Posts tagged ‘job creation’

Numbers without any Meaning

President DFF was out spreading lies again this weekend, oh, and using totally misleading numbers. I have discussed before numbers like the national debt which have no meaning whatsoever until compared to our earnings. Example: I only have $10,000 is total debt is meaningless unless we know your income to service that debt. If you are jobless, you are in deep kimchi. National debt has no meaning until we know the nation’s GDP (earnings). This discussion is part of my never-ending crusade to promote critical thinking.

As a project manager I was involved in building the Chemical Demilitarization Facility in Tooele Utah. It was a massive concrete facility to take apart chemical munition and then destroy the chemical nerve agents (and blister agents). Progress and schedule are almost everything in construction (along with safety and quality). So in our monthly progress meeting I am looking at a slide that says the contractor placed 100 tons (I am making these number up) tons of concrete and 40 tons of steel this week (Yes these were heavily reinforced walls). Say what? Big numbers, but meaningless unless you know what was scheduled that month. Numbers are always relative to something else to be meaningful. A restaurant rated as a 5 is only meaningful if you know it is a 10 point scale. If it is a 5 point scale, you may pass over something wonderful.

Obvious right? So there is President DFF out spewing numbers this weekend which he thought were really, really big in his limit vernacular, but were either meaningless or misleading because we don’t have the rest of the story. This is probably okay with the Trumpets as anything he says or does is just peachy. But for the rest of us whose brain has not been eatened by some horrible stupid virus, we need the context. So here is some examples from the NYT this morning fact checking the guy:

“ISIS, we have 98% of the land back.”

True, but what has he done in policy or approach other than continue on Obama Administration policies? Nothing. This is one of his trademark tactics, taking credit for other people’s work as you will see in the following.

“So we’ve created three million jobs since Election Day. Nobody thought that was possible.”

Actually it was totally expected since Obama created 2.6 million jobs during the last 13 months of his administration, and he is taking credit for Obama’s job numbers from November through January which was about 500,000 jobs, so in comparison to Obama he only created 2.5 million jobs. We are on the same curve basically with the same slope.  Where is the massive improvement from the tax cut and slashing regulations?  Oh those numbers.  I guess those of us who did not think that was possible were those of us that thought the economy would crash by now under President DFF, but that is coming.

“African-American unemployment two months ago reached the lowest level in history and last month it went up a little bit, right? And I made the mistake, because I didn’t know it went up, and it wasn’t quite as good but it wasn’t historic. So I was in a different month and I said un employment is the lowest level in history. They killed me. Because it was the previous month. But here’s the good news. The new month brought it down to the lowest level. So now it’s the lowest level.”

Same lie.  He is taking credit for a trend that the economy under President Obama was on, decreasing African-American unemployment steadily from 16.4 percent in August 2011 to 7.8 percent in January 2017, right before Mr. Trump took office.  Get the trend (no pun intended).  And one might ask, as part of critical thinking, what has President DFF done for African-Americans?  What policy directly affected them?  None.  Once again he is taking credit for what his supporters would never give President Obama credit for.

Now here is one that is a lie, and should worry you:

“We spent $7 trillion in the Middle East over a 17-year period, $7 trillion as of three months ago”

First it is false. Best estimate we have according to the NYT is $1.88 trillion between 2001 and 2017.  That is still a lot of money, whose spending started by who again?  No, not Obama, Bush.  The $7 trillion number comes from extending out the costs to 2053 and includes veteran’s care, terrorism-prevention spending, etc.  So first, he does not understand the numbers he is spewing, and second if he is going to get that down are we going to cut veteran’s care and terror prevention?

So the conclusion here is that either he does not understand what the numbers mean, or he does not care and just lies to puff up his ego.  But what is really sad is that I would bet it would not be just the Trumpets who did not get these lies, but a large part of the American public that does not think critically.  Time to start.

Economics on The Cycle, Not Really Economics

Friday’s The Cycle had a segment that is still bothering me.  Now MSNBC’s The Cycle is young and fun, so direct confrontation is highly discouraged.  See, both sides have good arguments so we will just sit here like rocks when somebody says something just beyond stupid.  Well Friday that is what they did in their dueling economists segment where they have liberal Jared Bernstein, and conservative Maryland Economist Peter Morici.  In a discussion of the jobs report and some flag waving about the Obama record on Jobs, Morici claimed that during the Reagan years, the job recovery was stronger.  See Ronald Reagan is his hero.  Jared wasn’t given a chance to rebut this or did not take the opportunity, I am not sure which so I will.

