This is rich. Wall Street's hedge fund managers are having second thoughts about President Obama. Not the ones that never did support him, but the Democratic ones that gave big chunks of cash to his campaign. Their sense of upper-class entitlement is nauseating. These are the people who said we were on the brink, the ones who bet big and lost, the ones who gleefully accepted TARP funds, (which in any other context would be called welfare), and now have huge earnings and bonuses to match. Yeah, I know, this applies mostly to the banksters, but everyone in Wall Street has been sucking from the federal milk cow, as Alan Simpson might put it.
According to the Andrew Ross Sorkin at the NY Times, Obama's support from hedge funds and others on Wall Street is drying up, along with donations, because he is actually trying to add some reforms. It's ironic, of course, because so many have urged the President to go much further and stop the ridiculous use of derivatives and the too-big-to-fail banks that have resulted. In our hostile anti-banking climate, especially in Obama's first year, the mood in America was for genuine banking reform, and it still is. Yet Obama gave banks so much, progressive Democrats were again ignored, and a weak financial reform bill was passed. In reality, Wall Street has rolled over Obama, but the millionaires are still not happy. They bitch about what they see as an onerous federal government (darn those regulations) but only after they have pocketed record bonuses.
What is especially revealing is how many of Wall Street's elite were enamored with candidate Obama. Why? As Sorkin says "The prevailing view is that bankers, hedge fund mangers and traders supported the Obama candidacy because he appealed to their egos...Mr. Obama was viewed as a member of the elite, an Ivy League graduate,... president of The Harvard Law Review — he was supposed to be just like them. President Obama was the 'intelligent' choice, the same way they felt about themselves. They say that they knew he would seek higher taxes and tighter regulation; that was O.K. What they say they did not realize was that they were going to be painted as villains."
Does this not sound like the Republicans of the 1930s when they said FDR was a traitor to his class? The underlying psychological dissonance is unfolding: these are sanctimonious bastards who want money and undying admiration from America. They want to feel envy from us, not disgust. They have clearly convinced themselves they are the masters of the universe and what they do should be applauded. Instead, they see a Democratic President, a well-educated man they thought was enough like them that he could be trusted, publicly chide them. Well, he hurt their feelings, don't you know?
Tuesday, August 31, 2010
Friday, August 27, 2010
There is No Social Security Crisis, Mr. President
There is no social security crisis, so why is President Obama letting Republicans dominate the Deficit Commission, otherwise known as the catfood commission, as if there were? Perhaps you have seen the repugnant Alan Simpson, former Senator for Wyoming, dismissively refer to social security as "a milk cow with 310 million tits." Nice guy. And it overlooks the fact the people spend a lifetime of working, all the while contributing to social security. In other words, people pay into it, but Simpson acts like recipients are addicted to something they don't deserve.
The commission was originally tasked with addressing the federal deficit. That is a semi-legit subject, but a politically dangerous tactic for President Obama because the commission has chosen to concentrate on social security, which is solvent and does not contribute to the federal deficit. Unless, of course, Obama buys into the Republican meme that social security must be cut. It sure seems like it. When you look at the people on the commission, you would think it was Republicans who won in 2008
Jane Hamsher has written a detailed and eloquent piece on the catfood commission (as in what Republicans expect retirees to eat if the commission gets its way). Republican disdain for social security is nothing new, but the real news here is Obama's role. Each party in Congress was able to appoint six of their own to serve. Umm, OK. And then the President appointed six members himself, for a total of 18 members. That seems fair too, yes? After all, Obama said he would keep social security strong, right?
Here is Hamsher on who Obama chose:
" * Chairman Erskine Bowles, described by Business Week as 'corporate America’s friend in the White House.' Bowles had negotiated the deal between Newt Gingrich and Bill Clinton to create 'private social security accounts' where 'taxpayers get some choice as to how to invest their contributions.' The deal fell through when the Monica Lewinsky episode jumped into the headlines.
