stimulus

Job Numbers Hype: It's Bad Politics and Worse Policy

Richard Eskow — Fri, 03 Feb 2012 21:18:30 -0500

The reaction to January's jobs report shows how tragically our expectations have fallen, especially among some Democrats and their supporters. Their cheerleading isn't just bad policy or bad politics, although it is both of those things. It's also callous and insensitive to the misery of millions.

It's important to keep explaining what needs to be done to end that misery. To do otherwise is to serve, however unintentionally, an insidious agenda from the right that would lower our expectations until these tragic levels of unemployment are seen as the "new normal."

An increase in jobs is a good thing, of course, even if it's far from what's needed. Here's something else that was good about the report: Conservatives keep telling us that manufacturing jobs have moved offshore permanently, but 50,000 of them were created last month. Now we can put that argument to bed and can get to work creating more of them.

The Good, the Bad, and the Urgent

But millions of Americans - including minorities and the young - have already endured years of catastrophe, with years more to come if nothing is done. Why won't more people express support for their plight and explain what needs to be done to help them?

Here's the real story: Government intervention has created millions of jobs. But those interventions were too small, so we're still years away from fixing the problem. To claim anything else is to reinforce the delusions that created the problem in the first place.

If the President and his supporters make that case clearly and forcefully, the country will be able to choose between competing visions in November. It's more likely to choose an end its misery. The pitch is pretty simple, really: The medicine's working, but let's not stop before the patient gets well. And despite this month's report, the patient is still very, very sick.

Help is needed urgently.

The New Abnormal

At December's rate of job growth (200,000 jobs) we won't reach an acceptable level of employment until 2024. At this month's rate of growth (243,000 jobs) it will still take us until 2019. Even if we accelerated that rate of growth to 400,000 jobs per month, it would still take us until 2015 to get back to our customary and normal rate of employment.

There would be room for celebration - cautious celebration - if we were protected from more economic shocks, which could come at any time from our under-regulated and too-big-to-fail banks. But we're not. Or if the Republicans and 'centrist' Dems (including the President) weren't pushing to cut government jobs, which will slow the rate of growth even more. But they are. Or if the President were pushing for bigger initiatives, on the scale that's really needed, while making the case for the kind of short-term help we need to get this country on its feet again.

But he isn't.

The President's current jobs proposals would help somewhat, but they're still much too small. What's more, they're filled with policies that are too easy for Republicans to poke holes in. Unless he comes up with a bolder, simpler, and stronger plan, Republican rhetoric will regain a credibility it doesn't deserve - and the government solutions that have always worked in the past will be discredited through half-measures that fail to solve the problem.

If that happens, our abnormal level of pain really will become the "new normal."

Economic Apartheid

This month's reported unemployment level dropped to 8 percent for adult males. But women gained only 89,000 jobs, which is a little more than a third of the total. (They got 42 percent of the jobs in the private sector, but were heavily affected by government cutbacks brought on by misguided austerity thinking - thinking that the President has sometimes encouraged with his rhetoric.)

The seasonally adjusted white unemployment rate for January was 7.4 percent.

For young people 16-19, it was 23.1 percent.

For African Americans, it was 13.6 percent.

For young African Americans, it was 38.5 percent.

To be clear, all of those numbers have seen some reductions. But those who say the current pace of recovery is acceptable are also saying that a devastating job situation for young people, African Americans, and those who are both, is an acceptable state of affairs for years to come. That means untold harm to human wellbeing, career opportunities, future health, lifetime earnings, and entire communities across the country.

It also means endorsing a state of "economic apartheid" that's unlikely to change for the foreseeable future. That's not the kind of country that the Democrats or their supporters should be tacitly endorsing, even if only by failing to consider the long-term consequences of what's being done and said today.

And in an equally devastating finding, long-term unemployment figure was still 5.5 million. These Americans have been thrown from a life of earning and security into hopelessness and spiraling poverty - and they're being ignored.

Falling Behind

The numbers tell another story, too: People with jobs are falling behind. That's why the middle class really is in a process of slow decay. This chart tells the story:

After a period of long-term stagnation, wages only grew by 1.9 percent and there's no sign that will change. There are lots of working people who will find nothing to celebrate in this report.

Champagne Corks

Nevertheless, a number of Democrats and allies took a premature and ill-considered victory lap today. That won't help the country get the policies it needs, and it won't help them politically either. When sympathetic writers like the one quoted by Ezra Klein write of "champagne corks popping at the White House," the image seems inappropriate at best and Marie Antoinette-ish at worst.

The President, his party, and their allies need to send a clear message about these job numbers: that they disprove the conservative argument, but that whole segments of the population were left out of the good news and we're facing many years of pain and stagnation unless government steps up its efforts.

That means they must face facts and make the only argument that will resonate with the American people: That what President and his party have done has helped, but not nearly enough, and that what he is proposing will also help, but not nearly enough. His job creation proposals will be blocked by the Republicans either way, so why not use them to tell the American people what needs to be done?

The President has learned a lot, politically and economically, from the pressure he's received from the left. He's getting better at making the rhetorical case for economic justice. Now he needs to get better at losing, by losing Congressional battles with a set of solutions that the public will understand and support. It's incomprehensible that Republicans would oppose a jobs bill for veterans, but they will.

