Monday Business Edition

Crossposted from The Stars Hollow Gazette

Economy Faces a Jolt as Benefit Checks Run Out

By MOTOKO RICH, The New York Times

Published: July 10, 2011

Close to $2 of every $10 that went into Americans’ wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody’s Analytics. In states hit hard by the downturn, like Arizona, Florida, Michigan and Ohio, residents derived even more of their income from the government.

By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody’s Analytics estimates $37 billion will be drained from the nation’s pocketbooks this year.

…

“If we don’t get more job growth and gains in wages and salaries, then consumers just aren’t going to have the firepower to spend, and the economy is going to weaken,” said Mark Zandi, chief economist of Moody’s Analytics, a macroeconomic consulting firm.

Job growth has remained elusive. There are 4.6 unemployed workers for every opening, according to the Labor Department, and Friday’s unemployment report showed that employers added an anemic 18,000 jobs in June.

…

Consumers account for an estimated 60 to 70 percent of the country’s economic activity, but two years into the official recovery, businesses are still complaining that people simply are not spending enough.

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Because benefit payments tend to be spent right away to cover basic needs like food and rent, they provide a direct boost to consumer spending. In a study for the Labor Department, Wayne Vroman, an economist at the Urban Institute, estimated that every $1 paid in jobless benefits generated as much as $2 in the economy.

Government Aid Dissipating, Damaging Economic Performance

By: David Dayen, Firedog Lake

Monday July 11, 2011 6:55 am

The Times story tells a simple tale, one rooted in elementary macroeconomic theory, and one which has escaped everyone in Washington. If you reduce benefits on those who have the highest propensity to spend money, that money gets taken out of the economy, and GDP suffers. And GDP has a direct bearing on unemployment. Our automatic stabilizers actually worked decently during the Great Recession. In fact, most of the stimulus went to tax cuts and beefing up those stabilizers, through aid to states and expanded benefits (in fact, too much so, as public investment in jobs was barely a sliver of the total stimulus). No doubt Republicans will see this article as some evidence of lazy Americans living on the dole, but it’s a direct result of an intelligently designed system to provide a safety net when the bottom drops out of the economy.

Herr Doktor Professor–

Regular readers of this blog know that I make a big deal of the failure of interest rates to rise despite massive government borrowing. There’s a reason for that: what happens to interest rates is a key indicator of which economic model, and hence which economic policies, are right.

The Very Serious position has been that government borrowing will drive up rates, crowd out private investment, and impede recovery. A Keynes-Hicks analysis, by contrast, says that when you’re in a liquidity trap, even large government borrowing won’t drive up rates – and hence won’t crowd out private investment. In fact, it will promote private investment by raising capacity utilization and giving firms more reason to expand.

…

What we usually get in response to this seemingly decisive data are a series of excuses – most recently, that rates were low because the Fed was buying all the bonds. Well, that program has ended, and interest rates are still low.

More Herr Doktor Professor on excuses–

The fact is, the United States economy has been stuck in a rut for a year and a half.

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The truth is that creating jobs in a depressed economy is something government could and should be doing.

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Our failure to create jobs is a choice, not a necessity – a choice rationalized by an ever-shifting set of excuses.

Excuse No. 1: Just around the corner, there’s a rainbow in the sky.

• Remember “green shoots”? Remember the “summer of recovery”? Policy makers keep declaring that the economy is on the mend – and Lucy keeps snatching the football away. Yet these delusions of recovery have been an excuse for doing nothing as the jobs crisis festers.

Excuse No. 2: Fear the bond market.

• Two years ago The Wall Street Journal declared that interest rates on United States debt would soon soar unless Washington stopped trying to fight the economic slump. Ever since, warnings about the imminent attack of the “bond vigilantes” have been used to attack any spending on job creation.

  But basic economics said that rates would stay low as long as the economy was depressed – and basic economics was right. The interest rate on 10-year bonds was 3.7 percent when The Wall Street Journal issued that warning; at the end of last week it was 3.03 percent.

Excuse No. 3: It’s the workers’ fault.

• (I)f there really was a mismatch between the workers we have and the workers we need, workers who do have the right skills, and are therefore able to find jobs, should be getting big wage increases. They aren’t. In fact, average wages actually fell last month.

Excuse No. 4: We tried to stimulate the economy, and it didn’t work.

• Everybody knows that President Obama tried to stimulate the economy with a huge increase in government spending, and that it didn’t work. But what everyone knows is wrong.
  
  …
  
  What happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had. This isn’t 20-20 hindsight: some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate. And so it proved.

Neoliberal Economics has as much credibility as Stalinist Genetics.

Crossposted from The Stars Hollow Gazette

The Conscience of a Liberal–

To those defending Obama on the grounds that he’s saying what he has to politically, I have two answers. First, words matter – as people who rallied around Obama in the first place because of his eloquence should know. Yes, he has to make compromises on policy grounds – but that doesn’t mean he has to adopt the right’s rhetoric and arguments. The effect of his intellectual capitulation is that we now have only one side in the national argument.