It is true, but that is not the real story.  The cause of the economic recessions were two entirely different circumstances.  As Paul Krugman wrote this morning on a different topic:

The 81-2 recession and the 2007-9 recession had very different causes. The first was caused by tight money, imposed by the Fed to curb high inflation. As a result, there was plenty of room to cut rates (and also pent-up housing demand). The second was caused by private-sector overreach; we came into it with inflation and interest rates already low, so that there was much less room to cut, more or less guaranteeing a slow recovery.

It was a gross misrepresentation of the two situations and comparing them without that distinction would, I think, be intellectual dishonesty portrayed by Morici.  But here is the second point that Paul made that should really make you think.  Our weak recovery is almost directly related to Professor Morici’s conservative GOP that has done everything possible to prevent anything approaching a job’s bill.   “… constrained monetary policy thanks to the zero sort-of lower bound, constrained fiscal policy because of the combination of debt fears and Republican obstruction.”

But the best is yet to come.  Professor Krugman looked at government consumption expenditures and investment, you know that Keynesian thing that Republicans like to deny that says if the government spends, it creates jobs.  And guess what?  Reagan was spending away while Boehner and his boys shut down the government with fear the deficit and implementing austerity across government spending.  Here is the graphic:











So when you actually look at the data, you are not comparing apples to apples and Professor Morici was being spectacluarly dishonest in his snide little comments about the great Ronald Reagan.  We really do need a better media than we get so this kind of stuff cannot go on and mislead most Americans.  For the Cycle hosts, wakeup and do your homework.  Your happy faces are doing more damage than good as you sing kumbaya.

The Economy Part IV

So where have we been? Well in The Economy Part I we showed that most of us think about our government’s financial problems in a Home Budget Analogy (HBA). This analogy fails us in extremely depressed economic times (lowering interest rates and printing money no longer helps the economy) when we try to solve our problems using this model. This model tells us our debt is growing and our revenues are decreasing so we must cut our spending to solve the problem. But the first thing we found out is that the debt is not really our problem and except for the lost revenue due to our depressed times and safety net spending, our spending is not out of line with a healthy economy and a reasonable debt being used to invest in our future.

So if we can get the economy going, our near term debt problem goes away. We don’t have a spending problem, we have a revenue problem (The Economy Part II). In the Economy Part III we looked at where we can generate income and what ailes the economy. It is not a lack of confidence, but a lack of spending because people have restricted budgets operating under their own HBA which is quite appropriate to their situation. They are restricting spending because their incomes are reduced. And what we arrived at is that government spending does create jobs in a depressed economy, austerity, cutting spending, is counter productive, and we are left to see how we can apply this to get the economy moving again.

This is where things get interesting because we have some real systemic problems with the way our economy is structured based upon policies that go back to the Reagan years. We have cut taxes for the very wealthy which is really government spending, and yet where are the jobs? The tax rates are the lowest in 60 years. The wealthy are sitting on oddles of cash. So where is the thriving economy? Well we all believed in that magic flow down thing and that a high tide lifts all boats. So if the wealthy are getting wealthier, we are all benefiting right? Except it didn’t work. It turns out that low tax rates for the wealthy just transfers our country’s wealth to wealthy with no benefit to the rest of us (See the Congressional Research Services Report). Instead we have a middle class that is loosing ground in wages and benefits. More importantly, if this trend continues, they won’t have the buying power to sustain our economy.

Here is the other counter-intuitive thing we are doing that hurts us. Our states are in a rush to the bottom to lower wages and benefits (Right To Work laws) with the idea that it creates a more competitive atmosphere and creates jobs. But the real impact is to lower wages and benefits for all and reduces the total amount of money to be spent in the economy. Their spending is our income and if it is further deflated, in the macro economy, we all loose. Paul Krugman showed us how more and more of the economic pie is going to those who own things (capital) while labor is getting a smaller and smaller bite. It is just another part of the transfer of wealth to the wealthy and disenfranchising the middle class. There is a tide that lifts all boats, but that tide is the middle class and we must find a way to reinvigorate them. As Chrystia Freeland showed us in her book, Plutocrats:  The Rise of the New Global Super-Rich and the Fall of Everyone Else, the lessons of history teach us that as the distribution of wealth becomes more uneven, the economy falters.