But it's equally incomprehensible that a Democratic President would offer small responses to such a large disaster. (I include the Jobs Act in the category of "small responses," since such a large chunk of it is dedicated to ineffectual tax cuts for business. But it would help.)

And it's a measure of our mad times that CNN is able to call the proposal for veterans' employment as "hefty" with a straight face. At these levels of unemployment, its estimated $5 billion price tag is almost homeopathically small.

Recovery Winter

Some people are talking about a "recovery winter," an ironic reference to the Administration's premature declaration of "recovery summer" in 2010. For too many Americans, "recovery winter" feels like more like nuclear winter.

The young people and minorities who weren't invited to the party last month can feel it. What's more, this good news could shift dramatically in coming months - if Europe collapses, if a major US bank goes down, or if the periodic recessionary cycle that's built into our under-regulated system strikes again this year.

Nevertheless, some liberals are celebrating. Ezra Klein waxes enthusiastic at the Washington Post, writing that the January report "is pretty much all good." C'mon, Ezra. All good? 23.1 percent for young people? More than 13 percent for African Americans and more than 38 percent for young African-Americans?

Klein is right when he says that revised figures for earlier periods "are positive,"at least where jobless figures are concerned. But adjusted population figures added 1.7 million people to the workforce, which means we need even more growth - and quickly. It means that overall labor force participation is at the unacceptably low level of 63.1 percent.

Klein correctly cites most other areas of concern, including lost public sector jobs and the gap between needed job growth and current figures. But he writes that " this isn’t just a good jobs report. It’s a recovery jobs report." He couldn't be more wrong, in my opinion - unless he's talking about a recovery in 2019.

And I hope Democrats don't listen when he calls these results "the sort of numbers that win elections." Current projections show unemployment rising to 9 percent again before November. This lagging recovery will give credibility to the President's opponents while discouraging his opponents, especially young people and minorities.

Steve Benen of the Maddow Blog understands what's going on behind the figures, yet still says "it's hard not to feel good about the surprising strength" of this report - a sentiment that few of the long-term unemployed would share. Jamelle Bouie of the American Prospect called the report "blockbuster" and said "the economy is looking good."

All this cheerleading feels more than a little unseemly in the face of so much misery - especially when the misery's likely to continue for years if more isn't done.

Some media types might want to be more cautious, too. A headline writer for McClatchy, which has often distinguished itself with terrific financial reporting, missed the mark by writing "January jobs report sizzles ..."

The body of McClatchy's article is much more accurate and objective, correctly noting that the figures were "better than expected" and quoting everyone from a market analyst who cheerleads the numbers for different reasons, to the President and House Speaker John Boehner. But the title's pure hype - unless they meant "sizzle" as in that old expression about "separating the sizzle from the steak."

The Balance

It's time for Dems and their allies to stop partying like it's 2019.

It's not hard to strike the right balance between encouragement and admonition. Alan Krueger, Chairman of the President's Council of Economic Advisors, came close. “It is critical that we continue the economic policies that are helping us to dig our way out of the deep hole that was caused by the recession that began at the end of 2007,” wrote Krueger, who called the report "an encouraging sign."

“Nonetheless," Krueger added, "we need faster growth to put more Americans back to work.”

That wasn't hard. Jared Bernstein struck the right balance, too, calling on Congress to "seal the deal" and saying "let's not screw this up." (Although I wish he had explained what a full recovery plan could do.)

The Republicans struggled to respond today."These numbers are encouraging," said Eric Cantor, "especially for those millions of Americans out of work, but we should aim even higher.”

Great, the President should say. I'll take you up on that.

The Message

The right message is clean and simple:

1. What we did worked. But we need to do more of it.
2. So let's stop the bleeding of public jobs. We've seen the damage that's caused in Europe and we don't want that here.
3. The deficit is a legitimate concern - after we address today's crisis with "the fierce urgency of now."
4. The best way to cut deficits in the long term is to put Americans back to work so they can pay their taxes and buy things that create even more jobs.
5. We tried to compromise with our opponents, because we thought they'd be reasonable. They weren't.
5. So here's what it takes to get that done, with no games or pretense. Let's go to work, and if the Republicans won't help, please vote for people who will.

See? The right message is simple, clean, honest, and easy to deliver. It's cheap, too: No champagne corks necessary.

Three Charts To Email To Your Right-Wing Brother-In-Law

Dave Johnson — Sun, 28 Aug 2011 12:08:47 -0400

Problem: Your right-wing brother-in-law is plugged into the FOX-Limbaugh lie machine, and keeps sending you emails about "Obama spending" and "Obama deficits" and how the "Stimulus" just made things worse. Solution: Here are three "reality-based" charts to send to him. These charts show what actually happened.

Spending

Government spending increased dramatically under Bush. It has not increased much under Obama. Note that this chart does not reflect any spending cuts resulting from deficit-cutting deals.

Deficits

Notes, this chart includes Clinton's last budget year for comparison.

The numbers in these two charts come from Budget of the United States Government: Historical Tables Fiscal Year 2012. They are just the amounts that the government spent and borrowed, period. Anyone can go look them up. People who claim that Obama "tripled the deficit" are either misled or are trying to mislead.