Second, since Obama keeps talking nonsense about economics, at what point do we stop giving him credit for actually knowing better? Maybe at some point we have to accept that he believes what he’s saying.

The question then is why. As I’ve tried to show many times, the facts overwhelmingly refute the anti-Keynes talking points. Neither the invisible bond vigilantes nor the confidence fairy have made an appearance. So why is Obama talking up those talking points?

OK, here’s an unprofessional speculation: maybe it’s personal. Maybe the president just doesn’t like the kind of people who tell him counterintuitive things, who say that the government is not like a family, that it’s not right for the government to tighten its belt when Americans are tightening theirs, that unemployment is not caused by lack of the right skills. Certainly just about all the people who might have tried to make that argument have left the administration or are leaving soon.

And what’s left, I’m afraid, are the Very Serious People. It looks as if those are the people the president feels comfortable with. And that, of course, is a tragedy.

Extending the Blessings of Civilization to our Brother who Sits in Darkness has been a good trade and has paid well, on the whole; and there is money in it yet, if carefully worked – but not enough, in my judgement, to make any considerable risk advisable. The People that Sit in Darkness are getting to be too scarce ­- too scarce and too shy. And such darkness as is now left is really of but an indifferent quality, and not dark enough for the game. The most of those People that Sit in Darkness have been furnished with more light than was good for them or profitable for us. We have been injudicious.

Crossposted from The Stars Hollow Gazette

A story about smoking.

The big place to watch fireworks is down on the beach and one year my friends and I decided to make an event of it so we packed up a couple of cases and our portable stereo- a car battery, 250 watt car equalizer/amp, a Colecovision power supply and voltage inverter, 2 Walkman CD players, mixer board, and 4 Minimus 7s.

And a blanket.

We got there early so we’d get good seats and were only 3 or 4 rows behind the Police tape and had a fun early evening waiting for the dusk to gather amusing ourselves, scaring little children, and annoying our neighbors.

Nothing like playing the feedback.

As it got darker we switched to more mellow fare, Holst’s The Planets and Pink Floyd as I recall and soon enough the show started and we were right underneath it.

Underneath as in the shells were exploding pretty much directly overhead and showering flaming debris all around us.  A blanket a couple of rows ahead caught fire causing several moments of excitement until somebody remembered that if you just shovel sand on top these things go out.

I personally was put in mind of an old Buck Rodgers comic strip where the villain, in preparation for a duel with Buck, lies down in a field and has his flunkies howitzer him with spikey mace balls to demonstrate his courage until his chief toady right next to him gets kind of, well, squished.  Think chunks of facade landing next to the Orc captain at the siege of Minas Tirith if you’re not getting the 1930s image.

Harmless good times for the most part and it seemed only fitting that when a lit fragment landed close enough to reach without straining I fished out a Kool and kindled it off the chunk.

The difficult thing was the three hours getting out of the parking lot.

Crossposted from The Stars Hollow Gazette

(a reprint from our initial offerings)

It’s an interesting coincidence that exactly 50 years after The Declaration, Jefferson and Adams died within hours of each other.  Ironically Adam’s last words were- “Jefferson still survives.”  In fact Jefferson preceeded Adams which could have caused some embarrassment provided you believe in an afterlife and that Jefferson and Adams could have ended up in the same place.

Me?  Not so much.  People forget that our founders were revolutionaries and the establishment of The United States of America led to a string of more or less successful rebellions in Haiti, South America, and France.

It’s certainly not a historical leap of faith to call The Council of Europe and the Age of Metternich a reaction to a little fight we picked on the road between Lexington and Concord.

History is real, and not so very long ago.

These were people just like us.  Every bit as smart, twice as tough, and doing the best they could with the tools they had available.

Recently they’d been through 30 years of Civil War based on religious sectarianism and class warfare.  Fighting the French and Indians was kind of intermittent by comparison.

They were not rubes by any means though it’s a classic American gambit going back to Franklin at least to put a dead beaver on your head and pretend to be an idiot.  It makes the women want you.

My favorite Ben who is not a traitor was considered the head of the committee that composed The Declaration, but the principal Author was Thomas Jefferson whom we find recently to have made a last minute substitution of ‘citizen’ for ‘subject’ that I found reflective of his principles as a Founder.

Revolution is not all skittles and beer.

America had its Cincinattus and a Republic if we could keep it, but political feuding between the Democratic-Republicans and the Federalists was little short of open warfare in the election of 1800.  People were literally shot down like dogs.

Adams had to suffer Jefferson as a Vice-President (Mr. Heartbeat) and successor.  Two Term Jefferson left his office to James “Mr. Constitution” Madison and the rest, as they say, is history until Andrew “Kingfish” Jackson (but that’s a story for another day).

The democratic impulse and enlightenment values embodied in the work of our Founders, little things like the Constitution and Bill of Rights, the institutions of the Congress, Presidency, and Court have always been under attack by powerful elites who seek to influence outcomes in their favor.

The very least honor we owe these brave and principled patriots is to resist those efforts and defend justice and the rule of law to the best of our ability.