So we know stimulus and spending helps and from above we need to realign who gets that help where we will get the most bang for the buck. Well eleminating the tax breaks for the wealthy is a start (revenue). Getting rid of a tax code that favors the wealthy through deductions and incentives to industries that don’t need it would help (revenue). Keeping the tax cuts for the middle class is stimulative because they will spend it. They need it (spending). Investing in infrastructure is an investment in our tomorrow, just like alternate energy, research, education, not to mention bouying up reduce state spending (spending). And it all gets spent creating jobs. So you get the drift. We need to be smart about our economy and stop wasteful spending and spend where it counts.

And that leaves us with one other issue, we will be growing our deficit with this spending. Well maybe. Certainly for the short term. But we are living in extrodinary times where the solution requires creating spending by creating jobs. It is a short term investment in a long term bonanza. Clearly as the economy starts to heat up and private investment starts to increase, government spending can throttle back without hurting the recovery. We can then establish spending levels where we can reduce the deficit and as the GDP grows, the percent of GDP that is debt reduces. When we get near full employment we could do something smart like not cutting taxes (see George Bush for the anti solution) for the rich, maybe raise taxes on the other 98%, and further reduce our debt so that when bad things happen again, we have a pad.

So there is a lot to do and right now our discussion has about everything wrong. Some grand bargain will be about solving the debt problem and austerity will hurt us. We don’t need to cut entitlements, and the real solutions to those growing costs are to implement more efficient systems and approaches utilized around the world instead of our for profit insurance industry, fee for service, and not negotiating drug costs. As the economy grows our Social Security problem is reduced and we can afford to raise taxes to pay for the benefits. Sadly John Maynard Keynes had it right back in the 30s and we have forgotten everything we ever knew. But now you have been reminded of the way forward and have a rational basis for it.

I don’t know what it will take to get people to wake up and recognize this, but I have hope. The horrible massacre in Connecticut has woken most up to the misguided idea that the more guns the better. I can only hope it won’t require that kind of tragedy and suffering to get them to wake up the realities of our economic future. But as a rule of thumb, just assume that if it is Republican, it is wrong headed. Okay, I have done my civic thing, and saved the planet from the evil Republicans. Now I think it is time for maybe a nice Pinot and hold the ones I love close to me, hoping for a better tomorrow.

The Economy Part III

Are you still with me? If you have followed this so far, you are starting to understand that we don’t have a spending problem, we have a revenue problem. In fact we have grossly underspent in critical areas such as infractructure upgrades. In our Home Budget Analogy (The Economy Part I) (HBA) we would have to find a second shift, overtime, or put our kids to work since our expensives are necessary to our future (The Economy Part II). But a government’s revenue is its tax income. It’s tax income is dependent on a growing GDP, so how do we get that going again?

Well now we get to the crux of the issue. To fix the economy we have to understand what ailes it. In my world of engineering we would call that finding the root cause and separating out all the effects so we can fix the real cause. Right now we have a circular argument going on in our political sphere. The argument that is all wrong is that the debt is causing the problem because businesses do not have confidence to invest and hire new employees. So in their minds to solve our problem we must first reduce our debt by reducing expenditures. But as I will show in a minute, when a government reduces it expenditures, it reduces its income, very different from the HBA.

On the issue of whether a lack of confidence in the economy is keeping businesses from creating jobs (the supply argument), we have had much higher debt levels and yet we had a growing economy that solved the problem. And we see some improvement in the economy from the lowering of private debt (having a little more money to spend) and the very slow recovery of the housing industry. That is due to their increased spending, not from any improvement in “confidence”. The real issue here is demand. When people buy things, the economy grows because that is what instills confidence, not some fuzzy idea about government debt. So if spending is the key and people do not have the wherewithal to spend, how do we create it?

