Wednesday, November 25, 2009
Tuesday, November 24, 2009
US debt a phantom menace
Yesterday the New York Times reported that the United States is borrowing trillions of dollars under terms that seem "too good to be true" just as a "spending explosion" on benefits programs like Medicare and Social Security is set to begin.
In a series titled "Payback Time: Debt Bomb," the Times details the magnitude of our nation's borrowing and warns of an impending and monumental reality check:
"The government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.
With the national debt now topping $12 trillion, the White House estimates that the government's tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically."
Replete with charts and stupefying figures (Americans must pay off more than $1.6 trillion in debt by March 31, 2010), the piece states that there is "little doubt that the United States' long-term budget crisis is becoming too big to postpone."
Au contraire, says Times columnist and Nobel Prize-winning economist Paul Krugman, who warned about the very fear mongering about the deficit that the Times was engaged in:
"Most economists I talk to believe that the big risk to recovery comes from the inadequacy of government efforts: the stimulus was too small, and it will fade out next year, while high unemployment is undermining both consumer and business confidence."
Krugman cites a recent interview during which President Obama warned that "if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession."
Krugman's response: "What? Huh?"
"The concerns Mr. Obama expressed become comprehensible if you suppose that he's getting his views, directly or indirectly, from Wall Street.
Ever since the Great Recession began economic analysts at some (not all) major Wall Street firms have warned that efforts to fight the slump will produce even worse economic evils. In particular, they say, never mind the current ability of the U.S. government to borrow long term at remarkably low interest rates -- any day now, budget deficits will lead to a collapse in investor confidence, and rates will soar...
A better model [for our current economic plight], I'd argue, is Japan in the 1990s, which ran persistent large budget deficits, but also had a persistently depressed economy -- and saw long-term interest rates fall almost steadily. There's a good chance that officials are being terrorized by a phantom menace -- a threat that exists only in their minds.
Read Krugman's full piece here.
Likewise, economist Dean Baker, who was one of the first to recognize the housing bubble years before it burst, scoffs at the Times's over-hyped debt reporting. Baker's post -- titled, "In Just a Decade the U.S. Interest Burden Could Be as High as It Was in 1992!!!!!!!" -- notes that there is "no evidence presented in this article that the rise in interest rates will place the U.S. government in a situation where it will be unable to pay its bills and no one cited in this article makes such a claim."
Incidentally, today's Wall Street Journal features more evidence that the Obama administration is rejecting Krugman's advice. "The White House is lukewarm about proposals by congressional Democrats to introduce broad legislation to create jobs, instead favoring targeted measures that would be less likely to inflate the deficit," the Journal reports, citing administration officials.
In a series titled "Payback Time: Debt Bomb," the Times details the magnitude of our nation's borrowing and warns of an impending and monumental reality check:
"The government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.
With the national debt now topping $12 trillion, the White House estimates that the government's tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically."
Replete with charts and stupefying figures (Americans must pay off more than $1.6 trillion in debt by March 31, 2010), the piece states that there is "little doubt that the United States' long-term budget crisis is becoming too big to postpone."
Au contraire, says Times columnist and Nobel Prize-winning economist Paul Krugman, who warned about the very fear mongering about the deficit that the Times was engaged in:
"Most economists I talk to believe that the big risk to recovery comes from the inadequacy of government efforts: the stimulus was too small, and it will fade out next year, while high unemployment is undermining both consumer and business confidence."
Krugman cites a recent interview during which President Obama warned that "if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession."
Krugman's response: "What? Huh?"
"The concerns Mr. Obama expressed become comprehensible if you suppose that he's getting his views, directly or indirectly, from Wall Street.
Ever since the Great Recession began economic analysts at some (not all) major Wall Street firms have warned that efforts to fight the slump will produce even worse economic evils. In particular, they say, never mind the current ability of the U.S. government to borrow long term at remarkably low interest rates -- any day now, budget deficits will lead to a collapse in investor confidence, and rates will soar...
A better model [for our current economic plight], I'd argue, is Japan in the 1990s, which ran persistent large budget deficits, but also had a persistently depressed economy -- and saw long-term interest rates fall almost steadily. There's a good chance that officials are being terrorized by a phantom menace -- a threat that exists only in their minds.
Read Krugman's full piece here.
Likewise, economist Dean Baker, who was one of the first to recognize the housing bubble years before it burst, scoffs at the Times's over-hyped debt reporting. Baker's post -- titled, "In Just a Decade the U.S. Interest Burden Could Be as High as It Was in 1992!!!!!!!" -- notes that there is "no evidence presented in this article that the rise in interest rates will place the U.S. government in a situation where it will be unable to pay its bills and no one cited in this article makes such a claim."