The Stimulus and Jobs

In this chart, the RED lines on the left side -- the ones that keep doing DOWN -- show what happened to jobs under the policies of Bush and the Republicans. We were losing lots and lots of jobs every month, and it was getting worse and worse. The BLUE lines -- the ones that just go UP -- show what happened to jobs when the stimulus was in effect. We stopped losing jobs and started gaining jobs, and it was getting better and better. The leveling off on the right side of the chart shows what happened as the stimulus started to wind down: job creation leveled off at too low a level.

It looks a lot like the stimulus reversed what was going on before the stimulus.

Conclusion: THE STIMULUS WORKED BUT WAS NOT ENOUGH!

More False Things

These are just three of the false things that everyone "knows." Some others are (click through): Obama bailed out the banks, businesses will hire if they get tax cuts, health care reform cost $1 trillion, Social Security is a Ponzi Scheme or is "going broke", government spending "takes money out of the economy."

Why This Matters

These things really matter. We all want to fix the terrible problems the country has. But it is so important to know just what the problems are before you decide how to fix them. Otherwise the things you do to try to solve those problems might just make them worse. If you get tricked into thinking that Obama has made things worse and that we should go back to what we were doing before Obama -- tax cuts for the rich, giving giant corporations and Wall Street everything they want -- when those are the things that caused the problems in the first place, then we will be in real trouble.

Everything You Need To Know About Fixing Deficits & Jobs

Dave Johnson — Mon, 15 Aug 2011 13:38:24 -0400

Here is everything you need to know about how to fix the deficits and jobs problems. This is a chart of job creation over the last few years:

There is a report in Saturday's New York Times, "White House Debates Fight on Economy," saying the Obama administration is choosing between doing very little about jobs, or doing nothing.

Mr. Obama’s senior adviser, David Plouffe, and his chief of staff, William M. Daley, want him to maintain a pragmatic strategy of appealing to independent voters by advocating ideas that can pass Congress, even if they may not have much economic impact. ... But others, including Gene Sperling, Mr. Obama’s chief economic adviser, say public anger over the debt ceiling debate has weakened Republicans and created an opening for bigger ideas like tax incentives for businesses that hire more workers, according to Congressional Democrats who share that view.

So according to the Times the choices being debated are a) do nothing, because the mean Republicans will block it anyway, or b) offer even more tax cuts for businesses. Yikes!

Meanwhile, out in the Real World...

The ailing economy, barely growing at the same pace as the population, has swept all other political issues to the sidelines. Twenty-five million Americans could not find full-time jobs last month. Millions of families cannot afford to live in their homes. ... [. . .] A wide range of economists say the administration should call for a new round of stimulus spending, as prescribed by mainstream economic theory, to create jobs and promote growth.

But, back in the White House?

Mr. Plouffe and Mr. Daley share the view that a focus on deficit reduction is an economic and political imperative, according to people who have spoken with them. Voters believe that paying down the debt will help the economy, and the White House agrees, although it wants to avoid cutting too much spending while the economy remains weak.

They think that taking money out of the economy will put more money into the economy. Great. As I wrote the other day, this is austeridiocy. As England, France and every other country that ever tried to grow an economy by cutting the economy has learned, taking money out of the economy takes money out of the economy.

What Works In The Real World

Here is everything you need to know about how to fix the deficits and jobs problems:

This is a chart of the monthly job losses that were occurring before and after the "stimulus" package.

Before The Stimulus

In this chart, the RED lines on the left side -- the ones that keep doing DOWN -- show what happened to jobs under the policies of Bush and the Republicans. We were losing lots and lots of jobs every month, and it was getting worse and worse.

During The Stimulus

The BLUE lines -- the ones that just go UP -- show what happened to jobs when the stimulus was in effect. We stopped losing jobs and started gaining jobs, and it was getting better and better.

The Stimulus Winds Down

The TAIL -- the leveling off on the right side of the chart -- show what happened as the stimulus started to wind down. Job creation leveled off.

It looks a lot like the stimulus reversed what was going on before the stimulus.

Conclusion: THE STIMULUS WORKED BUT WAS NOT ENOUGH!

Jobs Fix Deficits

When people are working they are paying taxes and are not collecting unemployment. And they are buying things, which means there is demand in the economy again, so businesses will hire people.

Customers Create Jobs

Actually, the rich don't create jobs, we do. Lots of regular people having money to spend is what creates jobs and businesses. That is the basic idea of demand-side economics and it works. In a consumer-driven economy designed to serve people, regular people with money in their pockets is what keeps everything going. And the equal opportunity of democracy with its reinvestment in infrastructure and education and the other fruits of democracy is fundamental to keeping a demand-side economy functioning.

When all the money goes to a few at the top everything breaks down. Taxing the people at the top and reinvesting the money into the democratic society is fundamental to keeping things going. Cutting taxes at the top steals from democracy's ability to continue this reinvestment.

It doesn't matter how much more money you give to business owners, businesses are not going to hire any more employees until they have a REASON to -- and that reason is customers coming in the door.

Businesses Do Not Create Jobs

Businesses do not create jobs. In fact, the way our economy is structured the incentive is for businesses to get rid of as many jobs as they can. It costs money to pay employees, so businesses want to trim down to the minimum number required to get the needed work done.

