Goolsbee goes au naturel

I never thought I’d ever hear an economic adviser to a Democratic administration justify taking a natural path to recovery when the US economy is reeling from a basic lack of aggregate demand.   The comments were just about as Chicago school as you could get.   It was just another reheated bowl of smoking green shoots.

“Our effort now as a government should be to get the private sector to help them stand up and lead the recovery,” Goolsbee told “This Week” anchor Christiane Amanpour, citing efforts on regulatory review, while maintaining policies such as reduced payroll taxes through the end of the year. “We’ve got to rely on policies that are trying to leverage the private sector and give incentives to private sector to be doing the growth.”

I didn’t catch Obama economist Austan Goolsbee with Christian Amanpour on ABC which is where I got that quote.  I caught up with him on Candy Crowley’s Sunday show.  From what I can tell, the story line was about the same.  According to Goolsbee, whatever recovery we’re experiencing from the worst financial crisis we’ve had since The Great Depression is in the hands of the private sector who just needs to appreciate the gentle nudge they’ve already gotten. Goolsbee conveniently ignored every thing going on in the recent economy except a small window’s worth of job creation.  He declared that there was no downward trend in the economy.  I felt like I was watching a big ol’ flaming head tell me to ignore the man behind the curtain. But, I musn’t be the only one that was watching the little man behind the curtain given that the one month’s worth of data turned into “DOW plunges into longest weekly losing streak since 2004” last week.  I don’t think that’s the end of that either.

Scarecrow at FDL calls it the best speech evah given by President Romney’s chief economic adviser.

Goolsbee correctly told us that a smart economist wouldn’t get overly excited about one month’s jobs and growth numbers but would instead look at the overall trend. Of course what he wouldn’t want to concede is that GDP grew at a meager annual rate of 1.8 percent over the first three months of 2011 and so far was predicted to grow at only 2.8 percent for the next three. And the overall trend for job growth was still not enough to make a serious dent in unemployment unless you believe taking 5-10 years to get back to full employment is okay.

So Goolsbee was in denial from the opening moment because he didn’t have a decent story to tell even in his own framework. When Amanpour asked him what the Administration could or should be doing to improve conditions, he ticked off items you’d expect to hear from a typical GOP Presidential adviser: we’ve got to get the debt under control; we have a White House effort to identify and get rid of governmental regulations that are preventing the private sector from growing the economy; we should pass “free trade” agreements backed by the Chamber of Commerce; and we should leverage limited public dollars to release billions in private funding for investments.

Goolsbee’s bottom line: “It’s now up to the private sector.” That’s exactly what you’d expect from President Romney’s economic adviser.

It took Paul Krugman and Chrystia Freeland, over the absurd denials by Martin Regalia of the Chamber of Commerce, to remind ABC’s audience that business confidence and concerns about taxes and regulations aren’t the problem: business polls repeatedly show businesses aren’t expanding/hiring much because the demand for their products is weak. Demand is weak because the recession and the housing market crash depleted consumers’ wealth and they’re worried about losing their homes and jobs. You don’t need a degree in economics to grasp the logic of that. When private spending is still depressed, only government spending is keeping the economy afloat, and the stimulus is phasing out.

Now, I hate to keep writing about the same things over and over again.   I know I’m not the only one.   Brad DeLong has finally discovered there is no Plan B.  There is only full speed ahead with deficit reduction which is a great long term goal but a disastrous short term strategy.  Mark Thoma is even more straightforward.

Policymakers have been telling us to have patience for some time now, but patience ran thin long ago. We need action, not excuses to do nothing based upon Republican talking points. We have millions of people out of work, we face the prospect of a five to ten year recovery for employment, yet the administration has no plans to even try to push Congress to do more.

I stuck the nifty graph up top because it basically shows that most businesses aren’t expanding because they don’t have customers and they don’t see the economy improving.  Again, tax breaks don’t do businesses any good when they don’t have revenues. Low interest rates aren’t working either.  That means the Fed basically can’t do anything via monetary policy either at this point. The graph and the following analysis are from the  NFIB which tracks small business trends. They come from their latest poll of small and independent businesses.

The percent of owners planning capital outlays in the next three to six months fell 3 points to 21 percent, a recession level reading. Money is cheap, but most owners are not interested in a loan to finance equipment they don’t need. Prospects are still uncertain enough to discourage any but the most profitable and promising investments. Four percent characterized  the current period as a good time to expand facilities (seasonally adjusted), down 1 point from March and 4 points lower than January. The net percent of owners expecting better business conditions in 6 months slipped another 3 points to negative 8 percent, 18 percentage points worse than in January. Uncertainty is the enemy, and there is plenty of it to convince owners to “keep their powder dry”. Apparently consumers feel much the same way, as more customers spending more money would overcome the reluctance of owners to hire and make capital outlays. One in four still cite “weak sales” as their top business problem.

There is nothing mysterious about the fiscal policy solution to your basic lack of aggregate demand. What’s mysterious is the complete lack of concern about the significantly high unemployment rates, the continued foreclosure crisis, and the downward trends in both consumer and business confidence.

I guess I know what happens with the phone rings at 3 a.m.

No one picks it up and then some one goes on TV the next day and says we’ve done all we can do.  For this they expect re-election?


20 Comments on “Goolsbee goes au naturel”

  1. bostonboomer says:

    We have to face the fact that the current crop of Dems and Repubs has decided jobs don’t matter. Trying to convince them otherwise is a waste of time. It’s time for revolutionary tactics.

