The DC Disconnect
Posted: May 31, 2011 Filed under: Economy, Federal Budget and Budget deficit | Tags: Bush tax cuts, U.S. Economy 12 CommentsThe disconnect between reality and beltway rhetoric has never been more obvious when it comes to the economy. The NYT editorial page has an op-ed up today– ‘The Numbers are Grim’–in which they call for more attention to the unemployment crisis. As I mentioned when these numbers came out, a decrease in domestic household consumption is a troublesome signal in an economy where nearly 68% of production usually goes to domestic consumption.
When consumers are constrained, so is hiring, because without customers, employers are hard pressed to retain workers or make new hires. A recent Labor Department report showed a greater-than-expected rise in the number of people claiming jobless benefits even as private-sector economic forecasts are being revised downward — both very bad omens for continued job growth.
Republican lawmakers have responded to renewed signs of weakness with a jobs plan that prescribes more of the same “fixes” that Republicans always recommend no matter the problem: mainly high-end tax cuts, deregulation, more domestic oil drilling and federal spending cuts.
The White House has offered sounder ideas, including job retraining, plans to boost educational achievement and tax increases to help cover needed spending. But its economic team is mainly focused on negotiations to raise the debt limit, presumably parrying Republican demands for deep spending cuts that could weaken the economy further while still reaching an agreement on the necessary increase.
The grim numbers tell an unavoidable truth: The economy is not growing nearly fast enough to dent unemployment. Unfortunately, no one in Washington is pushing policies to promote stronger growth now.
Even the Wall Street Journal recognizes the challenges our economy faces. Many corporate economists see similar indications of a permanent growth problem. This should not be happening. We know how to correct this. We have nearly 70 years of economy theory and empirical data that have provided a guide to every administration except the last two.
Manufacturing is cooling, the housing market is struggling and consumers are keeping a close eye on spending, meaning the U.S. economy might be on a slower path to full health than expected.
“It’s very hard to generate a rapid recovery when rapid recoveries are historically driven by housing and the consumer,” said Nigel Gault, an economist at IHS Global Insight. He expects an annualized, inflation-adjusted growth rate of less than 3% in coming quarters—better than the first-quarter’s 1.8% rate, but too slow to make a meaningful dent in unemployment.
A growing number of forecasters are downgrading their second-quarter growth predictions. JPMorgan Chase & Co. economists revised down their estimate to a 2.5% rate from 3%, while Bank of America Merrill Lynch economists cut theirs to 2% from 2.8%. Deutsche Bank cut its forecast to 3.2% from 3.7%.
Companies are similarly cautious. Applied Materials Inc., the largest maker of machines used in producing computer chips, said it expected growth in its semiconductor and solar markets to slow following one of its best quarters ever. Hewlett-Packard Co. cut its fiscal-year outlook amid weak computer sales and negative effects from the disaster in Japan. Clorox Co. offered a more guarded outlook for its household goods business as executives noted that higher prices may hurt sales.
As stated by the NYT, most Republicans put a plan forward that calls for “high-end tax cuts, deregulation, more domestic oil drilling and federal spending cuts”. This is exactly the opposite of what needs to be done. The mantra of ‘too high’ taxes strangling business which dampens unemployment is simply not true. It’s never been true. It’s a fallacy! Bruce Bartlett has done an excellent job–see the nifty graph above–in using facts to put down that meme. Not only are effective tax rates on corporations already exceedingly low, but tax revenues from wealthy individuals are so low that most of us probably have higher effective marginal tax rates. This has been the case now for nearly 7 years and for about that same time we’ve experienced some of the worst job creation and economic growth ever.
The economic importance of statutory tax rates is blown far out of proportion by Republicans looking for ways to make taxes look high when they are quite low. And they almost never note that the statutory tax rate applies only to the last dollar earned or that the effective tax rate is substantially lower even for the richest taxpayers and largest corporations because of tax exclusions, deductions, credits and the 15 percent top rate on dividends and capital gains.
The many adjustments to income permitted by the tax code, plus alternative tax rates on the largest sources of income of the wealthy, explain why the average federal income tax rate on the 400 richest people in America was 18.11 percent in 2008, according to the Internal Revenue Service, down from 26.38 percent when these data were first calculated in 1992. Among the top 400, 7.5 percent had an average tax rate of less than 10 percent, 25 percent paid between 10 and 15 percent, and 28 percent paid between 15 and 20 percent.
The truth of the matter is that federal taxes in the United States are very low. There is no reason to believe that reducing them further will do anything to raise growth or reduce unemployment.