Well the whole panic over the fiscal cliff answers that question for you. The panic is over raising taxes (reducing buying power for the majority of Americans) and cutting spending which will result in layoffs. The whole fiscal cliff is reducing the deficit on steroids. If cutting spending cost jobs, then spending that you are cutting creates them. If businesses, who are sitting on massive amounts of cash with interest rates at record lows, won’t invest, government must. Welcome to Keynesian economics. Now this is not a general rule, and when the economy is working normally, a lot of this doesn’t apply. But we are now in a place where this not just a way forward, it is the only way forward.

Okay, so we need more spending by private citizens to buy things and increase the government revenue through a growing GDP. Now in our HBA, increased spending was the last thing you wanted to do. And here is where the HBA really fails. When a government spends in a depressed economy, it results in roughly 1.4 to 1.5 times that amount of spending in the economy. Not only does it allow spending to continue, providing the government an income, but it multiplies it. The same can be said for cutting. When you cut, you reduce federal income by the same multiplication factor. In effect you are creating a vicious cycle where the reduced spending further reduces your income and makes your ability to pay down your debt worse.

So government creates its income by its spending, which in a depressed economy is the primary engine of our economy. If we cut it, we simply reduce our income by more than our cuts were (1.4-1.5 times the cuts), and decrease our ability to pay our debts because we now earn less than we cut. Now these are not normal times. In a normal economy, these effects have very little impact and any loss in jobs can be absorbed in a growing economy. But when the federal government is the only game in town, the spending cuts just make things worse. It is counter-intuitive to the HBA, but there it is.

So the lesson here is that where in the Home Budget Analogy we need to cut our spending and increase our revenue if we can, in the Government model, cutting our spending multiplies our loss in income and hurts the economy on which we depend. That is why even the Republicans agree we need to do something about the fiscal cliff, but they want to cut lifelines in terms of entitlements to solve the debt problem instead of eliminating tax cuts and cutting military spending, just making things worse. Oh, and hanging the costs on the poor and elderly.

If spending helps when our economy is hurt, what spending will be most effective and what do we do about the growing debt in the short term? That is for tomorrow in The Economy Part IV. But think about this. We have shown that the debt in the short term is not the problem and that cutting entitlements and most other spending is counter productive. But the Very Smart People (VSP) as Paul Krugman calls them, which includes many Democrats still tell us we have to come together and both sides give. It’s bullshit because they are still locked into the Home Budget Analogy.

The Economy Part II

So lets start with debt. How much debt is okay and do we really need to pay it off? Well, in our Home Budget Analogy (HBA) we have some hints. When you go to get a loan, mortgage companies looked at your debt to income ratio. The old rule of thumb used to be that your house payment could not exceed 30% of your monthly income. So first we can say that based upon income there is an acceptable level of debt. We will get to what that is in a minute.

So based upon the above, what is an acceptable level of debt for a government and let’s use what the mortgage companies use, a percent of income. Well a country’s income is its Gross Domestic Product (GDP). And like the home budget (at least we hope) our revenues increase over our life so an absolute number is not useful ($1 Trillion Dollars!). So the measure should be percent of GDP. The larger the GDP, the larger our tax revenue, and the larger the amount of debt we can absorb.

Now there are all kinds of complications here in a macroeconomy like does government borrowing compete with private borrowing and therefore it should be kept at a level that does not in fact depress private investment and the resulting tax revenue. I won’t get into the fact that the government can just print the money to pay off these debts raising the fear of inflation. It suffices to say that when the interest rate combined with inflation is below zero and nobody seems to have a problem lending the government money, this makes this idea moot until the economy really takes off again. The issue we are trying to solve is how to get it going again when lowering interest rates no longer does the trick (fiscal policy) and printing money does not cause inflation.

Okay, what is an acceptable level of debt for a country? Well some would say none and I will get to that in a moment, but that ignores the lesson of history where we need to be able to spend in bad times and have a surplus (or very low debt) in the good times. Paul Krugman has looked at this from a historical perspective and a rule of thumb is about 30% to 40% of GDP (See That Terrible Trillion). Note that we have had much worse debt to GDP ratios in the past (WWII to be precise) than we do now. But since we have a much higher ratio than that now, do we have a spending problem? Short term the answer is no and that is explained in Paul’s post where he shows that our spending during normal times is balanced, but all the extra spending is caused by the falling revenues due to the poor economy and safety net expenditures due to the poor economy. As he puts it:

Putting all this together, it turns out that the trillion-dollar deficit isn’t a sign of unsustainable finances at all. Some of the deficit is in fact sustainable; just about all of the rest would go away if we had an economic recovery.”