* As Bowles’ Republican Co-Chair, the President appointed loose cannon Alan Simpson, the former rich kid GOP Senator from Wyoming once famously said that those who were complaining that Social Security needed protection were 'people who live in gated communities and drive their Lexus to the Perkins restaurant to get the AARP discount.'
* Alice Rivlin was appointed by Obama to be chief wonk of the Catfood Commission, a Brookings Institute fellow who had been funded by Pete Peterson and a strong supporter of raising the retirement age to 70 — resulting in a 20% benefit cut to Social Security recipients.
* David M. Cote, the Republican CEO of defense contractor Honeywell"
So Alan Simpson was appointed by Obama. Oh, ferchristssake. But who knows? Maybe David Cotes will suggest that defense contractors help disentangle our military-industrial complex. It could happen, no?
Read all of Hamsher's article , including the role of billionnaire Pete Peterson who has worked for years to turn over social security to Wall Street. And for more background on why social security is not broken and why the arguments of Republican operatives are so disingenuous, see here.
This is discouraging. Obama may give in to deficit hawks on an issue that is supposedly untouchable. And he is doing this just before an election. Funny, ain't it how those who howl about how social security is in crisis, and how we must slash spending to reel in our federal deficit never suggest that maybe we take a look at our monstrously bloated defense budget. Or that we raise taxes on the wealthy.
It wasn't the working class that put the economy in the ditch, and it was not they who got $800 billion in bailouts and then rewarded themselves with massive bonuses, as if they actually made that money. That was our tax dollars.
And they accuse us of class warfare.
The commission was originally tasked with addressing the federal deficit. That is a semi-legit subject, but a politically dangerous tactic for President Obama because the commission has chosen to concentrate on social security, which is solvent and does not contribute to the federal deficit. Unless, of course, Obama buys into the Republican meme that social security must be cut. It sure seems like it. When you look at the people on the commission, you would think it was Republicans who won in 2008
Jane Hamsher has written a detailed and eloquent piece on the catfood commission (as in what Republicans expect retirees to eat if the commission gets its way). Republican disdain for social security is nothing new, but the real news here is Obama's role. Each party in Congress was able to appoint six of their own to serve. Umm, OK. And then the President appointed six members himself, for a total of 18 members. That seems fair too, yes? After all, Obama said he would keep social security strong, right?
Here is Hamsher on who Obama chose:
" * Chairman Erskine Bowles, described by Business Week as 'corporate America’s friend in the White House.' Bowles had negotiated the deal between Newt Gingrich and Bill Clinton to create 'private social security accounts' where 'taxpayers get some choice as to how to invest their contributions.' The deal fell through when the Monica Lewinsky episode jumped into the headlines.
* As Bowles’ Republican Co-Chair, the President appointed loose cannon Alan Simpson, the former rich kid GOP Senator from Wyoming once famously said that those who were complaining that Social Security needed protection were 'people who live in gated communities and drive their Lexus to the Perkins restaurant to get the AARP discount.'
* Alice Rivlin was appointed by Obama to be chief wonk of the Catfood Commission, a Brookings Institute fellow who had been funded by Pete Peterson and a strong supporter of raising the retirement age to 70 — resulting in a 20% benefit cut to Social Security recipients.
* David M. Cote, the Republican CEO of defense contractor Honeywell"
So Alan Simpson was appointed by Obama. Oh, ferchristssake. But who knows? Maybe David Cotes will suggest that defense contractors help disentangle our military-industrial complex. It could happen, no?
Read all of Hamsher's article , including the role of billionnaire Pete Peterson who has worked for years to turn over social security to Wall Street. And for more background on why social security is not broken and why the arguments of Republican operatives are so disingenuous, see here.
This is discouraging. Obama may give in to deficit hawks on an issue that is supposedly untouchable. And he is doing this just before an election. Funny, ain't it how those who howl about how social security is in crisis, and how we must slash spending to reel in our federal deficit never suggest that maybe we take a look at our monstrously bloated defense budget. Or that we raise taxes on the wealthy.
It wasn't the working class that put the economy in the ditch, and it was not they who got $800 billion in bailouts and then rewarded themselves with massive bonuses, as if they actually made that money. That was our tax dollars.
