The Jobless ‘Recovery’

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Erik Kain

Erik writes about video games at Forbes and politics at Mother Jones. He's the contributor of The League though he hasn't written much here lately. He can be found occasionally composing 140 character cultural analysis on Twitter.

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94 Responses

  1. Avatar Robert Cheeks says:

    “Meanwhile, employers are reluctant to hire because demand is down,…” How about employers are reluctant to hire and expand because they’re uncertain what new taxes and expensive regulations our president and his apparatchicks plan on burdening them with.
    And, then you call for another ‘porkulous’ bill when the last one funnelled $700,000,000 to the thug-union supporters, teachers unions, and bootlicking corporations (GE, GM, and the one that made solar panels and just went belly up). And, you support this clown’s efforts to waiste another billion or two..that’s pathological!Report

    • Avatar E.D. Kain in reply to Robert Cheeks says:

      I can’t help that you have a poor handle on basic economics, Bob, but please use spell check.Report

      • Avatar Robert Cheeks in reply to E.D. Kain says:

        E.D., thanks! How does one install spck? I used to have it and now, after several crashes, I don’t. And, we are in the mess we’re in primarily because of your leftist friend’s horrific political policies.Report

        • Actually, some economists agree with Bob, most notably Robert Higgs. The theory even has a name: regime uncertainty. And the idea stems from a good grasp of basic economics–if you have money to invest, but you don’t know what the rules of the game will be in the near future, wouldn’t you be a bit more cautious?Report

          • Avatar Christopher Carr in reply to James Hanley says:

            What you’re describing, contrary to the assessment of Krugman et al. that there wasn’t enough stimulus, is more or less what happened with Japan throughout the 90s.Report

          • Avatar Robert Cheeks in reply to James Hanley says:

            Thank you for your insightful analysis Rev. Hanley. I see you are a fellow seeker of the truth. The evil E.D., and his coterie of commie-koolaide drinkers need us here, to hep them.
            Robert Higgs is a no nonsense thinker. BTW, the same phenomenon fished up economic recovery during the Roosevelt regime. One does not require graphs of any sort to figger this one out!Report

          • Avatar Chris in reply to James Hanley says:

            What you describe and what Bob describe are somewhat different.Report

            • Avatar Robert Cheeks in reply to Chris says:

              How so?Report

              • Avatar Chris in reply to Robert Cheeks says:

                Regime uncertainty is a result of not knowing who will be in power, and therefore what sorts of changes will be made to rules governing businesses. You, on the other hand, blame it all on Obama. You’re myopic due to partisan blindness; economists aren’t.Report

              • Avatar Kim in reply to Chris says:

                … does any businessman actually believe that the New Health Care Plan is going away? Maybe there’s someone who’s that stupid… but he’s probably going out of business anyway… (just like all the Republican small-time investors.)Report

              • Avatar Robert Cheeks in reply to Chris says:

                I don’t believe Dr. Hanley agrees with you, but we’ll let him speak for himself. For me, ‘regime uncertainty’ is the idea that bidnessmen believe that the regime (and, yes in this case it’s the H-K Marxist, Barry) may do something inimical to negatively effect their position (like give their chief competitor $500,000,000 in taxpayers monies because he says he’s a greenie). Regime uncertainty has nothing to do with my antipathy toward Mr. Sorento.Report

              • Avatar Chris in reply to Robert Cheeks says:

                If they know what someone’s going to do, and you seem to believe that Obama is going to do something (only you and he know what), then they may be hurt, but it’s not a result of uncertainty. The uncertainty comes from not knowing what, if any, regulations or taxes will be passed. Businesses want consistency, even if the regulatory regime is a pain in the ass. Political uncertainty like we have now, given how divided the country is, makes for a great deal of uncertainty. I suspect James will agree with this explanation for regime uncertainty, mostly because I don’t think James is anything close to as irrational as you.Report

              • Avatar Robert Cheeks in reply to Chris says:

