobs is not the answer. Most Americans understand that. Republicans don't.

Recession taking toll on disabled Americans

The rising unemployment numbers are hitting Americans with disabilities particularly hard. From US News & World Report:

"People with disabilities tend to be the last hired and the first fired," says Rick Diamond, director of employment services at Disability Network/Lakeshore, a disability rights nonprofit based in Holland, Mich.

Advocates nationwide say they've seen a sharp increase in the number of their clients who have been laid off. And if data from 2007—as well as from previous recessions—holds true for this year, people with disabilities will be cut from their jobs at a rate disproportionate to that of nondisabled workers. [...]

The disparity in employment between people with and without disabilities has already been growing. In 2007, according to last month's Disability Status Report, only 36.9 percent of working-age individuals with disabilities were employed. The year before, it was 37.7 percent. But the employment rate of people without disabilities, at 79.7 percent, didn't change.

Sadly, many of these people will have very little to fall back on in terms of savings. Nearly one in 4 working-age individuals with disabilities were below the poverty line in 2007 compared to one in 10 people without disabilities.

Diamond says that one of his coworkers has noted that of her 70 client cases, 15 of them are both employed and homeless. "Three years ago, I would have said I'm not aware of anyone in those circumstances," Diamond says.

To make matters worse, groups that help disabled individuals face cuts next year from already-tightened state and federal budgets. Private donations are down from past years too. Unemployment is scary for able-bodied people, but it takes a real toll on people with disabilities.

"I can't think of a person now with a physical disability, literally today, that I'm working with, who isn't also struggling with depression," he says.

I hope Michigan and other states make budget cuts with a scalpel, not a knife, and try to protect our most vulnerable as much as possible.

(Cross-posted at Blogging for MI.)

Republicans deny economic reality

Can you believe Republicans are actually trying to pin the blame on President Clinton for the drumbeat of bad economic news we hear day after day?

The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

Reminder: George Bush is the only president to ever preside over an economy that has lost jobs, and now the people who probably need that credit card so they can fill up their gas tanks to hunt for jobs may be cut off.

Obama can't come to our rescue fast enough. We desperately need jobs in this country. High unemployment numbers continue to strain borrowers, leading to more foreclosures and delinquencies.

"The unemployment rate is highly correlated to consumer defaults," says Arpitha Bykere, an analyst at RGEMonitor.com, an economic consulting and research firm.

Well, duh! That's pretty simple to understand. If people aren't making money, they can't pay their bills, especially the big ones like mortgages. And according to Calculated Risk via the WSJ: Delinquent mortgages are set to nearly double in 2009.

TransUnion LLC ... predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17% in the fourth quarter of 2009.

That would be the highest level reached since the Chicago credit bureau ... first started tracking these statistics in 1992. It compares with an expected delinquency rate of 4.67% at the end of 2008. [...]

"There are a lot more loans that will be resetting throughout 2009 through 2011," says Ezra Becker, principal consultant in TransUnion's financial-services group, who notes that rising unemployment and depreciating home values are other contributing factors. "There may be an ongoing flow of consumers who may now be able to pay their mortgage but may not be able to a year from now."

Republicans willfully ignored warnings about the financial meltdown and now we're all paying the price, but you won't get them to admit they screwed up. It's never their fault.