Meanwhile, the complete disconnect between spending and cutting priorities in Congress and the White House and the American people grows. As mentioned by BostonBoomer this morning in a reference to a Paul Rosenberg peice at Alternet, Americans want none of what is being dished up in the beltway. It is true that the current spending path for the general budget, social security, and medicare are not sustainable at current levels. What is not true is that we need to accept the current path and Republican policy priorities as the solution. There is no evidence that anything they’ve suggested will remotely help our jobs and growth problem which would take care of much of the deficit problems. The rest could be solved by simply returning tax policy back to the Reagan or Clinton levels.
It’s obvious from the last set of economic numbers that the current problem stems from lack of consumer demand which is rooted in a lack of income, confidence, and wealth in the majority of US Households. People simply do not have the wherewithal to purchase homes or sustain household budgets. This is because we have an unacceptably high level of unemployment, we have let the pathway to home ownership completely collapse, and we’re allowing basic government services to collapse to fund unrealistically low tax rates for corporations and wealthy individuals. Don’t even get me started on funding never-ending wars. There is mounting evidence that these funds aren’t even staying in the country any more but are being used to fund jobs, investment, and growth in other places. This is unacceptable policy under our current economic situation. American treasury should not be used to chase profits abroad.
The President has gotten away with extending tax cuts for the wealthiest individuals. He appears ready to go to the table and accept draconian cuts to federal spending which will impact all levels of government provision of goods and services. This basically means that he has signed on to a prescription for slow economic growth. He undoubtedly does so with no worries about the upcoming election. The Republicans offer up potential candidates that have absolutely no grasp of reality or come with a facile lack of morality to deny it. Even George F. Will believes one of the front runners to be so incapable of holding office that the thought of giving the ability to launch nuclear weapons to some of the candidates bothers him. Is handing over the ability to tank our economy any less problematic?
This is beyond disheartening. It is evident that the plutocracy is doing everything it can to silence any one that could run a narrative contrary to these current fallacies. I don’t believe for one moment that Congressman Wiener’s hacker isn’t part of tearing down any one that appears to be stepping away from the abyss of Washington group think. Meanwhile, the media speak is about pushing the economy to the precipice by focusing on the debt ceiling. It’s looking like we’re being prepped for that. This will make the market demand extremely high rates of return for federal borrowing which will only increase our interest payments on the debt which are already a huge portion of the budget. How much sense does that make?
Early proposals for whittling down spending include a plan to drop federal agriculture subsidies and to require larger employee contributions to the pension system for non-military federal workers.
“Those talks, which actually we’ve been meeting for over three weeks now, they have been all positive. Everything is on the table,” House Majority Leader Eric Cantor (R-Va.) said Sunday on CBS’s “Face the Nation.” “We’ve said, as Republicans, we’re not going to go for tax increases. I think the administration gets that. But we’ve also put everything on the table as far as cuts.”
Oh, and if you think the Republicans are all about small businesses and start-ups because they create jobs, check this nifty graph out from MoJo. The Dubya years basically killed that phenomenon too so it wasn’t about lowering tax rates, was it?
As this chart from the BLS shows, the number of jobs created by new businesses peaked in 2000, began declining at the start of the Bush administration, and has been plummeting ever since …
So much for that Republican meme. Facts are stubborn things, aren’t they?
This problem is basically due to the inability to govern and make prudent decisions. They’d much rather pump out lies and continue on the same path to destruction. These people ran up tons of debt to fund wars for which they found no funds. This is all about the irresponsible Bush tax cuts that Congress and the Obama administration returned to law in December. The pain for these horrible decisions are about to be extracted on middle and working class Americans who have done absolutely nothing to bring on the recent economic problems and fiscal problems. There has been no bail out or special tax breaks for us. It should be obvious by now that the policies of the last five years have done nothing but improved the situation for the very rich and the very large corporation. Shame on all of those elected officials that go along with this. It is as if they are purposefully setting out to destroy our economy and our way of life. I have no idea why they hold so many of us in contempt but it is obvious that that they prefer the donor class to voters. They seem to want a repeat of the Great Depression. At this rate, that is exactly what they will have.
Tuesday Reads
Posted: May 31, 2011 Filed under: just because 36 CommentsGood Morning!! It sure was a long weekend! I’m kind of glad it’s over, although it was relaxing. I guess I haven’t gotten used to being unemployed yet, because I almost got bored.