Secondly, in our HBA, sooner or later we have to reduce that debt so we can live on a reduced retirement income. The old rule of thumb was to zero out that home mortgage. Now we just get it down to nice level we can sell it with enough profit to move into a smaller retirement home/condo/tent. We need to reduce our debt and payments for debt to be able to live on our retirement income. But governments don’t end. The whole idea of a balanced budget amendment ignores the fact that governments have new children (citizens) they have to provide for in the future. As Paul puts it:

“The first thing we need to ask is what a sustainable budget would look like. The answer is that in a growing economy, budgets don’t have to be balanced to be sustainable. Federal debt was higher at the end of the Clinton years than at the beginning — that is, the deficits of the Clinton administration’s early years outweighed the surpluses at the end. Yet because gross domestic product rose over those eight years, the best measure of our debt position, the ratio of debt to G.D.P., fell dramatically, from 49 to 33 percent.”

The point here is simple. Having debt is not only not necessarily bad, but is necessary and quite acceptable. We don’t have a spending problem, at least not in the short term, we have an income problem. In the HBA example think of it as increased expense payments because you have to have cancer treatments if you are going to be around to keep earning an income in the future. So we have a revenue problem not a spending problem and in the HBA we would need to find a second or third job. But government and its income is a whole other animal which we will discuss in the Economy Part III.

What this blog was all about was pointing out that the HBA of reducing our spending to live within our means was not the answer for our government. Living within our means requires more income because the spending is necessary to our future health. So we have to find a way to get more revenue, not cut expenses we can’t live without. See you tomorrow.

Who Said It Best Today: Arianna Huffington

I guess what is driving my me batty is we seem to be so focused on the “cliff” we have forgotten that the whole idea is to create jobs in the economy, not the long term problem with the deficit.  You can’t do both at the same time unless you want a very long slow recovery while lives are wasted.  But all the talk and the media circus is about who can cut the deficit most by increasing taxes and cuts to our critical programs.  I could go on, but Arianna did it so much better than I in her post, #My2k and How to Keep Our Political Debate From Going Over the Cliff.  Here are some excerpts to wet your appetite:

Just look at the current state of the negotiations. President Obama’s proposal — delivered to John Boehner and Eric Cantor last week by Obama’s lead negotiator Tim Geithner — calls for $1.6 trillion in tax revenue over the next 10 years, the majority of which comes from letting the Bush tax cuts expire for those making more than $250,000, along with $600 billion in savings from entitlement and farm subsidy programs, and $800 billion from reduced combat spending. There would also be $200 billion in new spending for unemployment benefits, homeowner mortgage relief, and infrastructure.

Republicans immediately took to their fainting couches. “Right now I would say we’re nowhere, period,”Boehner told Chris Wallace. But, in fact, these were the same terms the supposedly shocked — shocked! — Republican leaders had already heard from the president himself earlier in the year. “Republicans assumed that Obama’s initial offer floated to congressional leaders would go like many others he’s made in the past,” reported HuffPost’s Ryan Grim, “and quickly soften amid staff talks.” But this time, the president held firm…

It’s really great that the president is appealing directly to the people. But why assume that the people will only respond to a direct appeal to their pocketbooks? Why not also appeal to the need to grow the economy, create jobs, rebuild our infrastructure, and yes, even take care of America’s unemployed? Where is the moral imperative — that can help connect us all — to rebuild the country?…

Yes, each day we move closer to “the cliff,” the media will breathlessly report on how the White House and Republicans are defiantly squared off against each other. And on a few issues — primarily tax cuts for the top 2 percent — they are. But if you step back and look at the terms of the debate, it’s still a table set by Republicans — in which the main selling point is $2,000 in your pocket on one side, and an all-out effort to keep more in the pocket of the 2 percent on the other side.