Incidentally, today's Wall Street Journal features more evidence that the Obama administration is rejecting Krugman's advice. "The White House is lukewarm about proposals by congressional Democrats to introduce broad legislation to create jobs, instead favoring targeted measures that would be less likely to inflate the deficit," the Journal reports, citing administration officials.
Saturday, November 14, 2009
Jobs deficit requires bold action
Since the beginning of the Great Recession, unemployment has increased by 5.8%, the biggest increase since the Great Depression. The ranks of the long term unemployed (those laid off for more than six months) has soared to 5.6. million, also a post-depression peak. While Republicans like Congressman Paul Ryan, and Blue Dog Democrats hyperventilate about the threat of inflation and the federal deficit, America's working people are experiencing a real jobs deficit!
As the New York Times Bob Herbert notes:
Wall Street can boast about recovery all it wants, much of America remains trapped in economic hell.
It will take a monumental leadership effort by the administration and Congress to spark the kind of changes necessary to transform this wretched employment landscape. Ross Eisenbrey of the Economic Policy Institute has written: “By itself, the private sector is unable to create jobs in the numbers the United States needs to obtain a robust, full economic recovery.”
...we need to rethink our entire approach to employment. Conventional efforts to kick-start economic growth are dwarfed by the vast scale of the problem. Bold new efforts — creative efforts — are needed.
Herbert's piece is linked.
Wednesday, November 11, 2009
Bankers pocket billions while unemployment soars
Maureen Dowd writes:
Now we have two economies. We have recovering banks while we have 10-plus percent unemployment and 17.5 percent underemployment. The gross thing about the Wall Street of the last decade is how much its success was not shared with society.
Goldmine Sachs, as it’s known, is out for Goldmine Sachs.
As many Americans continue to struggle, Goldman, Morgan Stanley and JPMorgan Chase, banks that took government bailout money after throwing the entire world into crisis, have said they will dish out $30 billion in bonuses — up 60 percent from last year.
The saying used to be, whatever happens, the lawyers win. Now, it’s whatever happens, the bankers win.
The entire column is linked.
Now we have two economies. We have recovering banks while we have 10-plus percent unemployment and 17.5 percent underemployment. The gross thing about the Wall Street of the last decade is how much its success was not shared with society.
Goldmine Sachs, as it’s known, is out for Goldmine Sachs.
As many Americans continue to struggle, Goldman, Morgan Stanley and JPMorgan Chase, banks that took government bailout money after throwing the entire world into crisis, have said they will dish out $30 billion in bonuses — up 60 percent from last year.
The saying used to be, whatever happens, the lawyers win. Now, it’s whatever happens, the bankers win.
The entire column is linked.
Sunday, November 8, 2009
A jobless recovery is an oxymoron
If you are looking for an economic recovery you can believe in, the October employment report is not for you.
After contracting for a year and a half, the economy grew in the quarter that ended in September, driven largely by federal stimulus. But government spending, as large and as necessary as it has been, has not been enough to revive hiring.
Unemployment surged from 9.8 percent in September to 10.2 percent last month, its highest level since 1983. At the same time, the economy lost 190,000 more jobs. That means employers have eliminated 7.3 million positions since the recession began in December 2007.
As dreadful as they are, the headline numbers understate the severity of the problem. They also obscure an even grimmer fact: Unless there is more government support, it will take several years of robust economic growth — by no means a sure thing — to recoup the jobs that have been lost.
The unemployment rate includes only jobless people who have looked for work in the past four weeks. The underemployment rate — which also includes jobless workers who have not recently looked for work and part-timers who need full-time work — reached 17.5 percent in October. And the long-term unemployment rate — the share of the unemployed population out of work for more than six months — also continues to set records. It is now 35.6 percent.
The official job-loss data also fail to take note of 2.8 million additional jobs needed to absorb new workers who have joined the labor force during the recession. When those missing jobs are added to the official total, the economy comes up short by 10.1 million jobs.
Taken together, the numbers paint this stark picture: At no time in post-World War II America has it been more difficult to find a job, to plan for the future, or — for tens of millions of Americans — to merely get by.
At a recent meeting at the White House to discuss job creation, President Obama said that “bold, innovative action,” would be needed — from the administration, Congress and the private sector — to undo the devastation in the labor market. Americans are waiting for Mr. Obama to lead the way.
There were good ideas floated at the White House meeting, including bolstered federal support for efforts to retrofit and weatherize homes and public buildings. There was also talk of using government money to establishing a so-called infrastructure bank that would issue bonds to help finance big construction projects.
