The current bout of unemployment is so stubborn that there’s now talk of tax cuts coming from the Obama administration even though Obama has made it clear that the debt and the deficit are high on his radar. Too bad they won’t help the people without jobs and the businesses without customers.
There’s also pressure on the Federal Reserve to do something, anything. If you know any thing about money creation, you know that bank lending is the critical channel for transmitting monetary policy into the real sector where the GDP growth resides. No bank lending, impotent monetary policy. It’s very simple.
The recession of the 1980s (Reagan’s first term) was somewhat created by high interest rates. Bringing interest rates down reinvigorated the economy. Well, that and Reagan’s war time spending in a period of relative peace which is basically highly stimulative fiscal policy. Reagan was a huge deficit spender and a lot of it went to rebuilding the Navy in American ship yards. So, that started the “morning in America” phenomenon.
The Institute for Policy Studies has just released its 17th annual executive survey on executive pay. The subheading is pretty telling and basically is summed up “how CEOs laid off thousands while raking in millions”. This recovery and the stimulus package and corporate bailouts have done very well by the nation’s already abfab rich.
Corporate executives, in reality, are not suffering at all. Their pay, to be sure, dipped on average in 2009 from 2008 levels, just as their pay in 2008, the first Great Recession year, dipped somewhat from 2007. But executive pay overall remains far above inflationadjusted levels of years past. In fact, after adjusting for inflation, CEO pay in 2009 more than doubled the CEO pay average for the decade of the 1990s, more than quadrupled the CEO pay average for the 1980s, and ran approximately eight times the CEO average for all the decades of the mid-20th century.
American workers, by contrast, are taking home less in real weekly wages than they took home in the 1970s. Back in those years, precious few top executives made over 30 times what their workers made. In 2009, we calculate in the 17th annual Executive Excess, CEOs of major U.S. corporations averaged 263 times the average compensation of American workers. CEOs are clearly not hurting.
But they are, as we detail in these pages, causing others to needlessly hurt — by cutting jobs to feather their own already comfortable executive nests. In 2009, the CEOs who slashed their payrolls the deepest took home 42 percent more compensation than the year’s chief executive pay average for S&P 500 companies. Most careful analysts of the high-finance meltdown that ushered in the Great Recession have concluded that excessive executive compensation played a prime causal role. Outrageously high rewards gave executives an incentive to behave outrageously, to take the sorts of reckless risks that would eventually endanger our entire economy.
“I think that really shows a really perverse incentive system in this country,” said Sarah Anderson, lead author of the Institute for Policy Studies’ 17th Annual Executive Compensation Survey. “You are handsomely rewarded for slashing jobs in the middle of the worst economic crisis in 80 years,” she said.
It did for Fred Hassan of Schering-Plough, the man the report dubbed last year’s “Golden Parachuter.” Hassan was the highest paid layoff leader, earning $50 million in 2009 while his firm merged with Merck and cut 16,000 workers.
According to Anderson, “they’re prioritizing CEO pay at the welfare of their workers”.
So how do they get away with it? Anderson said you have to look at the make-up of many companies’ executive boards. She said they’re often made up of CEOs and high level executives from other companies “who really don’t want to question this ridiculous pay system we have in this country that continues to pay people these absurd amounts of money when they’re really not performing well for their company or the overall economy.”
Another disconcerting finding of the report: 72 percent of layoff-leading firms announced mass layoffs while delivering positive earnings reports. Anderson explained layoffs are really driven by efforts “to boost short-term profits even higher and also just to continue to have such high CEO pay levels.” She said these mass cuts are often bad for business over the long-term because they impact worker morale, which can lead to lower productivity. She said they also result in additional costs related to hiring and training new workers down the road
Good Morning from The Howling Wolf in New Orleans on this fifth anniversary of Hurricane Katrina. I’m live blogging from Rising Tide 5: A Conference on the Future of New Orleans. I’m sitting among the blogging community of New Orleans (and people who love New Orleans) who are readying themselves with coffees and good stuff for several panels today to discuss what’s going on and how we can make things better. The first panel is on public safety. The politics panel comes after lunch. We’re also going to have a panel to discuss the HBO series Treme. I’m sitting in front of an avid Treme Blogger (watchingtreme from Seattle) but have to admit I haven’t been able to face watching the series since I continue to live the entire ordeal IRL. Another panel will talk about environmental issues.
