Jobs and 2012

The New York Times has an extensive piece up today headlining that job numbers are key to President Obama's re-election.  It's sobering, to say the least. No President since Franklin Roosevelt has won another term with unemployment as high as it is today and no doubt will be next year - a historical trend that the President must overcome to keep his own job.  The central question is really will Americans believe in November 2012 that the President has done not just some of the right things to fight unemployment but all that he could.

Politics are what they are in today's climate - and have become particularly toxic and stagnant since the huge mid-term loss of Congress by the Democrats. I understand the limitations of "should" versus "could."  But, as a supporter of the President, I have to ask myself whether jobs have really been the central focus of the administration. Has everything been proposed that actually might have had a chance of passage when the Democrats controlled Congress - or that was at least worth more of a fight? And even if every proposal obviously couldn't get passed, isn't putting forward a clear policy to attack unemployment also good politics?

If an Obama supporter such as myself is not sure that attacking lingering unemployment has been at the top of the White House's economic agenda, the President has a problem. (Of course, as it happens, the Democrats have their perennial Ace in the Hole for 2012 - the GOP's lack of credible alternatives and remarkable ability to over-reach in their anti-government radicalism.  Will this blowback carry the Democrats through 2012?  Some days I think the radicalization and extremism of the GOP is all the Democrats, as a disparate coalition from Blue Dogs to Progressives, have got holding them together.)

According to the story quoted below, there is nothing of substance currently on the table - the Fed has reverted to a "priority" of fighting inflation, although core inflation (price increases not reflective of volatile shifts in global oil and agricultural  commodities markets but related to inflationary wage pressures and "too much money") is virtually non-existent.

And the White House appears to have reverted to tinkering with corporate taxes in concert with the GOP, to "restoring business confidence" - whatever that means - and promoting exports to China. That's it.

Putting Americans back to work is the central issue of 2012, and the weak record of the past several years is not reasssuring. The story this Times article tells should become a clarion call for Democrats and the White House moving forward:

Roughly 9 percent of Americans who want to go to work cannot find an employer. Companies are firing fewer people, but hiring remains anemic. And the vast majority of economic forecasters, including the president’s own advisers, predict only modest progress by November 2012.

The latest job numbers, due Friday, are expected to provide new cause for concern. Other indicators suggest the pace of growth is flagging...

But the grim reality of widespread unemployment is drawing little response from Washington.

"A Needless Housing Collapse"

Here's an antidote to the notion that has been aggressively pushed by such sources as the Wall Street Journal's op-ed page and  CNBC's Larry Kudlow that the mortgage crisis was the fault of borrowers and the government, rather than primarily a market failure and eventual collapse triggered by private lending agents who found ways to make short-term profits from aggressively pushing bad loans. The article also shows a promising policy moving forward for borrowers who are in trouble.

From Alyssa Katz at Think Progress:

John Smith's four-bedroom house stands tall on Cleveland's East Side, its tidy cream siding and green lawn oblivious to the devastation that has scarred the surrounding neighborhood. It is everything thousands of foreclosed homes in the area are not: occupied, intact, and still an asset to the family that lives in it. Smith purchased the home in 2005 through a nonprofit dedicated to repopulating the city with working- and middle-class homeowners. But Smith's investment was one of a few drops in a bucket with no bottom: The census tract he lives in, with about 600 homes, has seen more than 200 foreclosure sales in the past 15 years. "We know the inner city is the inner city, and it's no big surprise to us," Smith says. But even he is stunned at the level of devastation around him. "Whole neighborhoods are almost totally down."

The Smith family has come close to the precipice. In 2008, Smith, then 38, lost his job as a financial analyst for a bank and had trouble paying his mortgage. His credit-card debt shot into six figures. When his lender initiated foreclosure proceedings that December, the notice was a month late because the bank did not have the correct address on file for its own borrower.

