Tag Archives: Unemployment

Two Pieces of Good News from Washington

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Speaker of the House John Boehner allowed a straightforward “clean vote” on raising the debt ceiling instead of holding the world economy hostage again. Many right-wingers are outraged. Maybe one day Congress will get rid of the debt ceiling altogether, since raising it merely allows the government to borrow money to pay bills Congress has already approved.

Secondly, Janet Yellen testified before Congress for the first time in her new role as chairman of the Federal Reserve. It’s hard to understand why President Obama initially seems to have preferred someone else for the job. There is a nice, clear summary of her testimony from John Cassidy at the New Yorker. This is his conclusion (calling her “dovish” means she’s not an “inflation hawk”, i.e. fighting inflation isn’t her one big priority):

She’s a historic figure. I am not just referring to her gender. I’m talking about her approach to policy making, and the emphasis she puts on creating jobs and reducing unemployment. “Since the financial crisis and the depths of the recession, substantial progress has been made in restoring the economy to health and in strengthening the financial system,” she said toward the end of her prepared remarks. “Still, there is more to do. Too many Americans remain unemployed, inflation remains below our longer-run objective, and the work of making the financial system more robust has not yet been completed.”

It’s been a long time since we’ve had a Fed chief come to office declaring that unemployment is too high, inflation is too low, and that we need to keep those Wall Street bounders in check. (Bernanke ended up saying some of these things, but he didn’t start out saying them.) In a post last year, I suggested that Yellen could be the most dovish Fed boss since … the Great Depression, and I noted that, “if Yellen does take over from Bernanke next February, there’s no reason to doubt that concern for the unemployed will remain her leitmotif.” Nothing she said today was inconsistent with that description.

The Usual Fear Mongering Baloney

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Fox News headline: “ObamaCare could lead to loss of nearly 2.3 million US jobs, report says”.

Speaker of the House John Boehner tweets: “Pres. Obama’s [health care law] expected to destroy 2.3 million jobs”.

What the Congressional Budget Office really said:

CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor — given the new taxes and other incentives they will face and the financial benefits some will receive….the largest declines in labor supply will probably occur among lower-wage workers….

The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in business’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking, but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week)….

In other words, some people, especially low-wage workers, will decide to work less because of the ACA, mostly because of the benefits they’ll receive.

I don’t know why those who wrote the report believe this will result in fewer hours being worked. In the case of anyone but the self-employed, employers will presumably still want someone to work those hours. As the supply of labor declines, the demand for labor should increase, resulting in rising wages for some workers and job openings for others (and, of course, low wages and unemployment are still two of our major problems). 

You might even argue (incorrectly) that everybody should work as much as possible, because that’s the capitalist way. That’s very different, however, from saying the ACA is going to destroy millions of jobs. 

As usual, Paul Krugman offers thoughtful commentary on the economics and the social impact here and here.

It’s the Austerity and Lack of Trust

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The chart below shows government spending after our last four recessions (that’s total federal, state and local spending, corrected for inflation, with the numbers at the bottom representing yearly quarters after the recessions).

After three recessions, government spending went up. After the most recent recession, it’s gone down:

blog_austerity_state_local_federal_spending_0

It makes sense for families to cut spending if they run into economic difficulty, but it makes no sense for the government to do the same. In situations like we’re in now, the government has to counteract the natural tendency of families and businesses to cut back when economic times are hard. Common sense and economic theory tell us the government should spend more after a recession in order to help the economy recover, even if that means increasing government debt until things get better. Yet we’ve been following the opposite policy the past few years. The result has been a relatively weak recovery that has left too many Americans unemployed and underemployed.

Why have we acted so stupidly? The obvious answer is that there were Republicans in the White House after those earlier recessions. Now there’s a Democrat. That’s why Republicans in Congress supported government spending after the earlier recessions, but have vigorously opposed it this time. (After all, Republicans love certain kinds of government spending, despite what they claim.) Hypocrisy, foolishness, the desire to recapture the White House, combined with the failure of Democrats to make the case for more stimulus. It’s all those things and more. 

The chart is from “How Austerity Wrecked the American Economy” at Mother Jones. The author updates the story here.

Meanwhile, Paul Krugman sees a connection between the declining acceptance of evolution among Republicans and their rejection of stimulus spending: in order to be a good Republican these days, you have to deny climate change, evolution and modern economics.

Another economist who has repeatedly pointed out the stupidity of what we’ve been doing is Joseph Stiglitz. In a New York Times article called “In No One We Trust”, he explains how we’re losing trust in each other and our institutions as inequality increases. The article is especially interesting when he shows how a lack of trust and an excess of bad behavior got us into the economic mess we’re still trying to get out of:

Trust is becoming yet another casualty of our country’s staggering inequality: As the gap between Americans widens, the bonds that hold society together weaken. So, too, as more and more people lose faith in a system that seems inexorably stacked against them, and the 1 percent ascend to ever more distant heights, this vital element of our institutions and our way of life is eroding….

The banking industry is only one example of what amounts to a broad agenda, promoted by some politicians and theoreticians on the right, to undermine the role of trust in our economy. This movement promotes policies based on the view that trust should never be relied on as motivation, for any kind of behavior, in any context. Incentives, in this scheme, are all that matter.

Moe Should Have Watched “The Wire”

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David Simon, the creator of The Wire, spoke recently at a conference in Australia. The Guardian has an edited transcript of his talk here. Some selected paragraphs:

You know if you’ve read Capital or if you’ve got the Cliff Notes, you know that [Marx’s] imaginings of how classical Marxism – of how his logic would work when applied – kind of devolve into such nonsense as the withering away of the state and platitudes like that. But he was really sharp about what goes wrong when capital wins unequivocally, when it gets everything it asks for.