Let’s see if there is any news out there this morning. Practically the only thing on Memeorandum this weekend was the silly story about Anthony Weiner and Twitter. You probably heard that Breitbart is trying to pull another one of his fake outrage tricks. I don’t feel like writing about it, but you can read about it at Cannonfire
.Paul Rosenberg has a stimulating piece up at Alternet: Vision: How to Make Media Reflect the Popular Views of Americans, Not Those of Elites. It’s long but well worth reading. Rosenberg writes about efforts to force the media to reflect the views of real Americans. Here’s just a bit of it:
“Liar! Liar!” “He’s lying!” That’s how Wisconsin GOP Rep. Paul Ryan’s constituents responded at a town hall meeting in Kenosha a week after House Republicans passed Ryan’s draconian budget plan to privatize Medicare and slash taxes for the wealthy.
Ryan seemed genuinely shocked, totally unprepared for the grassroots outrage and for good reason: the gap between Washington elites and the American people seems to have reached an all-time high. While Ryan’s plan was lauded as “brave” and “visionary” inside the Beltway, poll after poll showed that the American people wanted none of it.
62 percent believe the government should focus on creating jobs, even if it means increasing the deficit in the short-term, according to a Lake Research Partners poll in March 2011.
76 percent believe cutting Medicare to help reduce the budget deficit is mostly or totally unacceptable, and 67 percent believe the same about Medicaid, according to a Wall Street Journal/NBC poll in February, 2011.
68 percent believe that phasing out the Bush tax cuts for families earning $250,000 per year is mostly or totally acceptable to help reduce the budget deficit, according to the same poll.
65 percent oppose changes to Social Security as a way to reduce the budget deficit, according to a Pew Research poll in March, 2011.
Yet, despite similar results in dozens of polls over the past few months, none of it seemed to penetrate the Beltway bubble.
He goes on to tout the The American Majority Project, led by Roger Hickey. There have been many attempts by liberals to influence the media as the Republicans have been able to do for the past 30 years. I don’t know if this one will be successful, but I sure do support the goal and the effort.
According to The New York Times, the latest housing index will show that home prices have hit a new low.
Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.
Disenchantment with real estate is bound to swell further on Tuesday when the most widely watched housing index is all but guaranteed to show that prices of existing homes sank in March below the lows reached two years ago — until now the bottom of the housing crash. In February, the Standard & Poor’s/Case-Shiller index of 20 large cities slumped for the seventh month in a row.
Housing is locked in a downward spiral, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.
Of course no one is doing anything about this, any more than they are doing anything about unemployment. At Common Dreams, Dave Lindorff asks: If Joblessness and Hopelessness Undermine Democracy in the Middle East, What About Here at Home?
In his latest speeches on the Middle East, President Obama, both at the State Department and at the G8 meeting in France, has pledged billions of dollars in economic aid to Middle Eastern countries, drawing a direct connection between the unrest and demonstrations that brought down the dictators in Tunisia and Egypt, and the joblessness and hopelessness felt by the young people in those two countries.
His adviser on international economics, David Lipton, has been more specific, saying that, “We believe that these two pillars go hand in hand. Without economic modernization, it will be hard for governments trying to democratize to show people that democracy delivers.”
What’s wrong with this picture?
If the official rate of unemployment for all Americans of 9% is actually less than half of the actual rate of 20%, then even if we took a conservative estimate, simply eliminating the adjustment of those working part-time who want full-time work from the youth unemployment figure, and just keeping the adjustment for those who have dropped out of the labor force (stopped looking for work) because it is fruitless, we would still see actual unemployment figures for young people in the US at staggering Egypt-like levels: 30% for all young people, 45% for young Latinos, and as high as 66% for black youth!
So why is the president so concerned about providing economic support to boost jobs in countries like Tunisia and Egypt, in order to “support democracy,” while in here in the US, he has basically thrown in the towel on job creation efforts, and is just talking about cutting the deficit–a Republican theme?
Very good questions. If only we could get some answers from the President.
At Truthdig, Chris Hedges has a post on global warming: The Sky is Really Falling.
The rapid and terrifying acceleration of global warming, which is disfiguring the ecosystem at a swifter pace than even the gloomiest scientific studies predicted a few years ago, has been confronted by the power elite with two kinds of self-delusion. There are those, many of whom hold elected office, who dismiss the science and empirical evidence as false. There are others who accept the science surrounding global warming but insist that the human species can adapt. Our only salvation—the rapid dismantling of the fossil fuel industry—is ignored by both groups. And we will be led, unless we build popular resistance movements and carry out sustained acts of civil disobedience, toward collective self-annihilation by dimwitted pied pipers and fools.