                If, say a Bush is elected bidness knows pretty sure that he’s going to be pleasant to deal with. If say a commie-dem, particularly a H-K Marxist like Barry Sorento is elected, bidness is pretty sure he’s going to try to screw ’em (in Barry’s case he’s trying, rather successfully to fish up the economy). I’m pretty sure bidness kind of figgers this stuff out before the newly elected regime spends one day in the oral office. And, of course you agree with me, irrational or not.Report

              • Avatar Kim in reply to Chris says:

                bobby-tail,
                I don’t think Bush, who enabled outsourcing and illegal workflow, is exactly the best person to cite as “good for business”, as he seemed to be rather good at losing jobs for America. Like that Harley Davidson plant.Report

              • Avatar James Hanley in reply to Chris says:

                Well, I’ll split the difference here. Regime uncertainty can shade over into what Charles Lindblom called “the market as prison,” business-interests’ ability to constrain the range of effective public policy by just withholding investments when policies are unfavorable, until politicians change them back. But when they think politician X will push through undesired policy Y, but don’t know if he will be able to, is their withholding of investment better described by Lindblom or by Higgs? It’s hard to say.

                But I would go beyond Obama and say that Republicans are creating uncertainty with their efforts to delegitimize government. Very few businessmen are true anti-government types–they may want fewer regulations on themselves, but they want a government that can provide basic physical infrastructure, that provides a sound system for resolving disputes, and–perhaps most importantly right now–one that doesn’t threaten to blow up the whole fucking economic basis through government default!

                I have friends in the business community, and it’s not just Obama they’re afraid of. One of my friends, a former international shipping executive who is now a college business prof, who voted against Obama and has railed against him since mid-2007, called me two weeks ago and said, “You won’t believe this, but Obama’s my man, now. Those fucking tea-baggers are insane, and they’re going to destroy any hope we have for an economic recovery.”

                Now it’s fair enough if Bob disagrees with my friend about Obama and the tea-baggers. But the fact remains that many in the business community do see them as a major part of the reasons for an uncertain economic climate right now. (E.g., think Mitt Romney-style Chamber-of-Commerce Republicans vs. Rick Santorum-type social right-wingers.)Report

              • Avatar Kim in reply to Chris says:

                James,
                Rick Santorum is Club For Growth is Saudi Arabia.Report

  2. Avatar Jib says:

    The govt is good at subsidizing things. What ever they subsidize we get more of. Why cant the govt subsidize domestic jobs? Why not a tax on shipping containers that would cover all costs associated with security around ports? Why not a VAT tax on imports that will cover the lost payroll taxes from the labor in the imports. No longer will a company be able to save on taxes by exporting jobs. What about allowing a company to bring profit in from overseas tax free as long they use it to hire new employees or raise the pay of existing employees (not for M&A or C level bonuses)

    There is a bunch of things the govt could do if it was serious about domestic jobs. It really is not that hard.Report

    • Avatar MFarmer in reply to Jib says:

      “It really is not that hard.”

      That’s what I can’t figure out. Seeing as how Krugman is sure that the correct level of stimulus is the remedy to such a recession as we are now experiencing, surely a group of economists with this Keynesian-type philosophy can create a formula to apply the right amount of spending at the fist signs of recession so that we never have another recession. If this formula had been created and applied in 2007, we’d be riding merrily along the Happy Trail by now. I don’t know why they have to make it so difficult.Report

    • Avatar Murali in reply to Jib says:

      There is a bunch of things the govt could do if it was serious about domestic jobs. It really is not that hard.

      There are things the government can do. They are not just the things that you recommended.

      Why not a tax on shipping containers that would cover all costs associated with security around ports

      This will slow down international trade, both imports and exports.

      Why not a VAT tax on imports that will cover the lost payroll taxes from the labor in the imports. No longer will a company be able to save on taxes by exporting jobs.