And they accuse us of class warfare.
Tuesday, August 24, 2010
Some Credit is Due, Part II
On August 2nd I posted an article called “A Little Credit, Please.” I made the case that the Obama Administration's decision to support US automakers was proving to be a good idea, not only because the automakers were turning profits, but also because thousands of jobs were saved at the auto plants and at numerous suppliers as well.
Now Jared Bernstein, chief economic advisor to Vice President Biden, has further made the case that the administration did the right thing. In a recent article, Bernstein also emphasizes that thousands of jobs still exist at Chrysler and at its lengthy supply chain. He notes that there are three jobs in the supply chain, at companies producing a huge array of components, for every job at a Chrysler assembly plant. And these companies, and their workers, are in business because Chrysler, along with GM, are in business.
As Bernstein writes, “In the year before we took office, the auto industry shed 431,300 jobs. But in the 13 months since GM and Chrysler emerged from bankruptcy, auto industry employment has increased by 76,300, a huge reversal -- one we'd never have seen had we listened to those urging us to walk away. Of those 76,300 new jobs, close to 40,000 come from the suppliers. That's the fastest year over year growth that they've seen in a decade."
Good job, especially in a recession. One of the biggest obstacles to job creation in this country is the emasculated manufacturing sector. That sector was about to get a whole lot weaker since many, especially the President's Republican opponents, were ready to let the automakers fail --on Obama's watch, of course.
If GM and/or Chrysler, and much of their supply chain, had gone under, with their thousands of employees out of a job, on unemployment, the whole works, do you think Republicans would have made a campaign issue out of it?
They would have loved to, but it ain't gonna happen.
Now Jared Bernstein, chief economic advisor to Vice President Biden, has further made the case that the administration did the right thing. In a recent article, Bernstein also emphasizes that thousands of jobs still exist at Chrysler and at its lengthy supply chain. He notes that there are three jobs in the supply chain, at companies producing a huge array of components, for every job at a Chrysler assembly plant. And these companies, and their workers, are in business because Chrysler, along with GM, are in business.
As Bernstein writes, “In the year before we took office, the auto industry shed 431,300 jobs. But in the 13 months since GM and Chrysler emerged from bankruptcy, auto industry employment has increased by 76,300, a huge reversal -- one we'd never have seen had we listened to those urging us to walk away. Of those 76,300 new jobs, close to 40,000 come from the suppliers. That's the fastest year over year growth that they've seen in a decade."
Good job, especially in a recession. One of the biggest obstacles to job creation in this country is the emasculated manufacturing sector. That sector was about to get a whole lot weaker since many, especially the President's Republican opponents, were ready to let the automakers fail --on Obama's watch, of course.
If GM and/or Chrysler, and much of their supply chain, had gone under, with their thousands of employees out of a job, on unemployment, the whole works, do you think Republicans would have made a campaign issue out of it?
They would have loved to, but it ain't gonna happen.
Thursday, August 19, 2010
They Want Your Pensions, Too
They must really hate the middle class. While Republicans repeatedly go to the mat for corporate profits, outsized bonuses, and favorable tax schemes for the wealthy, they begrudge middle class public sector employees because most have pensions that are still intact.
Economist Dean Baker has a good read on the manufactured outrage with some conservatives who not only want public pensions to be slashed, they blame the recession on them. Baker has a range of good reasons why this is achingly stupid. I will add here that the public sector has not always faired this well; historically it has lagged appreciably behind the private sector. Even so, Baker notes that when age, education, and job skills are fully accounted for, overall pay in the public sector still lags the private. And there is that other little detail; public employees pay into their pension plans year after year. Apparently they are naïve and selfish to expect those pensions to be there when they retire.
If there is a narrowing in the pay difference, surely it is because corporate America has been allowed to ravage private pensions, while having less direct access to those in the public sector. Strong unions have been but one reason. The real problem is not that public pensions are mostly intact, but rather that so many private retirement plans are not.