That may be the ultimate tragedy of capitalism in our time, that it has achieved its dominance without regard to a social compact, without being connected to any other metric for human progress.

From this moment forward unless we reverse course, the average human being is worth less on planet Earth. Unless we take stock of the fact that maybe socialism and the socialist impulse has to be addressed again; it has to be married as it was married in the 1930s, the 1940s and even into the 1950s, to the engine that is capitalism.

Mistaking capitalism for a blueprint as to how to build a society strikes me as a really dangerous idea in a bad way. Capitalism is a remarkable engine again for producing wealth. It’s a great tool to have in your toolbox if you’re trying to build a society and have that society advance. You wouldn’t want to go forward at this point without it. But it’s not a blueprint for how to build the just society. There are other metrics besides that quarterly profit report.

And that’s what The Wire was about basically, it was about people who were worth less and who were no longer necessary, as maybe 10 or 15% of my country is no longer necessary to the operation of the economy. It was about them trying to solve, for lack of a better term, an existential crisis. In their irrelevance, their economic irrelevance, they were nonetheless still on the ground occupying this place called Baltimore and they were going to have to endure somehow.

Moe really should have watched The Wire.

Pope Francis on Economic Tyranny and the “Deified Market”

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Pope Francis I has issued his first apostolic exhortation to the “bishops, clergy, consecrated persons and the lay faithful”. It’s called Evangelii Gaudium (“The Joy of the Gospel”). 

The most joyful part for many of us will be his comments on the global economy. He wants the world to say “No to an economy of exclusion”, “No to the new idolatry of money”, “No to a financial system which rules rather than serves” and “No to the inequality which spawns violence”.

Will his words affect those of us, Catholic or not, who would rather cut food stamps than regulate banks? Probably not, but it’s still great to hear the Pope talk like a Christian.

Quoted at length from the Vatican’s website:

53. Just as the commandment “Thou shalt not kill” sets a clear limit in order to safeguard the value of human life, today we also have to say “thou shalt not” to an economy of exclusion and inequality. Such an economy kills….Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.

Human beings are themselves considered consumer goods to be used and then discarded. We have created a “disposable” culture which is now spreading. It is no longer simply about exploitation and oppression, but something new. Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer society’s underside or its fringes or its disenfranchised – they are no longer even a part of it. The excluded are not the “exploited” but the outcast, the “leftovers”.

54. In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase; and in the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us. 

55. One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf … has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.

56. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule. 

57. Behind this attitude lurks a rejection of ethics and a rejection of God. Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. It is felt to be a threat, since it condemns the manipulation and debasement of the person. In effect, ethics leads to a God who calls for a committed response which is outside of the categories of the marketplace. When these latter are absolutized, God can only be seen as uncontrollable, unmanageable, even dangerous, since he calls human beings to their full realization and to freedom from all forms of enslavement. Ethics – a non-ideological ethics – would make it possible to bring about balance and a more humane social order. With this in mind, I encourage financial experts and political leaders to ponder the words of one of the sages of antiquity: “Not to share one’s wealth with the poor is to steal from them and to take away their livelihood. It is not our own goods which we hold, but theirs”.

58. A financial reform open to such ethical considerations would require a vigorous change of approach on the part of political leaders. I urge them to face this challenge with determination and an eye to the future, while not ignoring, of course, the specifics of each case. Money must serve, not rule! The Pope loves everyone, rich and poor alike, but he is obliged in the name of Christ to remind all that the rich must help, respect and promote the poor. I exhort you to generous solidarity and a return of economics and finance to an ethical approach which favours human beings.

59. Today in many places we hear a call for greater security. But until exclusion and inequality in society and between peoples is reversed, it will be impossible to eliminate violence. The poor and the poorer peoples are accused of violence, yet without equal opportunities the different forms of aggression and conflict will find a fertile terrain for growth and eventually explode. When a society – whether local, national or global – is willing to leave a part of itself on the fringes, no political programmes or resources spent on law enforcement or surveillance systems can indefinitely guarantee tranquility. This is not the case simply because inequality provokes a violent reaction from those excluded from the system, but because the socioeconomic system is unjust at its root. Just as goodness tends to spread, the toleration of evil, which is injustice, tends to expand its baneful influence and quietly to undermine any political and social system, no matter how solid it may appear. If every action has its consequences, an evil embedded in the structures of a society has a constant potential for disintegration and death. It is evil crystallized in unjust social structures, which cannot be the basis of hope for a better future. We are far from the so-called “end of history”, since the conditions for a sustainable and peaceful development have not yet been adequately articulated and realized.

60. Today’s economic mechanisms promote inordinate consumption, yet it is evident that unbridled consumerism combined with inequality proves doubly damaging to the social fabric. Inequality eventually engenders a violence which recourse to arms cannot and never will be able to resolve. This serves only to offer false hopes to those clamouring for heightened security, even though nowadays we know that weapons and violence, rather than providing solutions, create new and more serious conflicts. Some simply content themselves with blaming the poor and the poorer countries themselves for their troubles; indulging in unwarranted generalizations, they claim that the solution is an “education” that would tranquilize them, making them tame and harmless. All this becomes even more exasperating for the marginalized in the light of the widespread and deeply rooted corruption found in many countries – in their governments, businesses and institutions – whatever the political ideology of their leaders.