U.S. Chamber of Commerce wants to spend stimulus $s overseas

Leo Gerard, President of the United Steelworkers of America, warns that the federal stimulus package passed by the House of Representatives could be undermined if the U.S. Chamber of Commerce and large multi-national corporations get their way.

The $800 plus billion stimulus is designed to pull the United States out of a deep recession that has caused over 2.55 million layoffs. A record number of Americans are now receiving unemployment compensation.

As Businessweek reported in its cover story a few weeks ago, taxpayers will lose a major bang for their buck if their stimulus money is spent on products and commodities made overseas. Thus, the House of Representatives included language in the stimulus bill aimed at ensuring that when the stimulus money is spent, it will create jobs at home.

But Gerard cautions:

"...the U.S. Chamber of Commerce wants to spend the tax dollars of unemployed Americans to create jobs in China and Indonesia, Korea and India...

...15 business groups sent a letter to Congress opposing provisions added to the recovery package that would strengthen existing laws requiring government agencies buy American steel and other products when building public works projects with tax dollars.

The package is, essentially, Americans agreeing to increase their national debt to revive an economy sucker punched by greedy Wall Street gamblers. So when business interests want to spend those tax dollars overseas, to create jobs there at the expense of unemployed Americans, while at the same time increasing the U.S. trade deficit, frankly, it looks a bit like treason.

To survive this economic catastrophe, Americans must assert themselves as economic patriots. They must stand up to the likes of the Chamber and the Roundtable and call them out for being economic traitors to the United States of America.

Next week the U.S. Senate will debate and pass its version of the stimulus. They should keep the Buy American provisions in the bill.

The Chamber and the Emergency Committee for American Trade are spending millions on lobbyists to weaken the very provisions that steer stimulus dollars towards the purchase of American produced goods and services. They are receiving support from companies like Caterpillar and General Electric (not surprisingly, two of the biggest job outsourcers) as well as the usual cast of Washington's corporate-funded think tanks and private equity firms like the Carlyle Group who make the hysterical claim that ensuring American tax dollars are spent in America will somehow initiate a global "trade war."

The groups and companies lobbying against the Buy American provisions in the stimulus package are trying to defend a business model that relies on economic policies that effectively incentivize corporations to ship jobs overseas, where they can avoid unions, exploit labor, and destroy the environment. Buy American laws that reward domestic businesses for staying in this country are a threat to the multinational corporate lobby.

The Chamber and its allies have no loyalty to this country or its working people. Their sole commitment is to the bottom line.

They must be stopped.

Gerard's entire article is linked.

The Japanese experience with economic stimulus

In a front page Milwaukee Journal Sentinel Crossroads' column, Amity Shlaes cites the failure of Japan's "huge" fiscal stimulus program in the 1990s as a cautionary tale for President-elect Obama.

Shlaes who has become the darling of free market conservatives for her repudiation of the New Deal and all things Keynesian misrepresents the Japanese experience as a case of large public expenditures in infrastructure that failed to ignite the economy, arguing that infrastructure investments are better left to the private sector.

Leaving aside the obvious problem that a fiscal stimulus is needed precisely because private investment has collapsed, it's apparent that Shlaes is misinformed about Japan's experience. Perhaps she has not read Adam Posner's definitive work, Restoring Japan's Economic Growth, which is a detailed refutation of her arguments.

Japan's 1990s fiscal stimulus, changes in government spending and taxes, was disappointingly modest, not huge, as Shlaes contends. It amounted to only about a third of the announced stimulus and according to Posner: "This limited quantity of total fiscal stimulus was disbursed in insufficiently sized and inefficiently administered doses, with the exception of the 1995 stimulus package."

In 1995 Japan implemented an aggressive fiscal stimulus that led to strong economic growth in 1996. But its impact was undermined in 1996 and 1997 by fiscal contraction. Posner concludes: "On net, the Japanese fiscal stance in the 1990s was barely expansionary...."

The problem in Japan was not a huge stimulus package, as Shlaes contends, but an overly timid one.

This is similar to the U.S. experience in the 1930s. The economy began to grow in 1934 in response to increased deficit spending. But President Franklin Roosevelt, under pressure from his era's balanced budget hawks, was forced to cut federal spending in 1937 and the economy began to contract, only to be rescued by World War II and dramatic increases in federal spending.

So what are the real lessons President-elect Obama and his advisers should learn from Japan and the New Deal? First the stimulus package must be large enough ($700 billion to $1 trillion) to ignite the economy. And second, once the stimulus begins to work and the economy begins to grow, the Obama administration should reject any pressure from the Shlaes' crowd to prematurely cutback on the stimulus.

