This ain't your daddy's economy

[democraticrevolution]

One of the websites that I have high up on my blog's blogroll is the Economic Policy Institute and it's for a reason. Economics is the maid of honor ( or best man ) in the wedding between politics/government and the people. It is that important and it will always remain to be so. From wars to domestic policy it is the economy that is a major driver. Although our current President plainly lives in an alternate reality when it concerns the economy and war.

EPI just released a little report titled "Why are people so dissatisfied with today's economy". Of course there are conservatives out there who will tell you that the economy is rebounding and doing better. They will tell you that we are "on the march" ( on the march into the abyss if you ask me ).

In recent weeks, incumbent politicians have bragged about growth in gross domestic product, jobs, and pay and touted declines in unemployment. Yet a January 12 Gallup poll found that 55% of Americans rate the economy as only "fair" or "poor," and that 52% believe the economy is getting worse. It will not come as a surprise to these Americans that the Commerce Department reported today that, in the fourth quarter of 2005, GDP grew by a tepid 1.1% and the wage and salary growth rate was 1.7%.

The reason for this is simply because the numbers do not tell the whole story. The way we evaluate the nation's economic health is outdated. We must stop just looking at things like the GDP and retail sales as a barometer for our nation's fiscal well being. When you talk about jobs being created, what kind of jobs are you creating? I don't call working at Wal-Mart or in retail, a job that can really help anyone for that matter. I don't call working at some sales job where you don't get paid a salary, have no health benefits, and rely solely on commission, a great job either. These are what I call "survival jobs" ( I cannot take credit for the term ) which means you do them until you get something better. Or you work in those jobs while you go to college to get something better. I've already talked about Ehrenreich enough, but I just have to throw out there that people who have college degrees and were the middle-class white-collar workers, are now being forced into these survival jobs and they end up staying there too. Also, if you are in a survival job to pay your way through school there is little opportunity when you get out ( I can be a testimonial to that. I'm just lucky to have found employment opportunities in a new area of politics and non-profit which I love a lot more than my computer background, but is actually useful in this field too ). So now you have a melding of the working-poor and the middle-class and that is very ( and I mean very ) scary. This is the New Gilded Age. America I beg you, wake up and start organizing against your government, it is harming you. You must take political action no matter what ideology you claim. We will turn into a feudal state and I don't aim to be dramatic when I say that, I'm serious. You have a conservative mentality that is shared by the Dinesh D'Souzas, Patrick Buchanans, Grover Norquists, and New Reganites that want to take you back to the 1950's socially and the gilded age economically ( Karl Rove admires the era of William McKinley ). Must they be so regressive? Now tell me are they much different thant than other fundamentalists in the world who want to keep us in the dark ages? Clearly you can draw some parallels here.

President Bush has noted that 2 million jobs were created over the course of 2005 and that we have added 4.6 million jobs since the decline in jobs ended in May 2003. Doesn't that mean the labor market is getting back to normal?

Recent job gains lag far behind historical norms. Last year's 2 million new jobs represented a gain of 1.5%, a sluggish growth rate by historical standards. In fact, it is less than half of the average growth rate of 3.5% for the same stage of previous business cycles that lasted as long. At that pace, we would have created 4.6 million jobs last year. If jobs had grown last year at the pace of even the slowest of the prior cycles 2.1% in the 1980s we would have added 2.8 million jobs. Over the last half century, the only 12-month spans with job growth as low as 1.5% were those that actually included recession months, occurred just before a recession, or were during the "jobless recovery" of 1992 and early 1993.

All I'm saying is, it is up to the liberal and progressive community to make this a clear and articulate argument to the rest of the nation. It can be simple as saying the conservative's claim of job growth = lie. Then you give them the details.

According to President Bush, today's 4.9% unemployment rate is below the average rate of the 1970s, 1980s, and 1990s. Doesn't that mean we have a tight labor market?