Economist Dean Baker has a good read on the manufactured outrage with some conservatives who not only want public pensions to be slashed, they blame the recession on them. Baker has a range of good reasons why this is achingly stupid. I will add here that the public sector has not always faired this well; historically it has lagged appreciably behind the private sector. Even so, Baker notes that when age, education, and job skills are fully accounted for, overall pay in the public sector still lags the private. And there is that other little detail; public employees pay into their pension plans year after year. Apparently they are naïve and selfish to expect those pensions to be there when they retire.
If there is a narrowing in the pay difference, surely it is because corporate America has been allowed to ravage private pensions, while having less direct access to those in the public sector. Strong unions have been but one reason. The real problem is not that public pensions are mostly intact, but rather that so many private retirement plans are not.
Sunday, August 15, 2010
Our Looming Lost Decade
Readers will note my byline that says "things are not going to get better." And by "things" I mean the economy specifically, or more generally, the vitality of our nation, its institutions, and its citzens. Yes, it is pessimistic. Here is another bundle of reasons for that pessimism, from Professor William Black, a man who has received some attention in the news because of his testimony before Congress, but not nearly enough (watch the video here. And thanks to Badabing at DailyKos).
Follow the link and take the time to watch the 14 minute video. I will only add here that, among other things, Professor Black refers to Japan's lost decade and how it would not aggressively deal with the debt of the big national banks. He argues the US is setting itself up for its own lost decade.
If we could only get off so light. There are some crucial differences between the two countries, and they do not auger well for us. We are the ones with massive consumer debt, not Japan. We, not Japan, have by far and away the world's largest trade deficit, which many now recognize as deeply structural. We have allowed our trading partners to erode our industrial base; Japan's remains largely intact.
Even our daily government operations are being financed by our economic competitors, including Japan and now most certainly China. The interest on that debt pours into the economies of these other nations. The Japanese government is also deeply in the red. However, the difference is that it does not owe money to foreigners. Interest payments go to Japanese institutions and citizens. Most of it stays in Japan to the benefit of the local economy.
Lastly, we have been completely unable to rein in our hugely expensive warrior class. Our appetite for empire combined with an unwillingness to pay for it will seal our fate.
But hey, you have a good day. A tax cut is what we need, don'tcha know?
Follow the link and take the time to watch the 14 minute video. I will only add here that, among other things, Professor Black refers to Japan's lost decade and how it would not aggressively deal with the debt of the big national banks. He argues the US is setting itself up for its own lost decade.
If we could only get off so light. There are some crucial differences between the two countries, and they do not auger well for us. We are the ones with massive consumer debt, not Japan. We, not Japan, have by far and away the world's largest trade deficit, which many now recognize as deeply structural. We have allowed our trading partners to erode our industrial base; Japan's remains largely intact.
Even our daily government operations are being financed by our economic competitors, including Japan and now most certainly China. The interest on that debt pours into the economies of these other nations. The Japanese government is also deeply in the red. However, the difference is that it does not owe money to foreigners. Interest payments go to Japanese institutions and citizens. Most of it stays in Japan to the benefit of the local economy.
Lastly, we have been completely unable to rein in our hugely expensive warrior class. Our appetite for empire combined with an unwillingness to pay for it will seal our fate.
But hey, you have a good day. A tax cut is what we need, don'tcha know?
Wednesday, August 11, 2010
True Colors
First we had Rahm Emanuel proclaiming those of us who supported a real Democrat, Bill Halter, and not a Republican Lite, and committed corporatist, Blanche Lincoln, were “fucking retards.” Now we hear White House Press Secretary Robert Gibbs showing his true colors by badmouthing not his enemies, but the very people who got his boss elected. The Rude Pundit has a priceless rebuttal to Gibbs that I have reproduced in part.
"...So, let's get this straight, Bobby G. We on the left warned your boss and the Democrats that every time you reached out your hands to the Republicans, those fuckers would just gnaw on 'em. But you kept on with the effort of bipartisanship, watering down bills and watering 'em down. Anyone with a lick of sense knew that the GOP was just setting you up: force 'em to compromise and then make sure that what gets passed does just a scintilla of what could have been done. On bill after bill these mad negotiations occurred, and now you're accusing us of not living in reality? No, really, truly, fuck you, man.