Those who concede that the planet is warming but insist we can learn to live with it are perhaps more dangerous than the buffoons who decide to shut their eyes. It is horrifying enough that the House of Representatives voted 240-184 this spring to defeat a resolution that said that “climate change is occurring, is caused largely by human activities, and poses significant risks for public health and welfare.” But it is not much of an alternative to trust those who insist we can cope with the effects while continuing to burn fossil fuels.
Along similar lines, this piece by a Canadian journalist on our dependence on oil is real eye-opener: Why Our 21st Century Slave Society Can’t Last
In 2009 a British family living in a four-bedroom house became the subject of a subversive energy experiment about modern slavery.
While the foursome flicked on gadgets one Sunday with the abandon of Roman patricians, an army of volunteers (The Human Power Station) furiously pedalled 100 bicycles next door to generate the needed energy.
The unsuspecting family, of course, had no idea they had been unplugged from a power grid fueled largely by fossil fuels.
At the end of the day the slave masters literally dropped their jaws when a BBC television crew introduced them to the exhausted slaves that boiled their tea. (Get this: it took 24 peddlers to heat the oven and 11 cyclists to make two slices of toast.)
At the end of the experiment many of the cyclists collapsed. Several couldn’t walk for days. The peddlers actually consumed more energy in food than they generated by peddling.
Go read the whole thing. It’s a fascinating argument.
That’s all I’ve got. What are you reading and blogging about today?
SDB Evening News Reads for 053011 Memorial Day Edition
Posted: May 30, 2011 Filed under: just because | Tags: Memorial Day, movies 35 CommentsWell, for Memorial Day we are going to make this an Open Thread. The news is so depressing…so just for today check out these fun links. Since we have a music thread going on here, I thought we would have a movie thread this evening.
So be sure to post some of you favorite War and Summer movies!
I am going to post some funny ones, cause I just don’t feel like bringing the post down…
My first choice, No Time for Sergeants (1958) – IMDb
Will Stockdale is a country bumpkin drafted into the Air Force and too dumb to realize he’s driving everyone around him crazy — no one more than Sgt. King.
This next one is my son’s favorite movie…he is 13 so go figure.
When two escaping American World War II prisoners are killed, the German POW camp barracks black marketeer, J.J. Sefton, is suspected of being an informer
Billy Wilder directed this great movie…and what a cast. William Holden, Otto Preminger, Peter Graves and Robert Strauss.
And this next one…Kelly’s Heroes (1970) – IMDb
It is full of anti-war sentiment and a whole lot of hippie references.
For my Summer choices…one of the best movies that kick off summer: Jaws (1975) – IMDb
When a gigantic great white shark begins to menace the small island community of Amity, a police chief, a marine scientist and grizzled fisherman set out to stop it.
Anyway, lets have your favorite War and Summer flicks…
And if you want to get caught up on the news…Google News
I’ll be sure to go back to our regular format tomorrow. Happy Memorial Day!
Open Thread: Sounds of Summer
Posted: May 30, 2011 Filed under: just because | Tags: American Graffiti, Beach Boys, Drifters, Eddie Cochrane, Lovin' Spoonful, music, open thread, summer 63 CommentsWhat are your favorite summer songs? Since I’m so old, mine tend to be oldies from the ’50s, ’60s, and ’70s. But we have some younger folks here too–have there been any summer classics in the past couple of decades?
I grew up in a medium-sized town in Indiana. There wasn’t a whole lot to do there. When we wanted to get out, we often just drove around with a gang of kids. We’d drive around the drive-ins to see who was there. One of those drive-ins is pictured above. There was another one in town called John’s Awful Awful Drive-In (awful big and awful good!), but that one has been torn down and I couldn’t find a photo. We would drive around for hours, listening to music, laughing, and talking. It sounds boring, I know, but it was fun. This teen-age lifestyle was depicted in the great summer movie American Graffiti. You’ve probably seen it. America was car-crazy in those days, and rock ‘n’ roll ruled.
In the summer there were always upbeat, happy songs that went along with the sunny season. I’ll share a couple of my old favorites and hope you’ll share yours.
This one is a real oldie but goodie, Summertime Blues by Eddie Cochrane–a big hit in 1958.
Summer in the City, by the Lovin’ Spoonful
The Drifters, Up on the Roof
Of course the ultimate summer group of the ’60s was the Beach Boys. This one is from before they were the Beach Boys. They were so young!
Here’s another live video from before Brian Wilson got sick.
So….. what are your summer favorites?
Recent Comments