Like We Need More Austerity …
Posted: April 28, 2011 Filed under: Economy, jobs | Tags: BEA, GDP growth, still feels like a recession, U.S. Economy 19 CommentsU.S. Economic Growth did exactly what most economists expected during the first quarter of 2011, it slowed substantially. There is some hope that the low rate was due to temporary factors like bad weather and political unrest in the MENA region that’s contributed to higher gas prices.
Of these various economic menaces, the most enduring is probably higher commodity prices, which reduce the amount of pocket money that households and businesses have available to spend on other purchases and, in the case of companies, hires. Gasoline prices have shown little sign of falling in recent weeks, and have nearly neutralized the 2011 payroll tax cuts that were intended as a stimulus.
“Consumers are spending more, but it’s getting soaked up in higher gas prices and higher food prices,” the chief economist at RDQ Economics, John Ryding, said. “That’s not leaving nearly as much left over for discretionary spending.”
Declines in government spending will continue to drag on the economy throughout the year, as strapped state and local governments cut back and the federal government tries to cut down on nonmilitary spending. Last quarter’s steep drop in military spending, which tends to be volatile, will probably reverse itself later in the year, economists said.
It’s pretty easy to tell who is experiencing the worst end of this lackluster recovery. Hint: It’s not the wealthiest Americans. But, if you had any doubts, Wal-Mart reports their shoppers are “running out of money”. Again, there’s low overall inflation but higher gas and food prices make up a large portion of the family budget for ordinary Americans.
Wal-Mart’s core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried, CEO Mike Duke said Wednesday.
“We’re seeing core consumers under a lot of pressure,” Duke said at an event in New York. “There’s no doubt that rising fuel prices are having an impact.”
Wal-Mart shoppers, many of whom live paycheck to paycheck, typically shop in bulk at the beginning of the month when their paychecks come in.
Lately, they’re “running out of money” at a faster clip, he said.
“Purchases are really dropping off by the end of the month even more than last year,” Duke said. “This end-of-month [purchases] cycle is growing to be a concern.
This would explain the results of this Gallup Poll where “More than Half Still Say U.S. is in a Recession”. This amount of consumer depression in an economy driven by 70% household spending cannot bode well for future GDP growth. Businesses are expanding overseas and will not create any jobs or businesses here unless they see customers. This, in the Keynesia mold, calls for increased government spending. What we have been getting is decreases in taxes to people whose investments and job creation efforts are going outside of the country. It’s not hard to see why most citizens do not think we’re in any kind of recovery other than a technical one.
More than half of Americans (55%) describe the U.S. economy as being in a recession or depression, even as the Federal Open Market Committee (FOMC) reports that “the economic recovery is proceeding at a moderate pace.” Another 16% of Americans say the economy is “slowing down,” and 27% believe it is growing.
Meanwhile, every one within the D.C. beltway continue to eye the dwindling American safety net with greedy eyes. This has elicited comments from all over but none is perhaps more jaw-dropping than a pronouncement from Former Dubay Treasury Secretary Paul O’Neill who likened Republicans threatening to block the increase in the debt ceiling to Al Qaeda Terrorists. It does indeed seem that Republicans would like to bring on a great depression rather than find middle ground on spending and taxing priorities.
“The people who are threatening not to pass the debt ceiling are our version of al Qaeda terrorists. Really,” O’Neill, Treasury secretary in the Republican administration of George W. Bush, said Wednesday in an interview with Bloomberg Television’s InBusiness with Margaret Brennan.
“They’re really putting our whole society at risk by threatening to round up 50 percent of the members of the Congress, who are loony, who would put our credit at risk,” O’Neill said.
It’s as if our elected officials are deliberately sabotaging the country. The details in the National Income and Spending accounts are given here at the BEA. You can see that we’re not getting stimulus from either Federal Spending, Business Investments or Exports. (There’s a pretty much a wash when you look at Net Exports or you subtract Imports from Exports.)
Real exports of goods and services increased 4.9 percent in the first quarter, compared with an increase of 8.6 percent in the fourth. Real imports of goods and services increased 4.4 percent, in contrast to a decrease of 12.6 percent.
Real federal government consumption expenditures and gross investment decreased 7.9 percent in the first quarter, compared with a decrease of 0.3 percent in the fourth. National defense decreased 11.7 percent, compared with a decrease of 2.2 percent. Nondefense increased 0.1 percent, compared with an increase of 3.7 percent. Real state and local government consumption expenditures and gross investment decreased 3.3 percent, compared with a decrease of 2.6 percent.