The GOP's "cut taxes" litany ignores reality

The GOP's knee-jerk response to every problem is "lower taxes."  We hear it over and over and over again. Tax cuts are the cure-all.  And in response to the deficits that their fetish for tax cuts has created, the notion of raising revenue is the only option that is forbidden in this dogmatic agenda. Anything else, no matter how noxious or insane, is "on the table" - which is why we've got proposals like killing Medicare being floated.

The biggest lie in the GOP's "cut taxes" litany is that high taxes are causing unemployment, and that further cutting taxes for wealthy "job creators" is the key to recovery.  But the reality is that effective  tax rates are already the lowest they've been since before the Korean War. 

Bruce Bartlett at New York Times "Economix":

Historically, the term “tax rate” has meant the average or effective tax rate — that is, taxes as a share of income. The broadest measure of the tax rate is total federal revenues divided by the gross domestic product.

By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.

The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984.

In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.

Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again.

An old-fashioned banker talks straight about the banking sector as a "virtual casino"

Joe Nocera at the New York Times on "The Good Banker":

For nearly 30 years, (Robert G.) Wilmers has run the M&T Bank, based in Buffalo. When he took it over, M&T had $2 billion in assets; today, its assets exceed $68 billion, and it’s one of the most highly regarded regional bank holding companies. It has also been one of the best performing stocks in the Standard & Poor’s 500-stock index; indeed, M&T was one of only two banks in the S.& P. 500 that didn’t cut its dividend during the financial crisis….

Wilmers, it turns out, is that rarest of birds: a banker willing to tell harsh truths about banking. That, for instance, much of the money the big banks earn comes from trading profits “rather than the prudent extension of credit that furthers commerce.”  ...   “It has become a virtual casino,” (according to Wilmers.)  “To me, banks exist for people to keep their liquid income, and also to finance trade and commerce.” Yet the six largest holding companies, which made a combined $75 billion last year, had $56 billion in trading revenues. “If you assume, as I do, that trading revenues go straight to the bottom line, that means that trading, not lending, is how they make most of their money,” he said.

"Them that's got shall get, them that's not shall lose..."

Pat Garofolo at Think Progress has it:

Between 2000 and 2009, American workers experienced a “lost decade,” with incomes falling nearly five percent... Big bank CEO’s, meanwhile, made an average of $19 million per year between 2001 and 2010 (according to) Fortune's Colin Barr... :

Over the past decade the too-big-to-fail banks have showered a staggering $1.15 billion in cash and stock on a changing cast of hard-charging if inept chief executives, according to regulatory filings. That works out to an average paycheck of $19 million a year – this in a decade in which the biggest banks ripped off everyone in sight on their way to very nearly turning the lights out on the U.S. economy...

It’s not only in the banking industry that CEO pay has come roaring back. In 2010, median CEO pay climbed 27 percent. Median CEO compensation last year was $9 million, the highest since 2007, while the average CEO bonus grew by nearly 20 percent. CEOs at America’s largest companies now earn 343 times more than the typical worker. In 1970, the average CEO earned 28 times as much as the typical worker.

This disparity is contributing towards America’s sky-high income inequality, which is currently the worst its been since the 1920s. Currently, the top one percent of households make nearly 25 percent of the total income in the country, after they made less than 10 percent in the 1970s. Between 1980 and 2005, “more than 80 percent of total increase in Americans’ income went to the top 1 percent.”

Prof. Brad DeLong's list of 13 dumb and dishonest notions circulating among politicians and/or journalists

"Maybe we should find jobs in the Beltway."

DeLong's Baker's Dozen of Dumb and Dumber - HERE.

Not surprisingly, GOP Budget Czar Paul Ryan tops the list.

Quote of the week (month? maybe year!)

Paul Krugman:  "(P)olicy makers are sinking into a condition of learned helplessness on the jobs issue: the more they fail to do anything about the problem, the more they convince themselves that there’s nothing they could do."

Read the entire critically important column - "Against Learned Helplessness" - HERE.