  2. bostonboomer says:

    Obama spoke at a Chrysler plant and never even mentioned unemployment.

  3. bostonboomer says:

    OT–Anthony Weiner now being attacked for having unpaid parking tickets and the wrong regstration tag on his car. Some one really big wants to destroy this guy!

    • Peggy Sue says:

      I agree, BB. This is a concerted effort to being Weiner down. The crotch shot has all kinds of problems with the skanky sources accepted without proper vetting. Now we’re down to parking tickets and registration.

      The Repugs cannot and will not admit that they shot a blank on this one. My question is why is Weiner in their sights? Could it have anything to do with Weiner calling Justice Thomas out for his failure to declare his wife’s substantial earnings on Fed Disclosure Forms? Attending swanky conclaves hosted by the Koch brothers? Or holding his ground on Fox interviews, being just obnoxious as their ‘fair and balanced” talking heads generally are?

      Or something else.

      I agree that a big Someone or group of Someones is out to destroy the man’s credibility. If, in fact, he has any real skeletons in his closet? They’ll crucify the man, the typical Repug strategy.

      Time will tell.

      The lingering question is why???

      • bostonboomer says:

        I think Weiner is in Obama’s sights, frankly.

      • Peggy Sue says:

        I guess my snap answer to that, BB,

        “I think Weiner is in Obama’s sights, frankly.”

        would be:

        Obama, Repugs–where’s the difference? Although Cannonfire has additional info on his blog on the sterling blogger citizens who got this thing rolling. Ooweee. What a demented group!

  4. CinSC says:

    Kudos on pointing out (yet again) that tax breaks don’t do you any good if you have no revenue. Don’t know why that is such an abstract concept to those making policy.
    I am noticing the desperation of the small shop owners around here. Sales staff has all been let go, so you talk to the owner at checkout more often than not. Discounts and advertising aren’t helping, people just are not spending. Which is totally understandable given the employment numbers, but perpetuates the vicious circle.
    For this administration to claim they’ve done enough is just unacceptable.

    • dakinikat says:

      The best way to check your analysis is to also check with your local service businesses. I’m surrounded by mom and pop stores and none of them feel secure at the moment. The tourist trade has picked up and its mostly weekenders which means people aren’t taking big vacations. When economic analysis was prepared for the Fed Prez from the district, they always sent people out from the branches to talk to businesses to do a gut check on the economists’ numbers. I can tell when the stock market is off by which restaurants empty out now.

  5. fiscalliberal says:

    I would add that business saw the Finnacial Crisis and do not see anything being done by the regulaters in a concrete way. The risk of business is high. Aricles are starting to appear regarding the regulaters not getting things done,
    From Pro Publica:

    From Dodd-Frank to Dud: How Financial Reform May Be Going Wrong

    http://www.propublica.org/article/from-dodd-frank-to-dud

    They discuss: Volker Rule, Derivatives, Credit Rating Agencies and Resolution authority.

    If they botch these items there will be no fixing them as the House Financial Services committee is under Republican control. Bachus wants to scuttle Dodd Frank legislation.

    It looks like Ayn Rand has come back to haunt us.

  6. RSM says:

    I watched Goolsbee on THIS WEEK. There was a roundtable afterward with Krugman, Chrystia Freeland, and some flack from the U.S. Chamber of Commerce. Krugman and Freeland were polite, but you could tell they were appalled at what Goolsbee had said.

  7. fiscalliberal says:

    All of a sudden Ayn Rand is being discussed. I found this video on Naked Capitalism

    After you look at the 13 minute film, you kind of see what Objectivism is. Our current experience is that Greenspan was a acolyte of Ayn Rand (part of her weekly meetings and she was at his swearing in cerimony.

    Greenspan policies were major contributers to the Financial Collapse

    Yves article can be seen here

    http://www.nakedcapitalism.com/2011/06/philip-pilkington-debt-public-or-private-the-necessity-of-debt-for-economic-growth.html

  8. fiscalliberal says:

    There is an interesting article at Swampland (blog)regarding Paul Ryans problem with Ayn Rand. This came via Huffington.

    http://swampland.time.com/2011/06/03/paul-ryans-ayn-rand-problem/?xid=huffpo-direct

    The article has two short video’s worth Watching.

  9. fiscalliberal says:

    Dak – were the John Birchers followers of Ayn Rand?

  10. Peggy Sue says:

    There actually is a bill to reinstate a version of Glass-Steagall, headed by Marcy Kaptur with 13 Dem sponsors. See here:
    .
    http://market-ticker.org/akcs-www?post=187294

    And you see how much attention it’s received. Nah, we’d rather have everyone focused on Crotchgate.

    Article is from Karl Denninger’s site. I don’t agree with Denninger in all things [I’m decidedly not a Libertarian]. But on this, I absolutely agree:

    ‘You are being conned America – AGAIN.’

  11. fiscalliberal says:

    Very interesting article on FDL by John Waler titled: Obama Won’t Speak Out about Debt, Too Concerned What “Markets” Will Think

    http://fdlaction.firedoglake.com/2011/06/03/obama-wont-speak-out-about-debt-hes-concerned-with-what-markets-will-think/#comments

    My reaction is: Markets are clearly in control under Obama. I think that is Chicago economics (Freidman?)

    He is to white knuckled to react, we need some one to influence the markets.

  12. Branjor says:

    We need a third party called the Sanity Party.