Many people wrongly think that businesses create jobs. They see that a job is usually at a business, so they think that therefore the business "created" the job. This thinking leads to wrongheaded ideas like the current one that giving tax cuts to businesses will create jobs, because the businesses will have more money. But an efficiently-run business will already have the right number of employees. When a business sees that more people are coming in the door (demand) than there are employees to serve them, they hire people to serve the customers. When a business sees that not enough people are coming in the door and employees are sitting around reading the newspaper, they lay people off. Businesses want customers, not tax cuts.

Once again:

A Promise to Change: The President, Other Dems Pledge to Fight For Jobs and Growth

Richard Eskow — Tue, 02 Aug 2011 19:04:39 -0400

In the wake of a deal that included all the wrong things, today the President finally said all the right things. His agreement with the Republicans included no investment in economic growth, no job creation, no tax increases on the wealthy, no closing of corporate loopholes, no protection for entitlements - not even include an extension of unemployment benefits for the victims of Wall Street's last greed-and-gambling spree. That's why three-quarters of the Republicans in Congress - and only half the Democrats - voted for it. It's why most of the Tea Party Caucus supported it, and why most of the Progressive Caucus rejected it.

As Nate Silver explains, the numbers show that the President could have pushed for a better deal and he probably would have prevailed. This deal appears to be the latest in a series of agreements where the President seems to have gotten what he wanted, while at the same time claiming it was the best he could get. He's spent far too time much echoing the destructive austerity rhetoric of his opponents, and he has pushed for far too many of their policies. He has opposed positions that are supported by an "American Majority" made up of Democrats, independents, and in many cases by Republicans too.

But like a remorseful binge drinker apologizing to his spouse, today he told his angry base that he's finally seen the light. We've gone from "change you can believe in" to "honest, honey, I can change!"

President Obama is a leader of great gifts, perhaps the greatest of his generation, and if he changes his priorities he could still achieve great things. Like any wronged party, voters should be willing to accept his new pledge without unproductive emotions like anger and resentment. But that acceptance must come with certain conditions, the most important of which is this: He must keep the promises he made today, and not in a half-hearted way.

Here's what the President said today:

"... we’ll need a balanced approach where everything is on the table. Yes, that means making some adjustments to protect health care programs like Medicare so they’re there for future generations. It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share. And it means getting rid of taxpayer subsidies to oil and gas companies, and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses. "

Those words should be welcomed by most Americans. Even the "adjustments" to Medicare and other health programs can be good, if by "adjustments" he means eliminating runaway profits rather than cutting benefits. The President also said this:

"And in the coming months, I’ll continue also to fight for what the American people care most about: new jobs, higher wages and faster economic growth."

Those words will be met with skepticism and even bitterness by some of his wounded supporters, who have heard that kind of talk before. The President will need to reassure them with action instead of dismissing them with scorn, as he and his staff have sometimes done in the past. That means a constant drumbeat of action from the Oval Office and all of his senior advisors.

All the President's enablers on Capitol Hill will have to get in on the action, too. We heard some promises today from that part of town, too. Sen. Chuck Schumer said “It is now time for Congress to get back to our regularly scheduled program, and that means jobs ... The jobs issue won’t have to play second fiddle to the deficit issue anymore.” Leader Pelosi told the press, "Enough talks about the debt, we have to talk about jobs."

Washington's latest austerity binge has created a lot of wreckage. The Economic Policy Institute estimates that this Republican-friendly deal will cost the economy 1.8 million jobs and increase the unemployment rate by 0.6% in 2012 alone, while ending unemployment benefits that are currently being received by 3.8 million people.

Redemption is a central to the American character as individuality and freedom. We choose to take the President and other Democratic leaders at their word. But we, like others, are still somewhat skeptical. Not that it matters what we think. What matters is whether voters believe that the President and other Democrats are fighting for them.

How can they be convinced? By seeing action every day to create jobs and protect needed social programs. By an end to all the austerity rhetoric and misguided deficit preaching. By showing voters that someone is fighting for them and representing their point of view.

There are many people around the country who are willing to help. Each day that the President and other Democrats fight for a real recovery, they'll spread the word. But each day that they fail to fight or choose to preach the rhetoric of surrender, they'll note that too. The Democratic Party and the President's re-election campaign aren't likely to survive anything that might be seen as another round of broken promises.

The President and his Democratic colleagues on the Hill said the right things today. But trust isn't rebuilt with talk. It takes action to get the job done. We look forward to seeing them follow up these speeches with action, and activists will applaud them every time they do.

Let the recovery begin - with action.

Stock Market Plunges. The Free-Market God Is Angry With His Followers!

Richard Eskow — Tue, 02 Aug 2011 18:46:41 -0400

The American people have just endured a months-long bipartisan battering with words, as politicians and talking heads from both parties insist that they "take their medicine" by enduring severe austerity cuts. Against all evidence, they were told that this would be good for the economy. This illogical argument only has credence because Washington's filled with followers of a free-market religion whose deity is the Market, whose Oracle is the stock exchange, and whose clergy includes bishops named Greenspan, Geithner, Rubin, and Rivlin.

But if Democrats are true believers, Republicans are this religion's fundamentalists. All they need to do is repeat the sacred phrase "Tax cuts produce jobs!" and the whole congregation forms into ranks, prepared to do battle.