The Veterans Administration Hospitals - serving those who have served better and at less cost than for-profit medicine

Projected increases in health care costs are the biggest problem area in long-run predictions of future deficits. It's common knowledge - at least one would hope - that the US has the least efficient and cost-effective health care insurance and delivery system among peer nations.  Although a variety of systems abroad deliver far better results without reverting to "socialized medicine" - England is the prime example of a fully socialized system - we might look to one fully publicly-run example on our own shores that's working very, very well if we want a window into the option of government-provided health care.

The real first flag-raising on Iwo Jima

The Veterans Administration Hospitals are a nationwide network of - literally - fully socialized medicine in the United States. And they are consistently rated the best service centers our health care system has to offer. They spend significantly less money per patient and are rated higher than private hospitals by objective measures in numerous studies.

As a reminder of our ongoing commitment to veterans of our armed forces, for Memorial Day I'm offering a  2007 commentary by Ezra Klein on the VHA:

Over the last decade or two, the VHA system has become a worldwide leader in both the adoption and the invention of health-information technology, and it has leveraged its innovations into quantifiable gains in quality of care. As Harvard's Kennedy School noted when awarding the VHA its prestigious Innovations in American Government prize:

[The] VHA's complete adoption of electronic health records and performance measures have resulted in high-quality, low-cost health care with high patient satisfaction. A recent RAND study found that VHA outperforms all other sectors of American health care across the spectrum of 294 measures of quality in disease prevention and treatment. For six straight years, VHA has led private-sector health care in the independent American Customer Satisfaction Index.

Indeed, the VHA's lead in care quality isn't disputed. A New England Journal of Medicine study from 2003 compared the VHA with fee-for-service Medicare on 11 measures of quality. The VHA came out "significantly better" on every single one. The Annals of Internal Medicine pitted the VHA against an array of managed-care systems to see which offered the best treatment for diabetics. The VHA triumphed in all seven of the tested metrics. The National Committee for Quality Assurance, meanwhile, ranks health plans on 17 different care metrics, from hypertension treatment to adherence to evidence-based treatments. As Phillip Longman, the author of Best Care Anywhere, a book chronicling the VHA's remarkable transformation, explains: "Winning NCQA's seal of approval is the gold standard in the health-care industry. And who do you suppose is the highest ranking health care system? Johns Hopkins? Mayo Clinic? Massachusetts General? Nope. In every single category, the veterans health care system outperforms the highest-rated non-VHA hospitals."

GOP "Jobs Plan" - Tax Cuts for Dummies?

The Congressional Republicans have offered up - with great fanfare - a jobs plan that has more the characteristics of a children's book than a serious policy proposal. It's a rehash of everything we've ever heard from them before, dumbed down (if one can imagine such a thing) into a menu with tendentious prologue and peppered up with lots of pictures.

Paul Krugman notes, "There’s so little there there that the document — look at it! — has to rely on extra-large type and lots of pointless pictures to bulk it out even to 10 pages."

Nor are Jamielle Bouie, at American Prospect, and  Ezra Klein at Wonkbook impressed.
 
Bouie:

House Republicans have released their plan for "America's Job Creators," and it's underwhelming, to say the least. Clocking in at a whopping 10 pages, it begins  by indicting Democrats for high unemployment, conveniently ignoring the last four years of extreme economic hardship, and blames "taxation," "regulation," and "government takeovers of the economy" for the current mess. What follows is eight pages of silly art, large text, and "solutions" that amount to the same failed Republican playbook of tax cuts, tax cuts, and more tax cuts.

Klein has more:

Academic books pack about 600 words to a page. Normal books clock in around 400. Large-print books — you know, the ones for kids or the visually impaired — fit about 250. The House GOP’s jobs plan, however, gets about 200 words to a page. The typeface is fit for giants, and the document’s 10 pages are mostly taken up by pictures. It looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday, and so cranked the font up to 24 and began dumping clip art to pad out the plan…

When I asked David Autor, an economist at MIT and a specialist on labor markets, to take a look at the substance, he pronounced it a classic case of “what Larry Summers would call ‘now-more-than-everism.’”