      This will make things more expensive for americans. The increased cost of operations means that businesses will find it harder to expand and hire more people

      What about allowing a company to bring profit in from overseas tax free as long they use it to hire new employees or raise the pay of existing employees

      This would require the government to really monitor every single bit of how every company spends its money. This is a logistical nightmare. In addition, it has the same effect as increasing business costs. The overall effect is to increase unempoyment.

      Why cant the govt subsidize domestic jobs?

      The government can. They can directly subsidise domestic jobs by cutting payroll taxes. The payroll tax is a direct tax on jobs. Cutting the tax reduces the costs to the employer, therefore making it cheaper to do business in the US. While this doesnt have to make it cheaper than doing it overseas in general, it doesnt have to. All you have to do is make it cheaper than it previously was to see improvements at the margins.

      The second thing you need to do is cut corporate taxes. That will increase the fraction of profits that is re-invested into the company, thus increasing the budget the company has to work with. Again, this saves and creates jobs.

      Of course, because its a tax cut on the rich, we’re not supposed to like it.Report

      • Avatar wardsmith in reply to Murali says:

        Well said Murali and I’d add to your list that the reason corporations have record profits is two fold. First because they are making that money /internationally/ second the (currently) low cost of capital. I’ve talked with CEO’s of major “domestic” corporations. Business is not great in the great US of A. Domestic corporations serving domestic markets are hanging on by their fingernails, if they’re still hanging on at all. Only the multinationals are doing well.Report

      • Avatar Kim in reply to Murali says:

        … so you’re in favor of the Dole health care plan? thanks for playing…Report

        • Avatar Murali in reply to Kim says:

          Dole health care plan? I’m unfamiliar with it.Report

          • Avatar Kim in reply to Murali says:

            … what Obama implemented. Basically the same thing as what Dole proposed, back when Hillarycare was the catchword of the dayReport

          • Avatar Chris in reply to Murali says:

            The Dole health care plan, which wasn’t really Dole’s, was an alternative to the plan(s) being considered by the Clinton administration in 1993. You can get the details (next to the Obama plan of 2009) here:

            http://www.tnr.com/article/health-care/party-is-such-sweet-sorrow

            It should be noted that Dole and the other Republicans weren’t at all serious about that plan, or the others proposed by Republicans in ’93. They were simply put out there to show that the Republicans had an alternative. They were never going to be voted on, and the Republicans knew this. Had Republicans controlled congress in ’93, they wouldn’t have been proposing health care plans at all, as evidenced by the agenda after the ’94 election.Report

            • Avatar Kim in reply to Chris says:

              … i could just call it the “health insurance industry” plan, because we all know that’s just what Baucus let roll. (boy, obama laid the bitchslap on the industry, with that out-of-left-field threat to remove anti-trust protections, didn’t he?)Report

  3. Avatar b-psycho says:

    E.D.:

    To me, what all this adds up to is the need for more stimulus, public works projects, investment in infrastructure and printing lots and lots of money.

    Seriously? The financial sector going ham while all else seemingly crumbles below it suggests to you that the Fed needs to feed the financial sector even more?

    There’s plenty of money out in the system already. It’s just parked in relatively few pockets. On purpose. Printing lots and lots of money in this scenario is like trying to calm a hyperactive child by giving him Red Bull.Report

  4. Avatar Art Deco says:

    Even if they could, a lot of the last decade was spent wracking up private debt, so we’re deep into a balance-sheet recession.

    The Federal Reserve has a set of statistics collected every quarter on household finance, including the “Debt Service Ratio” (the sum of interest and principal payments as a share of household income) and the “Financial Obligation Ratio” (the sum of debt service and rent). They post 125 quarterly readings taken since the end of 1979. Those for the 1st quarter of 2011 are as follows:

    Debt Service Ratio
    11.51% (29th percentile of all readings, lowest since 1995 2d quarter)

    Financial Obligation Ratio, Total
    16.39% (24th percentile, lowest since 1994 q3)

    –Financial Obligation Ratio, Renter:
    23.85% (16th percentile, lowest since 1993 q3)