Obama considering $700 billion to $1 trillion stimulus

The Wall Street Journal reports that economic conditions have become so dire that President-elect Barack Obama's economic advisers now think a two-year stimulus of between $700 billion and $1 trillion is needed to jump start the economy:

"President-elect Barack Obama's economic team is considering an economic-stimulus program that will be far larger than the two-year, half-trillion-dollar plan under consideration two weeks ago, according to people familiar with the team's thinking...

With the unemployment rate now expected to hit 9% without aggressive intervention, Obama aides and advisers have set $600 billion over two years as "a very low-end estimate," one person familiar with the matter said. The final number is expected to be significantly higher, possibly between $700 billion and $1 trillion over two years."

The article is linked.

MJS calls for extending unemployment benefits!

On Saturday, the Milwaukee Journal Sentinel’s editors wrote that the $146 billion fiscal stimulus passed by the House of Representatives should be amended to “expand aid for food stamps, heating assistance or unemployment compensation…”

They are right that these increases should be included in any stimulus package designed to jump start the failing economy and assist those most in need.

But the paper’s Business section article on the unemployment report completely undermined the editorial’s policy proposal by suggesting people are losing their jobs because they lack “versatility,” “perseverance, and a commitment to “hard work.”

Strangely entitled “jobs for the diligent” the article explains the devastating impact of unemployment by focusing on someone who quit his job to pursue an entrepreneurial dream more than a year ago-before unemployment began to rise. His situation is very different than the millions nationally who are losing their jobs because the economy has slowed. The former voluntarily terminated his employment, is ineligible for unemployment benefits even if they are extended, and is currently working. The later are involuntarily unemployed.

During cyclical downturns firms reduce production and cut their operational costs. One of the easiest and quickest to way to accomplish cost reductions is to furlough labor. Hence, the increase in unemployment.

The article liberally quotes a retired healthcare executive who says: “…businesses are suffering too...”and they need “’versatile employees who can stick around and contribute to profitability….”

The problem is you can’t stick around and contribute to profitability when you’re given a pink slip.

Workers are getting laid off because the housing bubble burst, credit’s tight, consumption’s down and the economy is contracting, not because they lack versatility or a work ethic!

Last month the nation lost jobs for the first time in five years- 17,000 in total. The month before the unemployment rate rose significantly. Over the past three months only 42,000 jobs were created per month, far less than the 150,000 needed to absorb new labor market entrants.

The number of people who have been unemployed for more than six months is now 1.38 million. Long term unemployment has not been this high since the 2001 recession when Congress last extended unemployment benefits.

Most economists recognize that the official unemployment rate significantly undercounts the number of unemployed by failing to recognize those who have dropped out of the labor market, discouraged workers, and the involuntary part-time.

Milwaukee with the fourth highest unemployment rate in the nation has a serious and growing unemployment problem.

Hard working, diligent people are losing their jobs through no fault of their own. The ranks of the long term unemployed are growing. The MJS editorial board is right-Congress needs to add extended unemployment benefits to its stimulus package.

Stimulus plan a "lemon"

Over the past three weeks, even Republicans have been forced to acknowledge the nation's growing economic problems and the need for decisive action by the federal government.

It's worth noting that President Bush and his GOP agreed to act only after the downturn hit Wall Street, exacting an unacceptable toll on the Republican Party's financial and political base. As a result, the Fed enacted the single largest interest rate cut in its history and Congress has moved quickly to design a fiscal stimulus package.

For a stimulus package to be effective, it must stimulate spending (demand) quickly. The essence of an effective stimulus package is for government demand (spending) to step in when private spending (consumption and private investment) is declining.

A recent study by the non- partisan Congressional Budget Office (CBO) concluded that extending unemployment benefits and increasing food stamps, policies that get money to folks who will spend it immediately, is the most effective form of economic stimulus.

Even President Bush was forced to acknowledge this. As a result, he temporarily dropped his initial proposal for making his high income tax cuts permanent since it would not have affected the economy until 2011.

So what has the Democratically controlled Congress agreed to? Another round of tax cuts for people who are less likely to spend it immediately!

Paul Krugman writes that the compromise plan is nothing less than a "lemon:"

Unfortunately, the plan — which essentially consists of nothing but tax cuts and gives most of those tax cuts to people in fairly good financial shape — looks like a lemon...

Specifically, the Democrats appear to have buckled in the face of the Bush administration’s ideological rigidity, dropping demands for provisions that would have helped those most in need. And those happen to be the same provisions that might actually have made the stimulus plan effective...

The entire column is worth reading