Believers in the One True Market believe that their Deity can only be propitiated when they sacrifice the sick, the elderly, and the poor. This lowers government expenditure and reduces political pressure to make the rich and powerful pay their fair share. We're told that this sort of sacrifice reassures the wealthy. These minor deities will then invest and create new jobs, which is why they're given the ritual title of "Job Creator" or "Wealth Creator."

The believers tell us that once these sacrifices are made, money will flow downward like manna from heaven. There's even an obscure mantra called Ricardian Equivalence that explains this esoteric mystery, although debunking it thoroughly (as apostate members of the clergy like De Long and Krugman have done) doesn't discourage the True Believers.

Here's what should discourage them. The all-seeing and all-knowing Stock Exchange, that Delphic Oracle of their cult, has looked upon their handiwork ... and frowned. (Or maybe it upchucked. Whatever it did today, it certainly wasn't happy.) No sooner did the President and Speaker Boehner announce their agreement than the stock market fell dramatically. The S&P 500 fell by 2.6% to its lowest point of the year. The Dow fell 2.2%, and Nasdaq dropped 2.8%.

Why does the Lord of the Economy punish its followers so? What has displeased It? For one thing, new economic data came out today and it was terrible. This should come as no surprise to anyone who isn't caught up in the Free Market cult, but the True Believers seem to have been caught off guard.

Consumer spending is down, which is one big reason for today's battering. And why wouldn't it be down? Wages are stagnant, the long-term unemployed can't find work, and people are fearful for the future. A new report showed that U.S. manufacturing growth is flatlining. And is there any cause for optimism on the unemployment front?

As economists like to say: Girlfriend, please!

Another reason for the stock market plunge was the continued threat of a downgrade of the U.S. government's credit rating. That's likely to come, if it comes, from organizations which are amusingly described as credit ratings "agencies." They're actually for-profit companies whose decision-making process was shown to be corrupt and intellectually degraded during the run-up to the last financial crisis. Their behavior in the past several months has been equally erratic and obscure. If free-marketism is a religion, they're its corrupt medieval popes, selling their ratings like indulgences while looting the princes' treasuries and lusting after their wives and children.

What will the "agencies" decide to do? If history's a predictor, they'll do whatever their cash-paying client base tells them. Worship of Profit is an individual as well as a collective exercise. But it's the agencies' unpredictability, not the possibility of further regulation, that's making the private sector nervous.

Now, we're not saying that the stock market really is an Oracle. Or if it is it's like the one in the temple at Delphi. There, some researchers believe, the "prophecies" of its priests and priestesses were actually inspired by a hallucinogenic gas seeping up from the ground. Personally, I think of the stock market as a collective agreement about reality that's constantly being changed and updated by real and imagined information, as well as by hopes, fears, misconceptions, and greed. (And, like the temple at Delphi, by the occasional mind-altering substance.) But whatever you think it is, it sure wasn't impressed with yesterday's deal.

Joe Wiesenthal helpfully (if not cheerfully) points out that today marks the eighth day in a row that the stock market has been down, a serial drubbing that we haven't seen since the bleakest days of the crisis in October 2008. It's time to ask our oracle: Why so glum, chum?

Because yesterday's deal is an assault on the economy. The Economic Policy Institute estimates that it will cost the economy 1.8 million jobs and increase the unemployment rate by 0.6% in 2012 alone, while ending unemployment benefits that are currently being received by 3.8 million people. That's going to hurt ... a lot. Unemployed people spend most of the money they receive, which means it stimulates the economy. That's also true of lower-income people, who will be hurt by this deal, and of the elderly, who are likely to be hurt in the next round.

This kind of misguided parsimony doesn't just harm the overall economy. Ironically, it also makes it harder to reduce deficits over the long run. Even a consensual hallucination like the stock market can figure that out. Today's results should put fear in the hearts of the free-market radicals. It's telling them to expect a mighty smiting from a great Invisible Hand.

Like deities in all religions, the Lord of the Market is trying to tell its followers to be kinder to the elderly, the sick, and the poor. It's trying to explain that one is never enriched by taking, only by giving. And in a very literal sense, it's trying to tell the flock that "as you do to the least of these, you do to Me."

But like the extremists of all religions, the True Believers refuse to listen.

A Letter From 64 Senators ... In an Alternate Universe

Richard Eskow — Thu, 24 Mar 2011 19:18:48 -0400

Scientists say there are trillions of parallel universes. Statistically, that means that must be one where some poor version of humanity lives in an inverted, mind-bending alternate reality where everything is backwards and nothing makes sense.

But why did it have to be us?

Consider the latest evidence: 64 Senators are ignoring the one problem that polls consistently show is the public's highest priority. Instead they've written a letter to the President asking him to make a different issue his highest priority - and to address it by doing something the public doesn't want. In return they're promising that they'll do something the public doesn't want, too.

Welcome to reality.

You can see the original letter here. Then you can keep reading to see what that letter would say in a rational universe.

In our world - the one where most people live - 25 million Americans are unemployed or under-employed. A recent Celinda Lake poll shows that concern over jobs outweighs deficit concerns by 2 to 1, and that 77% of the public opposes cutting Social Security. Nevertheless, in what's an especially surreal move even for them, a majority of Senators just sent a letter demanding that the President make the deficit his highest priority, not jobs - using as his framework a a proposal that cuts Social Security.