    –Financial Obligation Ratio, Homeowner
    14.84% (36th percentile, lowest since 2000 q2)

    —-Financial Obligation Ratio, Homeowner, Mortgage
    9.98% (71st percentile, lowest since 2004 q3)

    —-Financial Obligation Ratio, Homeowner, Consumer
    4.87% (8th percentile, lowest since 1994 q2)Report

  5. Avatar Mike says:

    An Unbalanced Budget Amendment of some sort is a great idea. I’m not sure what nature I would want ours to take though. We have a really short national election cycle, and that puts a lot of pressure on politicians to manipulate the system for short-term results. I think that means we need some rules that concern every fiscal year’s budget and possibly some other rules that concern the business cycle budget. I really like Chile’s rule that requires a balanced budget outside of the government’s automatic stabilizers.Report

  6. Can anyone share some statistics on how many new jobs were actually created by the first Stimulus Bill? And were any of those permanent jobs?Report

    • The stimulus was overwhelmingly geared towards saving jobs rather than creating jobs. That was one of its real failures, certainly politically and arguably programmatically. I’ll find data if you’d like (google is your friend, though, Mike); but that’s the gist. It staunched the bleeding (insufficiently) for state and local governments that would’ve simply have had to raze their payrolls in order to survive.Report

    • Big Stick, they have “metrics” up the wazoo, except on what you’d actually like to know. You wouldn’t believe how many key stats I can’t find, and I’m acknowledged as a bit of a googlemeister even by my critics.

      I do think that the trillion spent on “stimulus” can’t actually be quantified. It din’t create jobs, that’s for fishing sure; the fallback position is that it saved many jobs.

      And opponents of the Obama Admin can’t say definitively that the $Trillion spent didn’t.

      Except mebbe the “green jobs,” which was a fustercluck. But we don’t talk about that here, just more flustercucking on “light rail” or heavy rail as self-evidently good.

      As if I want to live in the city, where I grew up and got the shit beat out of me every day. By me fellow white persons. The day our house blew up and we fled to the suburbs was the first good day of my life.

      Oh, what were we talking about? Oh, yeah, stimulus. You gotta be kidding me. The only stimulus that works is putting more money in the hands of the consumer or the investor. The rest is social engineering, and we human beings don’t dig getting engineered. We’re funny that way.

      I hate fucking caviar and I don’t care how cheap the gov’t makes it, OK? And I don’t need them improving Kraft Macaroni & Cheese. It’s perfect the way it is.Report

    • Avatar wardsmith in reply to Mike at The Big Stick says:

      @Mike, there are no statistics on “new” jobs, but I have it on good authority from the President himself that hundreds and hundreds of millions of jobs were “saved”. Of course there aren’t that many actual workers in this country so I assume he’s including jobs in trading partner countries, perhaps 100% of the “saved” jobs. We /think/ the Chinese are working for us, but our government is /really/ working for them. 🙂Report

    • The new chair of the DNC stated this morning that 3.6 million new jobs were created. Me thinks this will be an interesting debate in itself next year.Report

    • Avatar Michael Drew in reply to Mike at The Big Stick says:

      A couple of really honest questions here, Mike: in your view, what would have to be true for a job to be “actually created by the first Stimulus Bill”? What would it mean for it to be “new,” i.e. is the category of jobs “actually created by the Stimulus Bill” that are not “new jobs” a populated one? And if it is, what kind of a thing is a not-new job actually created by the first Stimulus Bill, and is the fact that it isn’t a new job important to how we judge the performance of that bill (er, law)?Report

  7. Avatar Bill Woolsey says:

    The Fed needs to create more money. Perhaps as much as
    $4 trillion.

    It needs to lower the interest rate it pays on reserve balances.

    And most importantly, it needs to commit to a growth path for
    GDP, spending on output.