The change in real private inventories added 0.93 percentage point to the first-quarter change in
real GDP after subtracting 3.42 percentage points from the fourth-quarter change. Private businesses
increased inventories $43.8 billion in the first quarter, following increases of $16.2 billion in the fourth
quarter and $121.4 billion in the third.
None of this is good news when coupled with the still high rates of unemployment. Despite all these tax cuts, the business sector is clearly not going anywhere. Here’s a link to some further analysis and nifty graphs from Econbrowser. This analysis is particularly germane to our conversation.
Inventory rebuilding and a gain in exports made positive contributions, but these were essentially undone by increases in imports and decreases in government spending. Perhaps the most disappointing detail was investment spending by businesses, which had been making solid contributions to growth the previous three quarters, but was essentially flat for Q1. Housing remains stuck at very low levels, but at least it’s no longer a significant factor dragging the level of GDP down.
But until housing and business investment start making a positive contribution, we’re likely to be disappointed by the employment and GDP reports.
It’s pretty obvious that fiscal policy in this country has gone to VooDoo land because we’re still in deep DooDoo. What we have here is fiscal policy malpractice. Too bad we can’t all join in a massive lawsuit and sue the Congress. Thanks a lot SCOTUS!!!
A First: Fed Chair Presser
Posted: April 27, 2011 Filed under: Economy, Federal Budget, Federal Budget and Budget deficit, financial institutions, Global Financial Crisis, jobs, U.S. Economy, unemployment | Tags: Ben Bernanke, FED, inflation, jobs, monetary policy, presser 10 Comments
I’m watching Bernanke do a presser. Wow. (It’s a live blog … updates and explanations will be provided.) I can’t believe the press sent political reporters to this. What an amazing number of really rotten questions!!!
Some key points from the morning’s congressional testimony.
On Unemployment: We do see some grounds for optimism, including a decline to the unemployment rate, declines in the new unemployment insurance claims and improvements in firms’ reported hiring plans. But, even so, it could take quite a while for unemployment to come down to desired levels at current expected growth rates and, in particular, the FOMC projects unemployment still to be in the range of seven and-a-half to eight percent by the end of 2012. Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.
On Inflation: “I want to go back over this whole line of interventions, including today quantitative easing. And there have been a series of criticisms that have been made and negative predictions, and my view is that none of them have come true. And I think it is important for us to — to note that. And — and I know you’ve talked about this. I know you mentioned in your statement some of the points. But we were told, for instance, that it was going to be very inflationary. And I know it is your view as of now, and I think supported by the facts, that inflation is not now a problem, and we do not see inflation, certainly not one caused by any of what’s been done going forward. We were told this was going to be extraordinarily expensive, that it was going to cost a lot of money. I believe the answer is that on many of these things the federal government has made a profit by the — by the intervention.”
On Crude Oil: “The relative price of oil, again, is primarily due to global supply and demand. I think it’s important to note that the United States is consuming less oil today, importing less oil and producing more oil than it did before the crisis. That all the increase in demand from outside the United States, particularly in the emerging markets. And so there’s limited amount of what the Fed can do about oil prices alone. Again though, we want to be very sure that it doesn’t feed into overall inflation. We will make sure that doesn’t happen.”
On the Dollar: If the dollar was no longer reserve currency there would – it would on the margin probably mean that we would have to pay highest interest rates to finance the federal debt, and that would be a negative obviously. On other other hand, we might not suffer some of the capital inflows that contributed to the boom and the bust in the recent crisis. But again, I know there was also a countervailing argument in the Journal this morning as well. And I – I just don’t see at this point that there is a major shift away from the dollar.
On the Consumer: We understand the visibility of gas prices and food prices and we want to be sure that people’s expectations aren’t adversely affected. I think it’s important to note that, according for example, to the Michigan survey of consumers, that long term inflation expectations have been basically flat. I mean, they haven’t moved, notwithstanding ups and downs in gas prices, for example.
On the U.S. Fiscal Situation: While I understand these are difficult decisions and we certainly can’t solve it all in the current fiscal year, I do think we need to look forward and I know the House Budget Committee and others will be setting up a 10 year proposal. It’s very important and would be very constructive for Congress to lay out a plan that would be credible that will help bring us to sustainability over the next few years. In particular, one rule of thumb is cutting enough that the ratio of the debt to GDP stops rising. Because currently it’s rising relatively quickly. If we could stabilize that, I think that would do a lot to increase confidence in our government and in our fiscal policies.
Obviously, Bernanke needs to drill baby drill to get rid of inflation … so simple!!!
or this:
ezrakleinEzra Klein
Bottom line: Congress is embracing austerity. The Fed is going to start tapping the brakes. Sucks to be you, unemployed people. #fedpresser
Background information on the Fed Presser from NYT and David Leonhardt.