Others have pointed out the timorousness of what they've done, most notably E. J. Dionne and Ezra Klein. After all, these Senators could've written a law and passed it. Instead they just wrote a letter.

So rather than repeat what's been said so well by others, which would be a depressing experience for both of us, I thought I'd offer an uplifting glimpse of a more rational universe, a universe where people are both fair-minded and sensible ... a universe where the letter from those Senators would read like this:

Dear President Obama:

As the Administration continues to work with Congressional leadership regarding the current prolonged, recession-like situation for many millions of people, we write to inform you that we believe comprehensive unemployment reduction measures are imperative and to ask you to support a broad approach to solving the problem.

As you know, a bipartisan group of Senators has been working to craft a comprehensive unemployment reduction package based upon the recommendations of the Jobs Commission[1]. While we may not agree with every aspect of the Commission's recommendations, we believe that its work represents an important foundation to achieving meaningful progress on our tragic economic situation. The Commission's work also underscored the scope and breadth of our nation's long-term employment and economic growth challenges.

Beyond FY2011 decisions, we urge you to engage in a broader discussion about a comprehensive unemployment reduction package. Specifically, we hope that the discussion will include stimulus spending, entitlement increases and tax increases for the wealthiest among us.

By approaching these negotiations comprehensively, with a strong signal of support from you, we believe that we can achieve consensus on these important economic issues. This would send a powerful message to Americans that Washington can work together to tackle this critical issue.

Thank you for your attention to this matter.

Imagine. Somewhere, in some other universe, this letter was actually written and sent to the President of the United States. Then these Senators concluded their productive work day, went home, and tenderly clasped their husbands, wives, and children in the loving embrace of their six tentacles.

For your consideration, we offer this glimpse of a different universe ... a happier universe ... a more rational universe. But we have to stop now. We Americans are a busy people, with jobs to find and underwater mortgages to pay. Our little diversion is over.

We now return you to the Twilight Zone.

________________

[1] There was no Jobs Commission. This is an alternate reality, remember?

Obama's Payroll Tax Cut: Another Bailout for the Rich

Daniel Marans — Mon, 13 Dec 2010 12:32:10 -0500

We already know the proposed $120 billion payroll tax cut in President Obama's deal with the Republicans poses tremendous risks to Social Security. Now, an analysis done by Nancy Altman, Co-Director of Social Security Works, reveals that it is altogether bad policy. The payroll tax cut would provide far more to Wall Street bankers and members of Congress than poor and middle class workers, who need the help more and are more likely to stimulate the economy with the money they receive.

State and local workers who are not covered by Social Security, including policemen and firefighters, would receive nothing from the plan. Americans seeking employment would also see nothing from the payroll tax cut. By contrast, renewing the "Making Work Pay" tax credit would provide real stimulus to our ailing economy without the handouts for the rich--and all at half the cost of the payroll tax cut.

See below for the Strengthen Social Security Campaign's complete chart comparing the proposed payroll tax cut with the "Making Work Pay" tax credit, or click here:

Ben Bernanke and Conservative Economic Sabotage

Zach Carter — Tue, 23 Nov 2010 16:01:39 -0500

The Republican Party's newfound political assault on Ben Bernanke is a grim reminder of the actual conservative economic agenda for the next two years. The midterm elections taught Republicans a destructive lesson: With Democrats in power, the worse the economy gets, the better Republicans do at the voting booth. Economic sabotage is the essential Republican strategy for winning the White House in 2012. They will block every effort to actually improve the economy they can, and make a big show out of criticizing any economic aid they can't block.

The Party's hypocrisy on the economy has been clear for months. They scream about the deficit when a few billion dollars worth of unemployment benefits are at stake, but deficit worries disappear when the $700 billion in Bush tax cuts for the rich are under discussion. When they do muster an economic defense of the Bush regime, it's the line that a recession is no time to raise taxes. This is a fundamentally Keynesian argument—a bad Keynesian argument, but Keynes through and through. And it's the same argument Republicans and conservative pundits deployed to enact the Bush tax cuts back in 2001 and 2003. It's a bad argument because tax cuts aren't particularly effective at stimulating the economy, especially when they target the rich. Unemployment benefits, in fact, would be a staggeringly more efficient mechanism, as former John McCain adviser Mark Zandi has repeatedly detailed.

Which brings us to Ben Bernanke, the most conservative candidate that President Barack Obama could possibly have appointed to head the Federal Reserve. The current Republican uproar against Bernanke shields the fact that he is, in fact, a Republican himself. He was a top economic adviser to President George W. Bush, who appointed Bernanke to the Fed's Board of Governors and eventually to Fed Chairman post. When Obama reappointed him to the job, a handful of Republicans objected on the grounds that Bernanke had approved generous bailouts of financial firms. Nevertheless, a majority of Senate Republicans still voted to reconfirm him—making his reappointment the most popular decision that Obama has made among Republicans. Republicans got their man, and they let him through.

But now Bernanke is taking a beating from conservative pundits and Republican politicians for the Fed's latest round of "quantitative easing." It's not just coming from the crazies, either. Even relatively milquetoast Senators like Bob Corker of Tennessee have threatened to strip the Fed of its mandate to promote full employment. Don't worry about whether people actually have jobs, you nervous Fed ninnies. Just focus on inflation, whatever the economic cost.