The Genius of the GOP's "Ryancare" plan to end Medicare and push seniors into private insurance markets

Note the huge difference, not just in doubling of each senior's personal share of costs, but in total spending on health care markets per senior under Medicare vs. "Ryancare."  I'm speechless. Except to note this: anyone who endorses this plan that dramatically drives up total expenditures on an already rapidly-inflating health insurance/delivery system and claims to be a "fiscal conservative" is either a liar with a hidden agenda (privatization at any cost?)  or a moron.  It really is that simple. The non-partisan Congressional Budget Office numbers speak for themselves.

Thanks to the CBPP for another great chart.

A bit of a bright spot in manufacturing and exports?

While the numbers pale in comparison to overall job loss and continuing unemployment, over 200,000 jobs were added over the past year in the manufacturing sector. No administration has been able to match those figures in growth of manufacturing employment since Bill Clinton in 1998.  Here's a chart showing manufacturing job growth since 1997, via The Economist:

Growth in manufacturing jobs, in 1000s (charts jobs added, not totals)

According to the Commerce Department, manufacturing - which has been shrinking in this county over decades - is actually leading the recovery due to growing exports:

"The 200,000 jobs added in the past year have been concentrated in the durable goods sector, whose advance report on shipments and new orders for April will be released this Wednesday.  Exports of durable manufactured goods have jumped 13.1 percent over the year, with exports accounting for roughly 37 percent of the growth in shipments over the past year."

Overall economic news is still very bleak, but an uptick in the anemic manufacturing sector and some significant growth in our exports might well signal structural improvements in an economy that has been bleeding jobs overseas and been wildly imbalanced on the trade front for almost as many years as I can remember.

More Congressional Republicans voted to pass Medicare than voted against it

Obviously a right-wing nut...

Here's an interesting bit of historical trivia in the context of our current political discourse. Although Ronald Reagan - in his role as General Electric toastmaster - famously attacked Medicare as a scheme to "socialize medicine," Republicans were not uniformly against a government-sponsored insurance plan to cover seniors.

Reagan's words sound crazy today, warning that if a Medicare bill passed, "you and I are going to spend our sunset years telling our children and our children's children what it once was like in America when men were free."  Yeah - totally nuts and even Paul Ryan is smart enough not to go there.

But in 1965 when Medicare was actually passed, more House Republicans voted for it than against it. 70 voted yea, while 68 voted nay.  In the Senate the GOP split went in the other direction - 13 yea, 17 nay - but the divide was still close enough to indicate the bi-partisan nature of the bill's passage.

In contrast, with Medicare currently the most cost-effective segment of our admittedly problematic health insurance and delivery system, today's Republicans pushing a scheme to destroy the most efficient piece of the health insurance puzzle signifies the party as a unified front of right-wing extremism with a "cost-effectiveness be damned" privatization obsession - hardly "conservative."

A weak economy staggers along - but is anyone in Washington paying attention?

As the recovery falters and appalling unemployment numbers remain with us, politicians of both parties seem to be focused on some version of debate over the deficit and the long-term future of Medicare.  Defense of Medicare against nutty professor proposals to end it is critical, but it doesn't speak to the crisis at hand.

This political logjam is an indication of just how lacking in seriousness and skewed to the socially nihilistic Right (personified by Ayn Rand fan Paul Ryan) our political discourse has become in a time of real crisis on the jobs front. No one in Washington seems to care about the central issue of getting economic growth on track and putting Americans back to work. David Leonhardt, business and economics writer for the New York Times, sounds the alarm:

The latest economic numbers have not been good. Jobless claims rose last week, the Labor Department said on Thursday…Perhaps the most worrisome number was the one Macroeconomic Advisers released on Wednesday. That firm tries to estimate the growth rate of the current quarter in real time, and it now says annualized second-quarter growth is running at only 2.8 percent, up from 1.8 percent in the first quarter. Not so long ago, the firm’s economists thought second-quarter growth would be almost 4 percent.