Gibbs also said, "I hear these people saying he’s like George Bush. Those people ought to be drug tested. I mean, it's crazy." You really wanna have this fight? 'Cause when's the last time you called the Tea Party delusional or "crazy." And here's a hint on how to prevent liberals from saying Barack Obama is like George W. Bush: stop acting like Bush. Howzabout an easy one: don't take the same cruel positions as the Bush administration in court cases that continued after Bush was out of office. Howzabout another easy one: do something without compromising, like order a halt to any effort to drum gay soldiers out of the military. Howzabout closing Gitmo, like the President promised endlessly on the campaign trail? Howzabout not saying you have the right to murder Americans abroad at will? Howzabout recess appointing everyone the Republicans are holding up? An aggressive stance towards the GOP ain't just about words, man. Words are worthless. It's action that matters."
Gibbs got a quick dollop of well-deserved criticism. He immediately offered a half apology, but said he stood by his comments. In other words, “I may have said I am sorry, but obviously I am not.”
There is a huge disconnect underway and Gibbs is contributing to it. It is not a matter of Gibbs having misspoken due to frustration. It is the mindset that thinks the liberal vote, you know, the millions who voted for Obama, can be taken for granted. There is growing disaffection among the base for a White House that caves in to the incessant yelping of people who are his committed enemies, but publicly ridicules its supporters.
"...So, let's get this straight, Bobby G. We on the left warned your boss and the Democrats that every time you reached out your hands to the Republicans, those fuckers would just gnaw on 'em. But you kept on with the effort of bipartisanship, watering down bills and watering 'em down. Anyone with a lick of sense knew that the GOP was just setting you up: force 'em to compromise and then make sure that what gets passed does just a scintilla of what could have been done. On bill after bill these mad negotiations occurred, and now you're accusing us of not living in reality? No, really, truly, fuck you, man.
Gibbs also said, "I hear these people saying he’s like George Bush. Those people ought to be drug tested. I mean, it's crazy." You really wanna have this fight? 'Cause when's the last time you called the Tea Party delusional or "crazy." And here's a hint on how to prevent liberals from saying Barack Obama is like George W. Bush: stop acting like Bush. Howzabout an easy one: don't take the same cruel positions as the Bush administration in court cases that continued after Bush was out of office. Howzabout another easy one: do something without compromising, like order a halt to any effort to drum gay soldiers out of the military. Howzabout closing Gitmo, like the President promised endlessly on the campaign trail? Howzabout not saying you have the right to murder Americans abroad at will? Howzabout recess appointing everyone the Republicans are holding up? An aggressive stance towards the GOP ain't just about words, man. Words are worthless. It's action that matters."
Gibbs got a quick dollop of well-deserved criticism. He immediately offered a half apology, but said he stood by his comments. In other words, “I may have said I am sorry, but obviously I am not.”
There is a huge disconnect underway and Gibbs is contributing to it. It is not a matter of Gibbs having misspoken due to frustration. It is the mindset that thinks the liberal vote, you know, the millions who voted for Obama, can be taken for granted. There is growing disaffection among the base for a White House that caves in to the incessant yelping of people who are his committed enemies, but publicly ridicules its supporters.
The result is not that a major chunk of the Democratic base, the most progressive half, will vote Republican. That will not happen. Yet Obama and the people who have his ear don't realize how special the 2008 election was and how many came out to vote because Obama seemed to represent the change they wanted. They did not vote for Obama to make deals with corporate America, nor to let Republicans obstruct and emasculate everything Obama said he was for. Real change takes time, I get that. But the contemptuous attitude of guys like Emanuel and now Gibbs speaks volumes about the Party leadership.
Many who turned out the last election won't be there this November. They will not vote against the Democrats; they just won't vote at all.