On Wednesday at 2:15 p.m., Ben Bernanke will do something that previous Federal Reserve chairmen considered a terrible idea. He will hold a news conference.
Mr. Bernanke spent much of his academic career arguing that the Fed should be less opaque, and, as chairman, he has put his ideas into action. Now it’s time for those of us in the media to hold up our end of bargain. In the spirit of democratic accountability, we should ask hard questions — and we shouldn’t let him get away with the evasions and half-answers that members of Congress too often allow Fed chairmen during their appearances on Capitol Hill.
One question more than any than other is crying out for an answer: Why has Mr. Bernanke decided to accept widespread unemployment for years on end, even though he believes he has the power to reduce it?
Here’s Paul Krugman’s take on the presser: Bernanke Wimps Out. He’s got the same questions I do about the inflation v. unemployment . (See my comments in the thread below.)
So Bernanke did get asked why, given low inflation and high unemployment, the Fed isn’t doing more. And his answer was disheartening.
As far as I can tell, his analytical framework isn’t too different from mine. The inflation rate to worry about is some underlying, inertial rate rather than the headline rate; the Fed likes the core personal consumer expenditures deflator; and this rate has actually been running below target, indicating that inflation isn’t a concern …
Late Night Question: Will they carry the Torch?
Posted: April 26, 2011 Filed under: abortion rights, black women's reproductive health, Reproductive Rights, Women's Rights | Tags: activists for choice, young women's reproductive health 6 Comments
I just read an astounding blog on the early fight for reproductive health rights by Eleanor Hinton Hoytt of Black Women’s Health Imperative at RH Reality Check. Hoytt asks a question that I’ve wondered myself recently. Will young women fight so that all US women will have access to reproductive health and not just those with sympathetic parents and partners or money in the bank? I know that Dr. Daughter is in the middle of the fight as an ob/gyn in a public hospital that serves many of Nebraska’s poorest women. She’s in a state that works hard to prevent access to a woman’s constitutional right to an abortion in the first two trimesters and a state that has eliminated access to prenatal care for women who can’t prove citizenship. Youngest daughter and I live in a state with a whacked legislator that wants to criminalize abortion. How can you “murder” something that’s–at best–on life support and marginally human? I worry that my youngest daughter doesn’t see the issue and the attacks by crazed religionists as completely central to any young woman who seeks to self-determine her life. Hoytt’s story reminds me of the early days when women frequently shared how they came to realize that they were feminists and had a huge system to fight just to be recognized as a complete person. But, again, her central thesis is a significant one and worth sharing.
I see the ‘passing of the torch’ as a common cause from a different perspective. I have heard the fears that some of the leaders of my generation have about the current generation. That they lack intensity; they refuse to listen and follow; they don’t have the urgency of NOW; and they have never lived without the power of their own agency or without control of their own body. When I see the young feminist of today, I see that their values are different, creativity is unlimited, and understanding of innovation amazing and astonishing. And, most of all, they have greater access and are most accepting of different races, ethnicities, socio-economic statuses and sexualities – this adds many more angels to the fight.
I’m happy that young feminists of today have had more opportunities to claim ownership of their bodies. I am happy that they don’t know the dark alleys, and I’m pleased that they are blogging, tweeting, and asking me to be their Facebook friend. And for many of them I meet, they want to share their stories with me and hear mine—they ask, what has kept me involved, passionate and angry for the past 30 years. I tell them my story and listen to theirs. But most of all I ask them to believe that they may achieve what I have not in many ways.
I urge my other pre-Roe or “menopausal militia” leaders to recognize the differences in this generation’s struggles, understandings, desires and dreams. I believe that too often we see a different experience or opinion as a sparring point, but now, more than ever, we must see this as a broadening of our cause. Young feminists are not laser-focused on abortion, and that’s okay. Let’s accept their boarder reproductive justice agenda.
I was fortunate enough to become sexually active post-Roe, way post-birth control pills, and at a University that practically wanted to give you all the birth control pills and reproductive health information you could possibly need. Planned Parenthood was accessible and free where I lived. Still, when the religionists started pushing back, I felt the need to take to the streets, to letter writing, and to volunteer as a clinic escort. I sent my two daughters straight to Planned Parenthood when the questions started and the needs were obvious. I’m not getting the reason that any young woman should be complacent right now about the obvious attack on their rights. But right now, I’m seeing a 50/50 shot in my own sample of 2.
It’s not really a constitutional right if we all can’t access that right equally, is it?
So, how do we in the menopausal militia pass the torch? Are there enough young activists out there to pick it up?








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