The debate the country should be locked in right now isn’t about the fiscal cliff and the deficit but about the growth cliff and the 20 million unemployed or underemployed Americans. Economic growth for the fourth quarter is expected to be under 2 percent — well below what it needs to be if we’re going to substantially reduce unemployment…

Tax cuts for the middle class are a start, but if President Obama wants the people’s help, he should trust them enough to believe they can understand, and act on, the bigger principles that could actually get the economy moving. Before we get a grand bargain, we need a grander debate, one that’s grand enough to include more than just tax cuts…

If this debate were framed as a growth crisis instead of a deficit crisis, that sort of job-producing infrastructure spending could be the centerpiece of the president’s barnstorming campaign. “We could get more short-term stimulus — and arguably more long-term growth — out of infrastructure investment than out of most of the policies in the austerity crisis,” Ezra Klein writes. “But the guiding principle should be remain the same: The first thing we need to do is boost the economy in 2013.”

It is about growth and jobs.  When are we ever going focus on the real problem instead of letting the Republicans and the Press lead us astray?

Still Not Making Sense

I was listening to a reporter today reporting on the budget negotiations and he said something like this:  “Insiders report that the negotiations will cut over a trillion dollars on the budget.  But that is really only a small portion of the budget so where are the big cuts coming from?  And they are not even addressing the need for jobs.”  Um, are these two things kind of mutually exclusive?  Well not in Republican la la land where cutting will unleash the confidence fairy and business will start hiring and investing even though no one has any money to spend.

But in the real world where the rest of us live, either the government starts spending (hopefully smartly) to create jobs, or they cut, cut, cut to solve the deficit problem.  Knowing the wishy-washy Democrats, they will try to both and neither will be effective.  So we have this schizophrenic message from our media that doesn’t ever look at the underlying confusion of their narrative and then is it any wonder Americans are confused or buy into Republican free ride narrative (cut taxs and everything will be fine).

In this mix, throw in the latest Medicare vote in New York.  The message here is very simple.  In some things socialism is required.  We like it.  Medicare is a government run program and we love it.  The vote reflected what most people know:  The government does a better job of providing health care for our aging population than the private sector.  Having said that, you know what the attack is going to be.  We can’t afford it so we need to find ways to cut it.  It is just another form of the argument that the deficit is out of control and we can do nothing till we reduce the deficit.

So we want Medicare, we are afraid it will break the bank, we want to control the deficit by cutting (including Medicare which we won’t cut), and we need to start creating jobs.  Got a headache yet?  Well here is the real question:  Can we ever do anything about the deficit if we don’t start creating jobs to increase the tax base?  Well the answer is of course not.  We are focusing on the wrong problem which is actually an effect of the problem, an economy that is lack luster and tax cuts that emptied the treasury.  But the conventional wisdom in the media is the debt is everything or a schizophrenic view describe above.

But there is a voice out there beside me and other Econ 101 “A” students who are starting to raise the question about the deficit and how big a problem it really is.  That would be Sally Kohn who asks all the right questions to make you start really thinking about your assumptions about the debt problem (USA Today op-ed: “Don’t Believe the National Debt Hype”).  To quote Sally:

Critics of government often say public institutions should be run more like efficient, profit-driven businesses. In that case, it’s time to end the ideological attacks on our federal debt and let our government borrow the same way America’s best businesses do. The dividends will come back to all Americans — not just in dollars but also in better schools, better health care and retirement, new roads, safer streets and greater prosperity for all.

In the meantime, the only interest we should worry about is our national interest.”

My thought is that we need to decide which way we want to go soon.  Our schizophrenia has paralyzed us and we need to pick a path and get on with it.  For my money there is only one path that will work, and that is investing in our future.

A New Stimulus Package and Conservative Obstructionism

Remember that our conservative friends were totally against the stimulus bill.  Then they loaded it up with tax breaks saying that only creating private sector jobs would do any good.  Now they are saying it failed to create the number of jobs promised.  Apparently all those tax breaks weren’t all that effective.  What was effective were the jobs that were not lost in each of the states, especially teaching jobs due to stimulus money.  So let’s just think this through.  You know, apply logic instead of emotion and ideology.  Remember that except for three Republicans, the rest wanted to do nothing.  “Let them eat cake.”