Saturday, August 7, 2010
Those Jobs Aren't Coming Back
Numerous reports in the media have spilled ink and electrons alike detailing the difficulty the US and other countries are having getting back on economic track. Mainstream sources are especially prone to argue that debt and the banking system are the twin towers of our economic malaise.
These are undoubtedly major factors: A sick banking system, especially one so dominant as what we have allowed to develop in the US, is a risk to us all. Debt? Yeah, well that is pretty bad too, but it is much harder to quantify and accurately characterize. What is demonstrably false is to insist that federal debt is unwaveringly bad and must be avoided. We'll wait until another day to review the lack of regulation that brought on our banking fiasco. But however one apportions blame, it was not America's underclass, or the middle class, that put the economy in the ditch.
But I digress. A recent article in the Wall Street Journal captures the angst so many feel about the sluggish economy. It notes that countries with relatively strong banking systems, such as Brazil and Chile, have experienced relatively strong job growth.
In the US, huge increases in consumer debt have been steadily climbing to unsustainable levels. As the Wall Street Journal notes, “As of March, U.S. household debt stood at 122% of disposable income, down from a peak of 131% in early 2008 but still well above the 100% economists tend to see as sustainable.” The Journal doesn't say it, but the huge increases in consumer debt were fueled by Wall Street's credit card frenzy, action that was implicitly approved by the federal government. It has taken a recession to get that debt figure down.
In any event, an under-regulated banking system, and the mountain of debt it fostered, are only part of the analysis. There is much missing from mainstream sources, including the WSJ and other cheerleaders for the financial elites, for they hold back, unwilling to acknowledge the core contradiction in their analyses.
Japan was among the other countries the Journal reviewed (based on data from the OECD and the International Labor Organization) Again, the emphasis was on national debt, and the reluctance to hire workers that is supposedly the direct result. The obvious bromide is that Japan can create jobs if would just cut spending.
But Japan has a more fundamental problem, and it is a problem that will only spread. The Japan of today is being compared to the Japan of yesteryear; the post-war era from roughly 1960 to 1990. But that gravy train is over. During that time Japan built up huge overcapacity, encouraged by the knowledge that the US was wide open to imports. The US actually took all that free trade talk seriously, as it demonstrated an unprecedented willingness to sacrifice its manufacturing base. Japan took free trade seriously as well, at least the export half. Along the way, Japan became hugely dependent on the American market to maintain growth.
Regardless of how one cares to assess blame on past US-Japan trade tensions, Japan's ability to export to the US has been compromised by unrelenting competition from its Asian neighbors: First the Asian Tigers (Taiwan, Korea, Singapore, and Malaysia) and more recently China. Huge quantities of merchandize that used to come from Japan now come from somewhere else. And it will likely only get worse. Japan's meal ticket in America will never be as lucrative and wide open as it was up until the end of the 1980s. Japan created fantastic over-capacity because it took full advantage of its access to the American market. That market will never be the low hanging fruit for Japan again. Spending, debt, tax burdens? Those are secondary reasons.
Despite the frantic ranting in the US about debt, stimulus spending, and taxes, others seem unwilling to acknowledge the systemic corner into which we have backed ourselves. Policymakers pretend that there is a painless way out. There is not. The mind reels when one sees that many elected officials actually argue that tax cuts are the solution.
Only two issues remain: how much worse will it get before we turn on our antagonists, and who will feel the pain of adjustment? So far, the answer to the second question clearly are the poor and the middle class; roughly 80-90% of all Americans. Unemployment is high, and it will remain high, because many of the jobs are not coming back. This is the reality that the Obama administration did not create but must face. Much of the stimulus money is being spent on Asian imports, which serves to stimulate their economies, not ours. Corporate America, often with government blessing, has created a massive systemic trade deficit with Asia and much of the world, by abandoning factories, communities, and entire industrial sectors, along with the millions of relatively good paying jobs that went with them. All of this in the name of free trade.
So people will not return to work in this economy as they did in the past because those factories that called them back after previous layoffs have moved abroad. The impact has been masked by the willingness of consumers to take on massive debt. Consumer debt, along with government's own deficit spending, have sustained the economy, but growth will not continue without a healthy industrial base.