An economy that is growing this slowly will not add jobs quickly. For the next couple of months, employment growth could slow from about 230,000 recently to something like 150,000 jobs a month, only slightly faster than normal population growth. That is certainly not fast enough to make a big dent in the still huge number of unemployed people.

Are any policy makers paying attention?

Do higher taxes kill the economy?

Apparently not.

Taxes in both Denmark and Sweden are considerably higher than they are in the US. Economist Lane Kenworthy has taken an extensive look at factors such as GDP growth over decades, the World Economic Forum's "Competitiveness Index," rates of employment, household income growth, income distribution and government debt and found that Denmark and Sweden perform at least as well if not better by all relevant economic measures. They also have greater life expectancy and greater "life satisfaction."

Most surprisingly, both countries are judged by the Heritage Foundation-Wall Street Journal index to have a level of "economic freedom" essentially the same as the United States (Denmark actually scores better on that one.)  Not surprisingly, both Denmark and Sweden have much lower levels of government debt as percentage of GDP  than we currently have in the United States.

"Taxophobia" appears to be just that at the level of economic argument related to jobs and growth - a fear that can't be explained by rational measure or empirical evidence.  As we all know, there are lots of reasons not to like higher taxes, but the usual arguments about "job-killing" taxes - especially on high earners - put forward as "sound economics" don't add up in the real world.

Check out Kenworthy's piece here - it debunks a lot of "conventional wisdom" about taxation, job growth and productivity.

GOP Budget Czar Paul Ryan has trouble telling the truth

Jared Bernstein, former chief economic aide to VP Joe Biden, comments on Congressman Paul Ryan's assertion that ”Our plan is to give seniors the power to deny business to inefficient providers...their plan [Affordable Care Act] is to give government the power to deny care to seniors”:

"What's up with this guy?"

The ACA does nothing of the sort.  It was structured precisely to ensure that the fundamental guarantee of Medicare remained in place.   This link, from Austin Frakt, provides the details.  The punchline is that IPAB—the Independent Payment Advisory Board created by ACA to control cost growth—is explicitly not permitted to “…ration health care, raise costs to beneficiaries, restrict benefits, or modify eligibility criteria.”

So Ryan is wrong.  Full stop.

But there’s more.  Understanding this difference provides a useful insight into how health care reform under the ACA differs from Ryan’s approach.  ACA gets under the hood of the health care delivery system to attempt to control health-care cost growth.  Ryan simply shifts cost growth from the government to seniors.

Once more with feeling: The GOP's "Ryan Plan" RAISES total health care spending for seniors

Peter Orszag, former White House budget director:

Under (the Ryan/GOP budget) proposal, starting in 2022, the government would issue new Medicare beneficiaries a payment that they could use to purchase private insurance. These payments would increase in line with the consumer price index but not with faster-rising health costs. The slower increase in payments would generate large savings (and less risk) for the federal government; indeed, this would be the single most important driver of savings from the Ryan budget plan as a whole.

As the government paid relatively less for Medicare, beneficiaries would bear an increasing share of the cost of their care. It is no great accomplishment, however, merely to shift health expenditures from the federal government to consumers, without doing anything to decrease them in total.

The CBO’s analysis of the Ryan plan confirms that federal expenditures would be reduced, by a lot. By 2030, payments for a typical beneficiary would be more than 20 percent lower than current projections, according to the report, and the beneficiary’s personal costs would increase.

So far, nothing unexpected. On the critical metric of whether the Ryan plan would reduce total health-care costs, though, the CBO conclusion is shocking: The plan would not only fail to decrease health-care costs per beneficiary, it would increase them –- by an astonishingly large amount that grows over time. By 2030, health spending on the typical beneficiary would be more than 40 percent higher under the Ryan plan than under existing Medicare, according to the CBO report.