First of all let’s look at cutting taxes to stimulate the economy.  If we were in a mild recession, this might not be a bad idea.  If people weren’t loosing their jobs, then giving business an incentive to hire or replace equipment might be an effective way to stimulate demand.  But in the current situation, there is no demand because the economy is shrinking* and people are losing their jobs.  Why would I hire someone or replace equipment for demand that does not exist?  In other words, in an extreme recession, why would I take the risk on expansion when there is no one to buy my increasing inventory?  I would venture that if you made the tax rate 0% right now, it would not have any impact except on Wall Street where they bet on derivatives, not create capital for new businesses.

Let’s just take little old me as an example.  When I get a consulting check, I sock 37% away for taxes that I have to pay quarterly.  37% is what I have computed over the years to make sure I don’t owe anything come April.  Now if you reduced my taxes from earnings to zero I would have a nice chunk of change I could spend, and so the theory goes, I would stimulate the economy with this spending.  The trouble with this simple minded conservative thinking is I would not spend it.  Times are tough and I am not sure when the next job is coming so I want as much money stashed away as possible as a pad for the future.  No stimulus there. This is generally what economists will tell will happen with tax cuts in a severe recession, but if the only thing you know how to say is tax cuts, then, well, you prescribe it no matter what.  It’s all you got.

So if demand is shrinking, and tax cuts are not going to stimulate private spending, what you have left is public spending.  Oh how conservatives hate this.  The usual complaint is two parts.  It increases the deficit and government jobs are not real jobs that sustain the economy.  So let’s take one at a time:  It is very true that this spending will raise deficits, but so will tax cuts.  Either way the effect is the same on the deficit and our treasury.  Oh but private jobs are self-sustaining while government jobs are dependent on continued spending.  Well, yes and no.

First of all there are no private jobs to be had and they are shrinking.  So the government has a couple of choices.  It wants to stimulate the economy by giving the economy money that will be spent.  That means you give it to people that will spend it, people on the margins.  That generally means you fund state programs.  That is why the job numbers created are teacher’s jobs that would have probably been cut.  You also fund help for indigent (social programs) and that money is also spent.  Is that stimulative?   Of course it is since those people spend money that fuels private sector jobs.  Without it, many more jobs in the private sector would have gone away just further shrinking the demand and the problem.  Same result is achieved with construction/infrastructure projects.  The benefit of this kind of spending is that not only do you at least keep the economy working, you get something for your money, either in your kid’s education (teachers jobs), or needed infrastructure improvements.

To the question of are these make-work jobs that are dependent on continued government spending, the answer is not really.  The government is trying to maintain the services and infrastructure improvements to stimulate the economy until the tax base can once again support these critical services.  The private sector is moribund.  There is no other option.  Well that’s not quite true.  You can follow the conservatives lead and just let the economy collapse and sooner, or more likely later, things will restore themselves.  The collateral damage is not their concern.

Their concern and bogeyman is the deficit.  Okay it is a concern.  But they don’t bat an eye about billions for Iraq and Afghanistan, they don’t see the defense industry as a government program, and they wouldn’t hesitate to cut education, health care, or whatever to support these giant programs.  I don’t think it means a hill of beans to have the strongest military in the world if our economy is a shambles.  Is the deficit something we should worry about?  Of course, but right now we have to get things moving or the deficit is going to get much worse than what this spending will cause.  Later on we will have the fight with conservatives once again to set reasonable tax rates to pay off the borrowing we need to do today.  It is called shared sacrifice which is totally alien to their mind set.  They are on the wrong side of almost every issue because their ideology has constipated their brains and of course the status quo (those that got rich in the existing climate) pays them not to think.

And yes we need another stimulus, as the first one was too small and not targeted to things that would fuel the economy with spending.  Thank you conservatives for that.  That includes some of those moron conservative Democrats that the press continues to falsely refer to as moderates.  This stimulus package or whatever they want to call it, ought to be more focused, to help those out of work (extending unemployment) and real investments in tomorrow. Forget about bipartisanship because the conservatives will try to keep anything from happening.  They will scare the rabble with the fear of deficits while setting the country up to bankrupt the poor.  Nothing ever changes and you would think sooner or later people would wake up to going nowhere.