The key note speaker will be Mojo’s Mac McClelland. She’s been avidly blogging about BP recently and I’m assuming we’re going to hear her stories of being chased off the story by local officials. She also covered the direct aftermath of Hurricane Katrina.
I’m just going to be posting to this thread all day. I’ll let you know which panel is up and taking questions if you want me to ask any one anything. Since you know the topics, just lemme know if something’s on your mind.
update: you can listen to Mac McClelland’s speech here. (f bomb s bomb warnings) worth listening to her stories on BP.
Well, I’ve settled back into my spot here after having talked to a buncha people. Harry Shearer is here and you can undoubtedly read his take on HuffPo later. Mac is great. There’s also some one here from Bloomberg so there’s some media around the place with an actual audience.
I’m looking forward to the Political panel although so far it’s all been very informative. Activism isn’t dead here. I voted before I came. Keep your fingers crossed for Charlie Melancon and for Juan LaFonta. If I’m still standing, I’m heading to victory celebrations post conference.
Again, the consensus here is that Bobby Jindal is the worst thing to happen to New Orleans and Louisiana which is great to hear!!! I’m glad some folks know how he is devastating higher education here as well as all public health facilities. I just hope some of these folks can have some impact in their communities so we can get rid of him shortly. Unfortunately, he wants to run for president so his plans to re-establish plantations may go national.
So, I’ll be here for a bit. After the political panel there will be a discussion of the levee system. The last panel is over the HBO series Treme.
We often talk about being prematurely right here at TC because so many folks around us don’t seem to look at the facts on the ground, learn about a situation, and then ignore the majority when it blindly establishes a meme. I distinctly remember how it felt when I was one of a few people telling every one that Iraq was not responsible for 9-11 and we should not invade. Wow, did I get called a lot of unpatriotic names then.
I felt it when I refused to get caught up in Obamania, taking a position like little Huey Riley, “hope is irrational”, and trying to say let’s look at the facts on the ground. I know I’ve felt that way all this week, although thankfully, the regulars around here and all of the frontpagers are in the boat with me on the Park51 site. The angry words that get spewed at you when you don’t hush up and fit in with the crowed can feel like arrows sometimes. Still, there’s always been something in me that knows when something is right at the core and I’m like a mama bull. When some one waves a red flag at me, I charge.
This is another, less emotionally filled topic but one that I’ve been writing about for the better part of two years. This is NOT the recovery summer and we haven’t turned a corner. When unemployment stubbornly stays high and banks would rather play paper games than make loans with rates this low, you’re not out of the woods. Funny thing is that a lot of people around me have known this, but you hardly hear it from them because it seems the sensible people never make it to TV news or the Halls of Congress.
Here’s some of the voices joining me in the wilderness or coming to get me–I don’t know which–on our very fragile economy.
First, Paul Krugman–who along with a bunch of us old neoKeynesians called for a much stronger stimulus package about two years ago–headlined the shaky economy today. Unfortunately, he’s taking it out on Ben Bernanke who can’t do QE (Quantitative Easing) forever. The Fed’s balance sheet can’t be the ultimate repository of bad investment decisions. Some of the bad investors need to either be perp walked or sent to bankruptcy court. He needs to call his friends–if he has any–in the White House and explain why doing right by investment bankers isn’t the same as doing right by small banks who really lend money out in small communities. Also, Bernanke needs a full Board of Governors and the Obama appointments are languishing in the ether. (More signs of inability to govern.)
The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.
All of this is obvious. Yet policy makers are in denial.
Let me scream it from the wilderness yet again! If an economy depends on a 67% C, in an equation that reads C+I+G+(X-M)=GDP, then not giving the C people jobs is going to put a really damper on the the GDP. (That’s C=consumption, I=investment, G= Government spending, X= Exports and M= Imports). Also, I traditionally spooks easily, is subject to huge volatility, and goes outside of the country now in hunt of greener pastures. Also, the M (which you see is a negative) is HUGE these days. It’s a definition, so how can you argue with simple math?
Economic statistics released Friday offered the clearest sign yet that the recovery, already acknowledged to be sauntering, had slowed to a crawl.