The timing of this argument is particularly instructive, since, right now, we are not experiencing inflation. We are, in fact, dangerously close to deflation, as rampant foreclosures continue to drive down home values.

But the Republican assault is not an attempt to fix the economy or even say intelligible things about the economy. It's straightforward political payback. Bernanke is directly contradicting the Republican midterm message, exposing the Republican anti-spending mantra as an economic disaster, and Republicans aren't going to stand for it.

Republicans just convinced a lot of voters that socialist intergenerational thief Barack Obama caused high unemployment with his budget busting economic stimulus. Government spending is the villain-- not the Wall Street excess or predatory lending that Republicans shepherded for eight consecutive years, not even the generous bank bailouts that Republicans approved.

But last week, Bernanke gave a speech emphasizing that the Fed's actions to revive the economy require Congressional help. Quantitative easing is basically an interest-free credit card for the U.S. government, allowing it to borrow money at negative real interest rates in order to spend that money on job-creation efforts. Since already record-low interest rates on Treasury bonds haven't been enough to convince congress that now is the time to borrow and spend, the Fed is driving those rates even lower. But for this credit card to work, Congress has to use it. It has to enact further economic stimulus, spending money to create jobs.

This kind of talk makes Congressional Republicans look stupid. Now it's not just Barack Obama and his anti-colonialist father who support government spending to boost the economy, it's a very high-profile Republican economist, too. Obama can't be a radical socialist when top-ranking Republicans agree with him. And God forbid that Bernanke's recent statements actually create pressure for Congress to do something about jobs. Lowering unemployment means reelecting Obama.

None of this is to say that Bernanke is some kind of liberal savior, or even a particularly good Fed Chairman. He oversaw bailouts that could have been much more effectively designed, to say the least, and he has not been open about those packages with Congress or the public. He's resisted calls for Fed transparency and waged misleading attacks on financial reform legislation.

But he isn't toeing the Republican Party line on Big Bad Government Spending. And Republicans are going to keep hammering him until he does.

Businesses Do Not Create Jobs

Dave Johnson — Thu, 11 Nov 2010 13:08:39 -0500

Businesses do not create jobs. In fact, the way our economy is structured the incentive is for businesses to get rid of as many jobs as they can.

Demand Creates Jobs

A job is created when demand for goods or services is greater than the existing ability to provide them. When there is a demand, people will see the need and fill it. Either someone will start filling the demand alone, or form a new business to fill it or an existing provider of the good or service will add employees as needed. (Actually a job can be created by a business, a government, a non-profit organization or just a person doing the job, depending on the nature of the good or service that is required.)

So a demand creates a job. A person who sees that houses on a block need their lawns mowed might go door to door and say they will mow the lawn for $10. When houses start saying "Yes, I need my lawn mowed" a job has been created!

Demand also creates businesses. The person who is filling demand by mowing lawns for people might after a while have a regular circuit of houses that want their lawns mowed every week, and will buy a truck and a new mower and hire someone to help. A business is born!

Businesses Want To Kill Jobs, Not Create Them

Businesses have more incentives to eliminate jobs than to create them. Businesses in our economy exist to create profits, not jobs. This means the incentive is for a business to create as few jobs as possible at the lowest possible cost. They also constantly strive to reduce the number of people they employ by bringing in machines, outsourcing or finding other ways to reduce the payroll. This is called "cutting costs" which leads to higher profits. The same incentive also pushes the business to pay as little as possible when they do hire. (It also pushes businesses to cut worker safety protections, cut product quality, cut customer service, "externalize" costs by polluting, etc.)

This obviously works against the interests of the larger society, which wants lots of good jobs with good pay. And businesses, while working to cut jobs and pay less, need other businesses to hire lots of people and pay well, because that is what creates the demand that makes all the businesses work.

Government To The Rescue

This is where government comes in. Government is We, the People, working for that larger societal interest. In our current system -- when it works -- we use government to come up with ways to balance the effects of the profit motive -- which pushes for fewer jobs at lower pay -- with our larger need for more jobs at higher pay for us, and for the good of all the businesses. We, through our government, create and regulate the "playing field" on which businesses operate. We set minimum wages, limits on working hours, worker safety rules and other rules designed to keep that balance between profit incentive and demand, and that playing field level. (We also provide the infrastructure of roads, schools, courts, etc. that is what makes our businesses competetive with businesses in other countries. The individual interest in paying less taxes for this has to be balanced with the larger interest that we all pay more for this, but that is another post, titled, "Tax Cuts Are Theft.")

Corrupted

Obviously businesses in our system must be kept from having any ability whatsoever to influence government decision-making in any way, or the system breaks down. When businesses are able to influence government, they will influence government in ways that provide themselves - and only themselves - with more profits, meaning lower costs, meaning fewer jobs at worse pay and not protecting workers, the environment or other businesses. And, they will fight to keep their ability to influence government, using the resulting wealth gains to increase their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government which increases their wealth which increases their power over the government ...

Unfortunately this is the system as it is today.