Medicare and the future of reality-based politics

Musing on blogger Mark Kleiman's justifiably snarky response to the GOP's epic failure to hold Jack Kemp's uber-conservative congressional district in last night's special election - a contest which was essentially a referendum on GOP budget czar Paul Ryan's plan to kill Medicare - UC Berkeley econ prof Brad DeLong goes beyond the easy temptation of triumphalism to consider the broader scope and longer range implications for our toxic, stupid politics:

The Ryan fiscal plan was cruel, stupid, and counterproductive: you do not try to improve health care by destroying Medicare and adopting the RyanCare plan of turning insuring the elderly over to private insurance companies whose first act is to hire more administrators and pay them $250 billion a year to try to screen the Medicare patients who will be expensive to treat out of their policy pool. And the claim that eliminating Medicare and replacing it with RyanCare for the elderly was essentially the same thing as FEHBP (medical insurance) for members of congress is a lie of extraordinary magnitude and cynicism.

And we should not be worrying right now about the cost of Medicare in the 2020s and 2030s. Sufficient unto the day is the evil thereof. And the 9% unemployment of this day is indeed evil. Government right now should be focusing on creating jobs now, not on potential deficits a generation hence--especially as no congress can bind its successors.

But given that we are worrying about the 2020s and 2030s right now, it is a fact that there is a large long-run gap starting about a decade and growing between the 20%-plus of GDP that congress on its current institutional trajectory will tax and the missions that congress has promised the American people that the federal government will assume. And the political lesson of the past two years is now that you win elections by denouncing the other party's plans to control Medicare spending in the long run--whether those plans are smart like the Affordable Care Act or profoundly stupid like the replacement of Medicare by RyanCare for the aged--sitting back, and waiting for the voters to reward you.

What goes into a budget deficit?

Economic Policy Institute, Rebecca Theiss.

The GOP in Wonderland (Updated)

Jacob Weisberg at Slate asks the rude question, "Are Republicans Losing Their Grip on Reality?":

Prepping for the GOP primaries?

Moments like this point to a growing asymmetry in our politics. One party, the Democrats, suffers from the usual range of institutional blind spots, historical foibles, and constituency-driven evasions. The other, the Republicans, has moved to a mental Shangri-La, where unwanted problems (climate change, the need to pay the costs of running the government) can be wished away, prejudice trumps fact (Obama might just be Kenyan-born or a Muslim), expertise is evidence of error, and reality itself comes to be regarded as some kind of elitist plot.

Like the White Queen in her youth, the contemporary Republican politician must be capable of believing as many as six impossible things before breakfast. Foremost among these is the claim that it is possible to balance the federal budget without raising taxes. Most Republican politicians are intelligent enough to understand that with federal revenues at 14.4 percent of GDP and expenditures at 25.3 percent, it is, in fact, impossible to close the fiscal gap with spending cuts alone. But GOP candidates acknowledge this reality at their peril. Grover Norquist, the right-wing lobbyist and former collaborator of Jack Abramoff's, has appointed himself chief enforcer of the party's anti-tax catechism. If Republican candidates won't sign his no-new-taxes pledge, Norquist and fellow inquisitors at the Club for Growth threaten them with excommunication, social death, and the punishment of being "primaried" by a well-funded conservative challenger.

Clinging to the "strong dollar"

Now that she's no longer part of the Official Beltway gaggle, former White House economic advisor Christina Romer offers some straight talk on the "strong dollar" dogmatics:

"Won't you be my Teddy Bear?"

In November 2008, I was sharing a cab in Chicago with Larry Summers, the former Treasury secretary and a fellow economic adviser to the president-elect. To help prepare me for the interviews and the hearings to come, Larry graciously asked me questions and critiqued my answers.

When he asked about the exchange rate for the dollar, I began: “The exchange rate is a price much like any other price, and is determined by market forces.”

“Wrong!” Larry boomed. “The exchange rate is the purview of the Treasury. The United States is in favor of a strong dollar.”

For the record, my initial answer was much more reasonable. Our exchange rate is just a price — the price of the dollar in terms of other currencies. It is not controlled by anyone. And a high price for the dollar, which is what we mean by a strong dollar, is not always desirable.