Thursday, July 28, 2011

Goldman Sachs (!) debunks "growth through austerity"

Via Jared Bernstein, we get this "note" from Goldman Sachs' researchers:
“A review of the spending and tax data at the federal, state, and local level suggests that a significant part of the weakness in economic activity in 2011 so far is due to fiscal retrenchment. In the first quarter, the Commerce Department estimates that spending cuts at the federal, state, and local level subtracted 1.2 percentage points from the annualized pace of real GDP growth; moreover, the expiration of the “Making Work Pay” federal tax cut and hikes in state taxes probably offset most, if not all, of the boost to disposable income from the temporary payroll tax cut.
In the second quarter, the fiscal policy impact was probably smaller, but still negative. Indeed, monthly data on defense spending, state and local employment, and state and local construction all show a clear downward trend for 2011 so far.”
Let's repeat that. According to Wall Street giant Goldman Sachs' research: "A review of the spending and tax data at the federal, state, and local level suggests that a significant part of the weakness in economic activity in 2011 so far is due to fiscal retrenchment."

Swine casting pearls?  We'll take 'em.

"The Age of Austerity Is Here"

Talking Points Memo:
Are reports of his death exaggerated?
Whatever the outcome of Thursday's projected House vote on Speaker Boehner's debt plan, this process has already ended the political life of one prominent member of the Washington establishment: John Maynard Keynes.

True, Keynes died in 1946. But his ghost hovered over America's economic debate until pretty much Monday night. At that time, in their ostensibly dueling speeches, both President Obama and House Speaker Boehner embraced the language of "austerity" and performed an unwitting exorcism...

On Monday night even House Minority Leader Nancy Pelosi - for so long demonized by the right as the smiling face of big government - released a pro-austerity statement. That's a clear sign which way the wind is blowing.
Read the entire TPM piece by Thomas Lane HERE for a good, relatively brief backgrounder on our current political - and economic - quagmire.

Update note: A commenter at TPM points out"The death of Keynes is due almost solely to a quasi-religious movement of free-market fundamentalist that is bank-rolled by billionaires. It is not based on data. It is not based on the dominant views in the academia, most economists and others social scientists believe that austerity in a recession is foolish...(T)his is something much closer to the victory of zealous religious movement with very powerful friends. The reason they offer the same solution to every problem--tax cuts and deregulation--is that they have larger social goals that have nothing to do with empirical facts or what is needed to help America. It is about changing America to match their Ayn Rand gospel."

Via Balloon Juice

The crisis within the crisis - staggering unemployment, with "recovery" centered in low-wage jobs

Steven Greenhouse at "NYT Economix"
(A new) report by the National Employment Law Project, a liberal research and advocacy group, found that while 60 percent of the jobs lost during the downturn were in midwage occupations, 73 percent of the jobs added since the recession ended had been in lower-wage occupations, like cashier, stocking clerk or food preparation worker.

According to the report, “The Good Jobs Deficit,” the number of jobs in midwage and high-wage occupations remains significantly below the prerecession peak, while the number of jobs in lower-wage occupations has climbed back close to its former peak.

Net change in occupational employment during and after the Great Recession.Source: National Employment Law Project analysis of Current Population SurveyNet change in occupational employment during and after the Great Recession.
“During the Great Recession, employment losses occurred across the board, but were concentrated in midwage occupations,” the report said. “But in the weak recovery to date, employment growth has been concentrated in lower-wage occupations, with minimal growth in midwage occupations and net losses in higher-wage occupations.”
 And for those low wage workers, there's additional bad news:
For workers in lower-wage occupations, median wages fell 2.3 percent after inflation — partly because many of the newer workers hired had lower wages than others in that group. For workers in midwage occupations, wages slipped by 0.9 percent, while there was some good news for workers in higher-wage occupations — their wages rose by 0.9 percent.
It looks like the carving out of the middle-class and the rise in income inequality continues apace...