The country also needs a program that would create jobs for teenagers — ages 16 to 19 — whose unemployment rate is currently a record 27.6 percent. Deep and prolonged unemployment among the young is especially worrisome. It means they do not have a chance, and may never get the chance, to acquire needed skills, permanently hobbling their earnings potential.
We know that more stimulus spending and government programs are a fraught topic. But they are exactly what the country needs. It may be the only way to prevent a renewed downturn.
And the only way to create the jobs needed to put Americans back to work. Those are the essential — and missing — ingredients of a sustained recovery.
New York Times, November 8, 2009
After contracting for a year and a half, the economy grew in the quarter that ended in September, driven largely by federal stimulus. But government spending, as large and as necessary as it has been, has not been enough to revive hiring.
Unemployment surged from 9.8 percent in September to 10.2 percent last month, its highest level since 1983. At the same time, the economy lost 190,000 more jobs. That means employers have eliminated 7.3 million positions since the recession began in December 2007.
As dreadful as they are, the headline numbers understate the severity of the problem. They also obscure an even grimmer fact: Unless there is more government support, it will take several years of robust economic growth — by no means a sure thing — to recoup the jobs that have been lost.
The unemployment rate includes only jobless people who have looked for work in the past four weeks. The underemployment rate — which also includes jobless workers who have not recently looked for work and part-timers who need full-time work — reached 17.5 percent in October. And the long-term unemployment rate — the share of the unemployed population out of work for more than six months — also continues to set records. It is now 35.6 percent.
The official job-loss data also fail to take note of 2.8 million additional jobs needed to absorb new workers who have joined the labor force during the recession. When those missing jobs are added to the official total, the economy comes up short by 10.1 million jobs.
Taken together, the numbers paint this stark picture: At no time in post-World War II America has it been more difficult to find a job, to plan for the future, or — for tens of millions of Americans — to merely get by.
At a recent meeting at the White House to discuss job creation, President Obama said that “bold, innovative action,” would be needed — from the administration, Congress and the private sector — to undo the devastation in the labor market. Americans are waiting for Mr. Obama to lead the way.
There were good ideas floated at the White House meeting, including bolstered federal support for efforts to retrofit and weatherize homes and public buildings. There was also talk of using government money to establishing a so-called infrastructure bank that would issue bonds to help finance big construction projects.
The country also needs a program that would create jobs for teenagers — ages 16 to 19 — whose unemployment rate is currently a record 27.6 percent. Deep and prolonged unemployment among the young is especially worrisome. It means they do not have a chance, and may never get the chance, to acquire needed skills, permanently hobbling their earnings potential.
We know that more stimulus spending and government programs are a fraught topic. But they are exactly what the country needs. It may be the only way to prevent a renewed downturn.
And the only way to create the jobs needed to put Americans back to work. Those are the essential — and missing — ingredients of a sustained recovery.
New York Times, November 8, 2009
Saturday, November 7, 2009
Job loss dominates political landscape
On Friday the Department of Labor reported that the unemployment rate had climbed to 10.2%, its highest rate since April 1983.
Nearly 16 million people cannot find work.
The underemployment rate which includes discouraged workers who have given up looking for jobs and those working part-time because they cannot find full time employment hit 17.5%
Economic insecurity and jobs have become the the nation's dominant political issue.
New York Times columnist Charles Blow writes:
This is now Obama’s crisis, and it carries political consequences. During Tuesday’s gubernatorial races in New Jersey and Virginia, nearly 9 in 10 voters said that they were worried about the direction of the nation’s economy in the next year. And the majority of those who held that view voted for the Republican candidates. This could portend a flashback to 1994.
It isn’t President Obama’s fault that he inherited this mess, but it is his to fix, and he must make haste. To paraphrase his Toledo prelection: you need to do it not five years from now, not next year, you need to do it right now. J-O-B-S.
Nearly 16 million people cannot find work.
The underemployment rate which includes discouraged workers who have given up looking for jobs and those working part-time because they cannot find full time employment hit 17.5%
Economic insecurity and jobs have become the the nation's dominant political issue.
New York Times columnist Charles Blow writes:
This is now Obama’s crisis, and it carries political consequences. During Tuesday’s gubernatorial races in New Jersey and Virginia, nearly 9 in 10 voters said that they were worried about the direction of the nation’s economy in the next year. And the majority of those who held that view voted for the Republican candidates. This could portend a flashback to 1994.
It isn’t President Obama’s fault that he inherited this mess, but it is his to fix, and he must make haste. To paraphrase his Toledo prelection: you need to do it not five years from now, not next year, you need to do it right now. J-O-B-S.
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