The government lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth in the three-month period was 2.4 percent.
The revision is a significant slowdown from the annual rate of 3.7 percent in the first quarter and 5 percent in the last three months of 2009.
The news came at the end of a week that showed the economic retrenchment that began in the second quarter has spilled over into the summer. Existing home sales in July were down to their lowest level in a decade, and sales of new homes last month were at their lowest level since the government began tracking such data in 1963. Orders for large factory goods, excluding the volatile transportation sector, dropped in July, indicating that recovery in the manufacturing sector was also stalling.
With such grim reports, economists are now concerned that the outlook for job creation, which has been spluttering all summer, could deteriorate further. Companies and consumers tend to be spooked by bad news, and market analysts and economists worry that faltering confidence could cause employers to hold back on hiring.
I have no idea what’s going to solve this problem because the Democrats appear to be in denial and have no back bone for fighting for the right thing. They also seem to be solidly sold out to the old Republican interests in big business because most of the Republicans elected these days are so bat shit crazy on social issues that no one wants to really touch them. (The new wedge issue appears to be purging the country of Muslims and Mexicans and probably Gay Americans if they could get away with it.) If I owned a business, I don’t think either a speaker of the house Nancy Pelosi or speaker of the house John Boehner would make me want to put my money into this country. I frankly think I’d head to India because their democracy seems more functional over there. Both India and China are certainly turning out better quality students these days in math, sciences like physics, engineering, computer sciences, and finance. India’s rule of law is based on the UK’s so it even has the benefits of extremely strong property rights. Watch for a continued flight of capital to the regions that aren’t experiencing social unrest, like Kerala.
But just as there is widespread agreement that the economy is faltering, there is also a sense that the federal government is running out of options to rebuild momentum.
“Housing is in the tank. Confidence is going down. The stock market is going down. It’s hard to imagine how consumers will spend,” said Sung Won Sohn, an economics professor at Cal State Channel Islands and former chief economist for Wells Fargo.
He put the probability that economic growth will slide back into negative territory — a double-dip recession — at “40% and going up.”
On Thursday, the Dow Jones industrial average closed below the 10,000 benchmark on the heels of worrisome new economic reports.
The government said that while initial unemployment claims last week dipped to to 473,000, from 504,000 the week before, the four-week average still reached its highest point since November. Unemployment was at 9.5% nationally in July and higher in many states, including 14.3% in Nevada, 13.1% in Michigan and 12.3% in California.
And a mortgage trade group said that, while foreclosures overall continued to ebb, more homeowners fell behind on their payments — the second straight quarter in which that has happened. With unemployment still stubbornly high, the data suggest that foreclosures could soon ramp up again.
Those reports followed news earlier in the week that home sales had fallen to their lowest level in more than a decade, despite mortgage interest rates that are at their lowest levels in nearly 40 years.
“All the indicators at the moment are pointing in the wrong direction,” said Bart van Ark, chief economist for the Conference Board, a business research group.
Of course, I finally fell to the Jindal Plan of ridding Louisiana of 10,000 four-year graduates a year, but I have to say, even if you graduate them from community colleges or trade schools, where are they going to go? Certainly, not to work in stable jobs. Plus, there’s this trend that’s undeniable of getting rid of folks in the mid 40s upward so you don’t have to pay for their more expensive benefit plans. These are things that the Federal Reserve cannot handle. They can’t force banks to lend without a law that makes them do so. When TARP and some of these laws were put into play, tougher requirements on asset and liability requirements should’ve been attached to the money. That’s the role of the Treasury to get a vital law written and the role of senior legislators to push it through.
Question: What do we have as leadership in the Treasury and the Senate?
Answer: Little Timmy-in-the-Wall Street Well again Geithner and Lobbyist-in-Training Chris Dodd.
The only thing getting through congress right now is legislation written by mega corporations in oligopolies that benefit from that horrid market structure. The legislation they push reduces the chances of them ever seeing legitimate competition. We also see legislation handing them tax payer money to screw over their customers. It’s shameful!!!
