Category Archives: Unemployment

Europe Sees the Light, as U. S. Opts for Darkness

The misguided GOP focus on deficits and austerity in the U. S. is messing up the whole world’s economy.  From the NYT*:

“The Europeans lately have slightly eased their austerity policies, after four years of deep spending cuts and rising taxes that many economists blame for keeping the Continent in recession long after America’s ended.

“And the Obama administration, after years of pressing Europe to adopt American-style stimulus measures, is now presiding — if reluctantly — over European -style austerity that is measurably slowing its recovery. …

“The new reality in the Unites States reduces the president’s already limited leverage in his fiscal debate with Europeans…even as Europe’s woes continue to act as a drag on its trading partners, including the United States.”

I would force every Republican member of Congress to write “Keynes was right” on the blackboard 1,000 times.

*  “Lines Blur in U.S.-Europe Debate on Austerity,” Jackie Calmes

Happy Days Are Here Again…

Consumer confidence is at its highest level since February 2008.

Housing prices in 20 major cities jumped 10.9% in the past year, the biggest annual increase since April 2006.

We know the deficit is looking much, much better than expected, as recovery brings more revenue to the government.

So for 2014, the GOP is left trying to sabotage Obamacare and trying to milk all the mileage they can out of the Benghazi, IRS, and reporter (AP/Fox’s James Rosen) “scandals.”  I remain unconvinced that any of these is really a true scandal.

Buried Under the “Scandal” Avalanche

There is some really good news out of Washington, if you look under the rocks of Benghazi, the IRS, and the AP.

The budget deficit is projected to drop to $642 billion for FY 2012, which ends on September 30.  That’s a whopping $200 billion less than the CBO estimated in February, when it adjusted the deficit downward to account for sequester spending cuts and 2012 tax increases.  This new projection comes strictly from higher-than-expected tax revenue.  This will be the first time the deficit has been under a trillion since 2009.

Things are so rosy that the deficit might be only a smidge over 2% of GDP by 2015, compared to more than 10% of GDP back in 2009.

In fact some economists, like Jared Bernstein, think the deficit may be coming down too quickly, keeping unemployment high.

 

Jobs, Jobs, Jobs

Good news on jobs, not just in the April numbers, but also in the revisions to prior months.

165,000 new jobs were created in April, plus March jobs were revised from 88,000 to 138,000, and February jobs were revised from 268,000 to 332,000.

The unemployment rate has dipped to 7.5%, the lowest in four years.

The Dow reacted by hitting 15,000 for the first time.

Policy of the One Percent, by the One Percent, for the One Percent

From “The 1 Percent’s Solution,” Paul Krugman, NYT:

“Thus, the average American is somewhat worried about budget  deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face.  And how should the budget deficit be brought down?  The wealthy favor cutting federal spending on health care and Social Security — that is “entitlements” — while the public at large actually wants to see spending on those programs rise.

“You get the idea:  The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor.  What the top 1 percent wants becomes what economic science says we must do.

“[T]he years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers.

“And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make.  To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?”

 

Quote of the Day

“Yes, total debt in the U.S. economy, public and private combined, has risen dramatically relative to G.D.P. No, this doesn’t mean that we as a nation have been living far beyond our means, and must drastically tighten our belts. While we have run up a significant foreign debt (although not as big as many imagine), the rise in debt overwhelmingly represents Americans borrowing from other Americans, which doesn’t make the nation as a whole any poorer, and doesn’t require that we collectively spend less. In fact, the biggest problem created by all this debt is that it’s keeping the economy depressed by causing us collectively to spend too little, with debtors forced to cut back while creditors see no reason to spend more.

“So what should we be doing? By all means, let’s restore the kind of effective financial regulation that, in the years before the Reagan revolution, helped deter excessive leverage. But that’s about preventing the next crisis. To deal with the crisis that’s already here, we need monetary and fiscal stimulus, to induce those who aren’t too deeply indebted to spend more while the debtors are cutting back.

“Unemployment, not excessive money printing, is what ails us now — and policy should be doing more, not less.”  Emphasis added.

Paul Krugman, from “The Urge to Purge,” NYT

I Wish the Whole Country Would Read This

If I could get everyone in America to read one thing today, it would be Paul Krugman’s NYT column, “Dwindling Deficit Disorder.”  Some excerpts:

“What’s really remarkable at this point, however, is the persistence of the deficit fixation in the face of rapidly changing facts. People still talk as if the deficit were exploding, as if the United States budget were on an unsustainable path; in fact, the deficit is falling more rapidly than it has for generations, it is already down to sustainable levels, and it is too small given the state of the economy.

“Start with the raw numbers. America’s budget deficit soared after the 2008 financial crisis and the recession that went with it, as revenue plunged and spending on unemployment benefits and other safety-net programs rose. And this rise in the deficit was a good thing! Federal spending helped sustain the economy at a time when the private sector was in panicked retreat….

“But after peaking in 2009 at $1.4 trillion, the deficit began coming down. The Congressional Budget Office expects the deficit for fiscal 2013…to be $845 billion.

“Bear in mind that the budget doesn’t have to be balanced to put us on a fiscally sustainable path; all we need is a deficit small enough that debt grows more slowly than the economy. To take the classic example, America never did pay off the debt from World War II — in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period.

“Right now, a sustainable deficit would be around $460 billion.   The actual deficit is bigger than that. But according to new estimates by the budget office, half of our current deficit reflects the effects of a still-depressed economy. The “cyclically adjusted” deficit — what the deficit would be if we were near full employment — is only about $423 billion, which puts it in the sustainable range; next year the budget office expects that number to fall to just $172 billion. And that’s why budget office projections show the nation’s debt position more or less stable over the next decade.

“So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.

“There are, of course, longer-term fiscal issues: rising health costs and an aging population will put the budget under growing pressure over the course of the 2020s. But I have yet to see any coherent explanation of why these longer-run concerns should determine budget policy right now.

“Yes, we’ll want to reduce deficits once the economy recovers, and there are gratifying signs that a solid recovery is finally under way. But unemployment, especially long-term unemployment, is still unacceptably high. … [A]ll you have to do is look at Europe to see the disastrous effects of austerity on weak economies.

“Now, I’m aware that the facts about our dwindling deficit are unwelcome in many quarters. Fiscal fearmongering is a major industry inside the Beltway, especially among those looking for excuses to do what they really want, namely dismantle Medicare, Medicaid and Social Security. “

We can’t make smart political decisions based on phony economic analysis.  Let’s have honest debates about the size and scope of government, but let’s not rely on scare tactics that depend on disinformation about our deficits and national debt.  To me, the GOP is engaging in economic terrorism.