*While the economy grew 3.5%, most of that was due to replacement of inventory, reduction of workforce , and longer work hours, while unemployment continued to increase.  Even the Stock Market has figured this out as it fell on the weak outlook.  Things are going to get worse, not better without a new stimulus plan.

Obvious Truths

Apparently Bill Maher was on CNN a couple of weeks ago and when asked if he thought Sarah Palin could be elected President, he said, “I hope not, but I would not put anything past this stupid country.” This started a landslide of hate mail and he responded to it with a new rule, “Just because this country elects a smart President doesn’t make this a smart country,” and a wonderful essay about the level of stupidity in this country (Bill Maher: New Rule).

Of course I am watching the health care “debate” and I believe his argument is moot because the level of stupidity is obvious.  What is on display are amazingly stupid people who lack the critical thinking skills to evaluate and separate lies and propaganda from real issues.  I watched a Democratic Congressman from Texas asked his Town Hall gathering who were dead set against a single payer system, how many were on Medicare.  About three-quarters raised their hands.  Then he asked them how many of them had healthcare that was financed by the government and only a few raised their hands.  This is the very definition of ignorance and stupidity.  With that level of ignorance, debate is hopeless.

What I really love is our media keeps repeating that the support for President Obama’s health care plan has fallen, while proponents of the plan urge Democrats and the grass roots support that elected President Obama to get out and support the plan.  Here is my question:  DOES ANYBODY KNOW WHAT IS IN HIS PLAN?

The answer of course is an emphatic NO because he has left it to Congress to craft it and it is in hiding.  That is why there is falling support, the grass roots haven’t come out, and the know-nothings are controlling the debate.  I would highly recommend a frontal assault on the know-nothings, but you have to have a plan to defend and right now the White House strategy is failing badly.  Pick one Mr. President, but pick a plan we can fight for, not some watered down plan meant to preserve the status quo and the profits for the industry.

But I digress.  In an editorial this morning by Charles Blow (Health Care Hullabaloo), he used the phrase, “Belligerence is the currency of the intellectually bankrupt” to describe what is going on out in the hinterlands.  The fact that so many can be swayed by this type of “logic” makes me fear for the future of this country.  What I do see at most of these Town Hall meetings, sadly, are mostly fat ignorant white people who are going to be most hurt when they no longer can afford their health care.  And sadly many speakers had that southern drawl that characterizes a particularly ignorant portion of our country.  Actually, ignorant may not be the right characterization, but racist might be more appropriate.  The ignorant are the easiest to whip up into a frenzy as you stoke their fires of fear.  This particular fire is change and people different from you.  One woman before the podium was weeping and said they had stolen her country.  Yep, we need to return to the good 60’s where those blackies and other off color people new their place and the country was full of injustice.

Anyone who reads or thinks knows this country is in decline and has been for sometime.  There was an interesting story in the business pages of the New York Times about the fact that job growth over the last 10 years has been infinitesimal (Job Growth Lacking in the Private Sector)

You mean that after all those tax cuts during the Bush years, we barely created any jobs? This is not a trend we want to keep up.  It is time to take a new path and try something different.  But what we are seeing is a Republican Party that is firmly planted in the past and is bought and paid for by those that do benefit from our current economic path (the rich and the corporations).  Their offering to the public is no change, fear of change, and “small town values”.  “I got mine, screw you.”  It is anti-intellectual, irrational, and destined for failure.  But apparently large portions of our population are ignorant and easily scared into believing this nonsense.

Probably what is most sad is that the people who will suffer the most from continuing our failed approaches to the economy, health care, energy, climate, you name it, are the same people who are bellowing for no change.  How do you actually have a rational debate with these people, I have no idea.  But I am in my frontal assault mode and I would like to see both the press and the Democrats take them on and belittle stupid people.  Unless we are willing to point out their stupidity, embarrassed and more importantly debunk their hysteria, we are likely to continue down the same path that has got us nowhere in the last 30 years (Ronald Reagan on).

I hope we are up to the challenge.  As I get older, I am becoming less tolerant of stupidity and people who don’t read or think. After watching the Town Hall “debates”, maybe more people ought to be less tolerant of this intolerance.  More people ought to confront this level of ignorance head on.  Apparently Bill Maher will.  Thank you Bill.  Your honesty is so refreshing.