The banking debacle may have put the economy in the ditch, but the decay has been well under way for decades. This is a fraudulent economic system and completely unsustainable.
There are clear signs that many people finally get this. And the signs that we will make the painful decisions, and actually stand up to America's plundering elite?
That's not so clear.
These are undoubtedly major factors: A sick banking system, especially one so dominant as what we have allowed to develop in the US, is a risk to us all. Debt? Yeah, well that is pretty bad too, but it is much harder to quantify and accurately characterize. What is demonstrably false is to insist that federal debt is unwaveringly bad and must be avoided. We'll wait until another day to review the lack of regulation that brought on our banking fiasco. But however one apportions blame, it was not America's underclass, or the middle class, that put the economy in the ditch.
But I digress. A recent article in the Wall Street Journal captures the angst so many feel about the sluggish economy. It notes that countries with relatively strong banking systems, such as Brazil and Chile, have experienced relatively strong job growth.
In the US, huge increases in consumer debt have been steadily climbing to unsustainable levels. As the Wall Street Journal notes, “As of March, U.S. household debt stood at 122% of disposable income, down from a peak of 131% in early 2008 but still well above the 100% economists tend to see as sustainable.” The Journal doesn't say it, but the huge increases in consumer debt were fueled by Wall Street's credit card frenzy, action that was implicitly approved by the federal government. It has taken a recession to get that debt figure down.
In any event, an under-regulated banking system, and the mountain of debt it fostered, are only part of the analysis. There is much missing from mainstream sources, including the WSJ and other cheerleaders for the financial elites, for they hold back, unwilling to acknowledge the core contradiction in their analyses.
Japan was among the other countries the Journal reviewed (based on data from the OECD and the International Labor Organization) Again, the emphasis was on national debt, and the reluctance to hire workers that is supposedly the direct result. The obvious bromide is that Japan can create jobs if would just cut spending.
But Japan has a more fundamental problem, and it is a problem that will only spread. The Japan of today is being compared to the Japan of yesteryear; the post-war era from roughly 1960 to 1990. But that gravy train is over. During that time Japan built up huge overcapacity, encouraged by the knowledge that the US was wide open to imports. The US actually took all that free trade talk seriously, as it demonstrated an unprecedented willingness to sacrifice its manufacturing base. Japan took free trade seriously as well, at least the export half. Along the way, Japan became hugely dependent on the American market to maintain growth.
Regardless of how one cares to assess blame on past US-Japan trade tensions, Japan's ability to export to the US has been compromised by unrelenting competition from its Asian neighbors: First the Asian Tigers (Taiwan, Korea, Singapore, and Malaysia) and more recently China. Huge quantities of merchandize that used to come from Japan now come from somewhere else. And it will likely only get worse. Japan's meal ticket in America will never be as lucrative and wide open as it was up until the end of the 1980s. Japan created fantastic over-capacity because it took full advantage of its access to the American market. That market will never be the low hanging fruit for Japan again. Spending, debt, tax burdens? Those are secondary reasons.
Despite the frantic ranting in the US about debt, stimulus spending, and taxes, others seem unwilling to acknowledge the systemic corner into which we have backed ourselves. Policymakers pretend that there is a painless way out. There is not. The mind reels when one sees that many elected officials actually argue that tax cuts are the solution.
Only two issues remain: how much worse will it get before we turn on our antagonists, and who will feel the pain of adjustment? So far, the answer to the second question clearly are the poor and the middle class; roughly 80-90% of all Americans. Unemployment is high, and it will remain high, because many of the jobs are not coming back. This is the reality that the Obama administration did not create but must face. Much of the stimulus money is being spent on Asian imports, which serves to stimulate their economies, not ours. Corporate America, often with government blessing, has created a massive systemic trade deficit with Asia and much of the world, by abandoning factories, communities, and entire industrial sectors, along with the millions of relatively good paying jobs that went with them. All of this in the name of free trade.