Obama's Top Priority Must Be Jobs, Not Republican Appeasement

Zach Carter — Wed, 03 Nov 2010 12:08:31 -0400

Economic policy has faced grave challenges over the past two years, hamstrung by obstructionist Republicans in the U.S. Senate and Wall Street-friendly advisers in the Obama administration. With the Republican Party now in control of the House, it seems certain that any major action to create jobs will face tremendous obstacles. This is a global calamity. But the political lesson of the past two years should be clear: all the good PR in the world can't whitewash a terrible economy. For the next two years, President Obama and his Congressional allies must do everything they can to actually improve the job market. Without a better economy for ordinary Americans, Democrats are doomed in 2012.

Ezra Klein presents what he thinks is a rosy view of how policy could proceed after last night. To me, it looks like exactly the sort of empty political gesture that Democrats should be fighting. Ezra envisions Obama and new House Speaker John Boehner, R-Ohio, reaching a grand bargain on economic policy: the payroll tax is lifted for a year, $50 billion in infrastructure spending is approved, the unspent 2009 stimulus money is abandoned, and $400 billion in spending cuts over 10 years are approved.

Ezra calls this the next chapter in an imaginary "universe where the government works." It's more like the next chapter in an imaginary world where the government works, and every policymaker is completely insane. Sure, the deal would convince voters that Democrats and Republicans can pass legislation (if it passed). But the result would be a neutral to negative impact on the job market. Continuing today's avoidable economic suffering is bad enough in its own right, but it's also a political disaster for Democrats.

If Obama heads into 2012 with double-digit unemployment, he will lose. End of story. Voters have a terrible view of Republicans, and they just sent over 60 new Republicans to Washington because Obama didn't bring down the unemployment rate. Those results prove that Democrats' backs are already up against the wall on 2012. Fixing the economy takes time, and we need strong, serious action as soon as possible, or we are headed for political calamity.

Why won't Ezra's policy package work? It has two useful elements—a tax cut to hire more workers, and $50 billion in infrastructure spending. Both of these would help some—if the tax cut was really wildly effective, they might combine to take the unemployment rate down by half a percentage point. But these useful policies would be offset by other spending cuts. And unless we're only cutting $600 hammers in the Pentagon budget, those spending cuts are going to kill jobs. To get $400 billion in cuts, we'd have to find 667 million of those hammers.

Lifting the payroll tax really might help create jobs. We don't know how many, but it surely wouldn't be as effective as simply hiring people outright, and that's what government spending—"stimulus" or otherwise—does. In other words, Ezra has outlined a proposal to kill jobs in order to maybe create some.

Showing that they can work with Republicans won't save Democrats in 2012. Only real economic results will. Aggressive PR about how you really actually did fix things won't convince people who are out of a job or in foreclosure. They know the economy still sucks, and even worse, they know you're not telling the truth.

So Obama also has to get his messaging in order. It may very well prove to be the case that Republicans block all but the most modest of steps to create jobs. Obama can't pretend that these steps are enough, and he cannot hesitate to attack Republicans, holding out hope that maybe, someday they will magically come to their senses and start approving policies that promote growth. He can't keep repeating the Republican talking points Rahm Emmanuel fed him over the past two years—the government can create jobs. Right now, it's the only entity that can.

Getting past "partisanship" doesn't mean cutting whatever crappy deal you can with your political adversaries. It means eschewing political grandstanding for good policy. Without good policy, bipartisanship is a pyrrhic victory.

So Obama has to fight hard for policies that actually bring the unemployment rate down, and he must be willing to defend his policy proposals from Republican attacks, making a clear moral case for why spending to support jobs is a good idea. Republicans know that they can win the White House in 2012 by simply blocking Obama and letting the economy fall apart. They'll do it. They already have. Obama has to hold Republicans rhetorically accountable so they fear the electoral consequences of obstruction enough to vote in favor of policies that actually work.

If Republicans refuse to cooperate, Democrats must at least demonstrate to voters that they are working for voters, not for bigwig bankers. The stimulus package approved in 2009 was too small for a variety of reasons, but one of them was due to the fact that Larry Summers and Timothy Geithner expected the financial system to help revive the economy. It didn't, because the system is dominated by too-big-to-fail behemoths with massive losses embedded in their balance sheets.

It's been very fashionable in D.C. to say that the bank bailouts "worked," even though they were unpopular. But they didn't work—banks aren't lending. And they didn't work because banks are still saddled with hundreds of billions of dollars worth of lousy assets. Regulators are allowing banks to account for those assets at inflated values, which protects the banks from losses. So banks trade securities instead of lending, and slowly recognize losses as they rake in gambling profits. This is why the foreclosure fraud scandal has sent bank stock prices on a downward trend—investors know that enough documentation will spark a new wave of losses, causing big trouble for Wall Street.

So we still need to fix the financial system. Banks must be forced to recognize their losses. Where those losses render a bank insolvent, the bank has to be restructured—shareholders wiped out, creditors taking a hit, and taxpayers putting up money only where doing so prevents a cascade of defaults. This will be painful, but no more painful than watching a recovery without credit.

And if Obama can't get these policies, he needs to at least fight for them. Prosecute the deep fraud in the financial system that is being uncovered every day. Explain to voters that Republicans are blocking job-creation.

These policies will be extremely difficult to secure in the face of anything close to the Republican obstruction we've seen over the past two years. But Democrats simply have no other choice. Without major action on the economy very soon, the White House is already gone.