Unfortunately, no, because the unemployment rate under today's circumstances is misleading as a gauge of tightness in the labor market. The unprecedented 26-month decline in jobs (from March 2001 to May 2003) followed by sluggish job growth ever since has caused many people simply to withdraw from the labor force. Only those who are actively looking for work are included in the calculations of the unemployment rate. However, the employment rate (i.e., the ratio of employed workers to the country's working-age population) provides a better gauge of tightness in the labor market for the 227 million people now of working age. The employment rate has declined from 64.3% in March 2001 to 62.8% in December 2005. If the employment rate had recovered to its March 2001 level, an additional 3.4 million people would be employed today. What's more, if the rate had increased by the average 0.6 point gain of previous cycles, 4.7 million more people would have jobs today.

This again is a really simple argument to make. First of all when you drop off the unemployment benefit line because you have exhausted it all, you are no longer factored into the equation by the government when determining unemployment. To them you just don't exist, even as a statistic that they care about. Yet you are still unemployed. I realize what was said above is saying something slightly different in that people are simply just giving up. There is no more hope left to them. It's interesting when I talk to people and read authors who lived as children during The Great Depression, Chomsky often has written that he viewed the depression as something different than today solely based on hope. Even in the midsts of The Great Depression people still had hope that things would get better he said. Now that feeling of hope is hard to find.

Last month, Treasury Secretary John Snow noted that real (inflation-adjusted) wages had risen 1.1% since March 2001 in contrast to the 2.1% decline in wages over a comparable period of the 1990s business cycle. Aren't wages doing pretty well?

The slack in the labor market has taken a toll on pay gains. While the Treasury data are accurate, they give the misleading impression that wages are doing well in this cycle. In fact, real wages fell by 0.5% over the last 12 months after falling 0.7% the previous 12 months. Because of the momentum of real wage growth from the tight labor market of the late 1990s, real wages actually continued to grow during the recession that began in March and ended in November 2001. Since then, however, they have fallen slightly.

I'm actually happy that it seems the wage argument is starting to get visible to the American people ( in my opinion anyway ). Real wages are down! The purchasing power of the working poor and middle class has significantly decreased. This is what truly hurts the economy because it is those two classes that keep it going. The rich sit on their money, it is not released back into the economy, most of the time it's invested. The only market that benefits are the luxury markets ( You want a nice mansion? How about a nice car? Or what about that $13,000 dollar plasma screen TV?). Again this was one of the factors that played a part in bringing on The Great Depression ( though I'm no expert on the depression ).

Haven't the tax cuts passed since 2001 been vital to job creation?

No. Federal spending, not tax cuts, are responsible for the jobs that have been created.

If tax cuts have created jobs at all since 2001, it will have happened in the private sector. Assuming that job growth in 2006 matches the Bush Administration's projections, the economy will have added about 2.0 million jobs to the private sector from FY2001 through FY2006. But how many of these two million jobs actually can be attributed to tax cuts and how many to increased government spending—particularly increased defense spending—in this period?

Based on Defense Department estimates of the number of private-sector jobs created by its own spending, we project that additional defense spending will account for a 1.495 million gain in private sector jobs between FY2001 and FY2006. Furthermore, increases in non-defense discretionary spending since 2001 will have added yet another 1.325 million jobs in the private sector, for a total of 2.82 million jobs created by increased government spending. Increased mandatory government spending—which is not even included in these estimates or would account for even more job creation. The mere fact that the projected job growth resulting from increased defense and other government spending exceeds the actual number of jobs projected to be added to the economy through 2006 clearly indicates that the tax cuts hardly seem plausible as the engine of the modest job growth in the economy since 2001.

The Bush tax cuts are simply part of your while "trickle down economics" and "voodoo economics" mentality. It just does not work because nothing trickles down. Bush has been trying to make these tax cuts permanent for a long time now. I just hope the Democrats ( and hopefully some Republicans ) will now have some political capital taken back to stand up to him and say no.

When you think of the political capital that Bush was said to have earned. How did he earn it exactly? I feel that his capital was earned by selling snake oil to the American people. They bought the goods alright. Like many corporations in the new gilded age, Bush earned his capital off the suffering, fear, and pain of others. Worst of all, the capital he earned was not real. He's been spending political capital he did not earn. The Bush administration is also running a political deficit and the American people are going to have to demand a return on their purchases. It seems that they are begining to do just that now we need congress to start spending it the right way.

[JanMichael]

1. This should be in GD.

Seriously. It's above the inane banter here. Not that inane banter is a bad thing.

EDIT: I should add that it's a damned good post.