    And once GDP is back on that stable growth path, it will almost surely
    have to reduce the quantity of money and raise interest rates.Report

  8. Avatar Roger says:

    Let’s try addressing the opposite problem:

    What could we do to OPTIMIZE unemployment? Easy breezy!
    1) Raise the minimum wage
    2) Give control of inner city schools to the teachers’ unions
    3) Increase licensing requirements for entry level self-employable jobs (taxi driver/hairdresser, lemonade salesman, ad nauseum)
    4) Increase the level of mandatory benefits — such as health care — to make entry level jobs uneconomically expensive
    5) Support closed shop (coercive) union requirements
    6) Increase regulations, bureaucratic agencies and red tape to limit business expansion
    7) Create an environment where entrepreneurs are wary of starting new businesses (because 150% of net new jobs actually come from start ups — existing businesses actually tend to lose employees over time)
    8) Extend unemployment benefits to discourage the need to re-enter the workplace
    9) Encourage home ownership in those better off renting (needing to stay mobile)
    10) Crowd out personal investment with special interest group payoffs

    If you were to do the above, what do you think the result would be as soon as the economy hit a recession? Well, “we” did the above. The only question left is whether “we” were fools or foxes. Maybe a coalition of the two.

    We’ve knocked out the bottom rungs of the voluntary employment ladder.Report

  9. I keep seeing people use this phrase “hoarding” (I recently critiqued Sam Harris for using it, but instead of blaming banks he was blaming wealthy people). Tell me exactly how banks benefit from “hoarding” money. It’s an odd business model since they generally pay interest to people who’ve put money in their vaults–that would mean that when they “hoard” money they’re actively losing money (presumably as a purposeful choice).

    In fact some banks have recently stopped paying money on deposits over a certain amount and are charging fees on them. That’s a clear sign the banks are not only not hoarding that money, they’d like to get a good chuck of it out of their vaults.

    And businesses don’t profit from just letting their money sit around doing nothing in a checking account, either, so the only logical explanation for why they’re doing it is that they don’t currently see good ways to invest that money (and nobody else is borrowing that money from the bank because they also don’t see good ways to invest right now). Now whether that’s because of regime uncertainty, as Robert Cheeks suggests above (and as Robert Higgs argues), or just because of low aggregated demand (as Paul Krugman and Brad DeLong argue), it’s definitely not because of a desire to “hoard,” which is the least profitable use of one’s money.Report

    • I think that when banks have no fear of failure, thanks to the promise of a bailout, and are assisted by the state to grow even bigger and even more too big to fail, hoarding actually makes decent sense at least in the short term.Report

    • Avatar Kolohe in reply to James Hanley says:

      It’s an odd business model since they generally pay interest to people who’ve put money in their vaults

      These days, though, the banks get paid. (though technically the money is not ‘in their vaults’ But also technically most of the money is just entries in an electronic ledger.)

      Since the 2008 meltdown, the Fed (as a carrot to promote solvency) gives the banks a bit of the vig for all the money they hold in excess of the minimum set by reserve requirements.
      http://www.federalreserve.gov/monetarypolicy/reqresbalances.htmReport

      • Avatar MFarmer in reply to Kolohe says:

        Another angle — http://www.businessinsider.com/banks-cash-hoarding-could-halve-and-still-be-too-much-2010-2

        Once government gets out of the way, there will likely be a new era of incredible economic growth and business expansion. The sooner the better.Report

        • Avatar MFarmer in reply to MFarmer says:

          I would love to see Obama announce four changes Thursday — simplified tax reform, elimination of all corporate welfare, comprehensive elimination of kob-killing regulations, and a withdrawal from the Mideast followed by military base closings worldwide — that might be five if you count bases and war as separate actions. It would piss off a bunch of people, but it would shake up the game, and investors would be scrambling to get an edge now that protection is pulled out from under them. It would also act as a reform on campaign financing — the big guys won’t know who to bribe, plus they’ll need all that cash to fight off competition from below. Political means will shift to economic means.Report

          • Avatar Kim in reply to MFarmer says:

            … I’ve only ever heard of one regulation that really was “job killing” — and it got fixed next budget cycle. Unless what we mean by “job killing” is “anything that means fewer deaths/disease.”
            There’s always one bad apple, and everything gets overregulated because of it. That doesn’t mean that the overregulation is a bad idea. Capitalism as it’s played today means that every company tries to get within a hairsbreath of the current regs.Report

            • Avatar DensityDuck in reply to Kim says:

              Lead-content regulations that require independent testing and tracking of every stage from raw material to finished product add a vast amount of expense to any child’s-product manufacturer’s operations, and exist only to ensure that the products made are .01% lead rather than .03%.Report

              • Avatar Kim in reply to DensityDuck says:

                cite a credible source, please.Report

              • Avatar DensityDuck in reply to Kim says:

                …this is in the CPSIA. Do you consider US federal law to be a “credible source”?

                Unless it’s your contention that instituting an, as it were, cradle-to-grave tracking system for children’s products (including third-party testing at every step from raw material to finished product) is a negligible no-cost activity.Report

              • Avatar Kim in reply to DensityDuck says:

                citation please. if you’re citing federal law, you can post the relevant statutes here, or on a different site.

                Are you against heirloom varietals? I think that might make your point a bit better, and with a cite from dkos. Assuming you’ll go to the Great Orange Satan for anything.Report

              • Avatar Plinko in reply to DensityDuck says:

                How many jobs were lost? Any data at all?

                The CPSIA was extremely poorly put out, yet I’m not sure there’s any evidence that employment in the making or selling of children’s products has declined in any way that’s not purely attributable to the Great Recession.Report

      • Avatar James Hanley in reply to Kolohe says:

        Well in that case the target of criticism is not properly the bankers but government policy, no?Report

    • Avatar wardsmith in reply to James Hanley says:

      It isn’t hoarding, it is the /requirement/ of both Basel III and Dodd/Frank bills. Banks used to operate on a capitalization ratio of 3-5%, now they are required to hold at least 9% of tier one assets. This doesn’t seem like much, but banks are inherently leveraged. Back when they could get away with 3% capitalization that meant they could *borrow* 33 times the amount on deposit. You give them $1000 they turned that into $33,333.33 and then lent that out (and/or gambled with a lot of it as we saw in 08).

      Right now of course they just turn around and “invest” in Treasuries. It /seems/ Treasuries aren’t paying anything, but that’s just for thee and me.

      Scenario A) I invest $1000 of my hard-earned after tax money in a Treasury and make 2% interest. At the end of a year I’ve made a whopping 20 dollar bill on my investment.

      b) Now here’s how a bank plays the same hand. I stupidly deposit that $1000 in the bank and they pay me .01% interest (but hey, it’s insured!_). They turn around and borrow $11,111.11 at .02% interest from the Fed. They then purchase the full amount in Treasuries and make 2% on $11K, not $1K. Their effective interest is now >20% (on the original $1k deposit). This is why banks have massive profits right now. They aren’t lending because they don’t need to lend to US, they’re lending to the U.S. The U.S. likes it because it helps keep interest rates down. Ultimately the economy will hate it, big time, but these guys hope to be out of office by the time the stinky stuff hits the fast spinning object.

      Try getting a home loan lately? Even if you have an 840 credit rating, banks are reluctant to lend. If you’re a business fugeddaboutit.Report

    • Avatar Kim in reply to James Hanley says:

      you hoard when you must have cash in order to not have to sell your (more risky) investments for well under their fair price. See: silver and gold crashing through the floor.
      flight to quality is a real phenomenon, I’m just not sure that’s what’s going on right now.Report

    • Avatar DensityDuck in reply to James Hanley says:

      “Tell me exactly how banks benefit from “hoarding” money. ”

      The problem is that most people have an idea of a bank as being something like Scrooge McDuck’s money vault.

      I think that one of the funniest bits in “It’s A Wonderful Life” is where George–the populist hero! The good guy!–is trying to explain to his customers why the Bailey Building And Loan does not actually have any cash on the premises, and they’re all “eff dat, want mah moneys”.Report

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