Meanwhile, there’s still problems with the potential of that damned BP well to spew oil. It’s not killed yet, folks. Then, there’s seriously unemployed people and nearly bankrupt state governments and localities. Meanwhile, all Fox new can do is gin up some Muslim conspiracy story and all the politicians are on vacation. I’m glad some of the journalists are down here pointing out the 5 years of slow progress towards Katrina recovery, but really, a two day attention span is not going to solve our problems down here. They might as well go home and talk about the country’s economic problems.
Why can’t we get some real political leadership and effective and smart Journalists? All I see on TV are a bunch of idiots like Rick Sanchez (who has me not watching CNN any more because he’s just plain dumb… I’d like to see him on that show pitting him against fifth graders… he’d lose to every one of them!) and Allan Simpson (whose voice is downright mainstream compared to most on Fox). The journalists are clueless on any topic of substance and driven by ratings. The current group of politicians seem to have us re-fighting the revolution and the first and fourth amendment and the civil war and the 14th amendment.
What’s next a movement to re-establish prohibition and remove the rights of women to vote?
There’s definitely a vacuum of leadership and a national voice of reason and I’d rather be right and out here in the wilderness than in the vat of corruption and stupidity that is the MSM and congress.
Have a nice day and a pleasant tomorrow!!!
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I’ve always had a thing about people with shifty, beady eyes. I don’t trust ’em. Two folks from Wyoming top my list in that category. The first is Dick Cheney. Close behind him is the Cat Food Commission’s Alan Simpson. Why any one would want to resurrect this man’s nasty career is beyond me. That a Democratic president was responsible for it, just makes me irritated. If his last comment isn’t a reason to send him back to BrokeIdeas Mountain, nothing will be.
Liberals and groups in favor of preserving Social Security are calling for the co-chair of President Obama’s deficit commission to resign after he said in an e-mail that Social Security is “a milk cow with 310 million tits.”
In a letter responding to criticisms against him from a group representing older women, former Wyoming Sen. Alan Simpson wrote that he has “spent many years in public life trying to stabilize” Social Security. However, he wrote, “Yes, I’ve made some plenty smart cracks about people on Social Security who milk it to the last degree. You know ’em too. It’s the same with any system in America. We’ve reached a point now where it’s like a milk cow with 310 million tits!”
Simpson and former White House Chief of Staff Erskine Bowles, the co-chairs of Mr. Obama’s bipartisan National Commission on Fiscal Responsibility and Reform, have raised the ire of liberals with remarks suggesting they intend to recommend scaling back Social Security as a means of reducing the deficit.
However, groups are saying today that Simpson’s latest remarks prove he is unfit to lead the commission and should resign.
How many times must we repeat that Social Security is an insurance program that people pay for with their hard earned cash and their boss’s profits? It’s not some mean-based social program. The very rich get topped out of it because there’s even a maximum benefit and maximum premium. You don’t collect if you don’t pay into it. That’s not a welfare program!
A copy of Simpson’s email can be found on The Atlantic along with an excerpt from folks calling on him to resign his position.
Here’s the resignation call from Eric Kingston, co-director of Social Security Works:
“Alan Simpson’s comments are offensive and sexist and clearly demonstrate that he is unfit to continue to lead the President’s Fiscal Commission. His comments not only show his true view of women and older Americans but also his disdain for the very program he claims he is trying to protect – Social Security. Social Security Works is demanding that he resign immediately. If he will not, the President must fire him. Alan Simpson has no business deciding the fate of hundreds of millions of Americans’ retirement future. He should have no power over Social Security, which provides vital economic support to millions of children and people with disabilities, as well as seniors and their families.”
Simpson continues to be a menace to the middle class. Why on earth would Obama bring him back from the dead unless he’s serious about ransacking Social Security along with the rest of the Republicans?
Here’s the worst part of Simpson’s letter.
If you have some better suggestions about how to stabilize Social Security instead of just babbling into the vapors, let me know. And yes, I’ve made some plenty smart cracks about people on Social Security who milk it to the last degree. You know ’em too. It’s the same with any system in America. We’ve reached a point now where it’s like a milk cow with 310 million tits! Call when you get honest work!
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The current bout of unemployment is so stubborn that there’s now talk of tax cuts coming from the Obama administration even though Obama has made it clear that the debt and the deficit are high on his radar. Too bad they won’t help the people without jobs and the businesses without customers.