So people will not return to work in this economy as they did in the past because those factories that called them back after previous layoffs have moved abroad. The impact has been masked by the willingness of consumers to take on massive debt. Consumer debt, along with government's own deficit spending, have sustained the economy, but growth will not continue without a healthy industrial base.
The banking debacle may have put the economy in the ditch, but the decay has been well under way for decades. This is a fraudulent economic system and completely unsustainable.
There are clear signs that many people finally get this. And the signs that we will make the painful decisions, and actually stand up to America's plundering elite?
That's not so clear.
Monday, August 2, 2010
A Little Credit, Please
I see that Jed Lewison over at DailyKos has raised a point shared by quite a few of us. The mainstream media does not have much to say about American automakers' return to profitability and shows reluctance to give much credit to the crucial role played by the Obama administration. As Lewison posted on Friday:
Detroit's rescue plan cost $60 billion, an amount that is dwarfed by any number of other spending priorities. That amount would not last long in Afghanistan. And it is a tiny fraction of the amount the feds threw at the big banks.
The critics are silent on the number of people employed by the automakers. This means not just the new jobs, but more importantly, the far greater number of jobs that were not lost because Detroit is still in business. Those workers are collecting paychecks, not unemployment. They are paying taxes on that income, a far higher share than most on Wall Street pay.
A relatively high portion of those paychecks goes to main street America. This is an economic reality that Washington's village people ignore. The guy or gal working assembly at one of the myriad Chevy or Chrysler plants receives a paycheck which is then usually deposited in a local bank or credit union, which then loans overwhelmingly to others in that same community. Much of the multiplier effect takes place within the community.
The auto industry also employs many other companies indirectly; e.g., the huge number of component suppliers. These manufacturers are filling orders and maintaining their own employment precisely because Detroit is still in business. Their workers also are paying taxes on their earned income, and they also have multiplier effects that benefit their own communities. It should be obvious that if the automakers went under, many of their component suppliers would have gone under as well.
Those who criticize the White House plan are missing the primary lesson. This is not, and should not be, the subject of an ideological purity test. It was more about doing what you can with what you've got. The benefits to the economy as a whole are direct and profound, for the government's role has returned both GM and Chrysler to profitability, and it has kept many thousands of employees working and not on unemployment.
$60 billion was a bargain.
“President Obama is in Motor City today to focus attention on what he feels is an untold success story: the improving fortunes of American automakers thanks to the administration's decision to use TARP funds to bailout General Motors and Chrysler. Since the administration took action, the auto industry has added 55,000 jobs -- the best growth since 1999.”
Detroit's rescue plan cost $60 billion, an amount that is dwarfed by any number of other spending priorities. That amount would not last long in Afghanistan. And it is a tiny fraction of the amount the feds threw at the big banks.
The critics are silent on the number of people employed by the automakers. This means not just the new jobs, but more importantly, the far greater number of jobs that were not lost because Detroit is still in business. Those workers are collecting paychecks, not unemployment. They are paying taxes on that income, a far higher share than most on Wall Street pay.
A relatively high portion of those paychecks goes to main street America. This is an economic reality that Washington's village people ignore. The guy or gal working assembly at one of the myriad Chevy or Chrysler plants receives a paycheck which is then usually deposited in a local bank or credit union, which then loans overwhelmingly to others in that same community. Much of the multiplier effect takes place within the community.
The auto industry also employs many other companies indirectly; e.g., the huge number of component suppliers. These manufacturers are filling orders and maintaining their own employment precisely because Detroit is still in business. Their workers also are paying taxes on their earned income, and they also have multiplier effects that benefit their own communities. It should be obvious that if the automakers went under, many of their component suppliers would have gone under as well.
Those who criticize the White House plan are missing the primary lesson. This is not, and should not be, the subject of an ideological purity test. It was more about doing what you can with what you've got. The benefits to the economy as a whole are direct and profound, for the government's role has returned both GM and Chrysler to profitability, and it has kept many thousands of employees working and not on unemployment.
$60 billion was a bargain.
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