Can you smell what the economy is cooking??
Can you smell what the economy is cooking??

Good economic news is worth celebrating.  However transitory the news is, good economic news typically means good news for all Americans.  We’ve been treated to quite a bit of good news over the last couple of years.

-Stock market is at an all-time high

-Bond market is at an all-time high

-40 straight months of job growth

-Unemployment has dropped to 5.9%

-Medical inflation has slowed

-Individual states (with a few exceptions) have largely recovered and see black on their books

-Manufacturing Index spiking

-Housing recovering, retirement plans recovering, consumer spending recovering

-Trade deficit decreasing

-Dollar strengthening

-Companies relocating back to the US

All of this good news reflects that the United States is the most solid advanced economy in the world right now.  (At least comparatively)

Who do we thank for this roaring success?  Who deserves the credit? What was the “secret sauce” of this remarkable recovery? And why aren’t we celebrating dammit?

The short answer is no one really deserves much credit, there was no “secret sauce”, the success isn’t roaring at all, so maybe we should put off celebrating for a while.  The long answer is more complicated.

CREDIT WHERE CREDIT IS DUE

First of all there is some credit to be passed out:  President Obama and the then-Democratic controlled Senate managed to muscle the Stimulus through Congress.  That particular wad of money was stuffed into the gaping wounds of the economy lying on the ER operating room table and probably saved its life.

– It kept several states from going bankrupt

– It enabled almost 30 states to avoid massive state and local layoffs that would have dragged the economy down even further

– It was the single biggest piece of green legislation in the history of our nation, planting the seeds of the alternative revolution

– It funded projects that otherwise could not have gotten off the ground, enabling hiring much sooner than the economy was ready for

This legislation as imperfect as it was gave states and corporate america just enough breathing room and space to pick up the pieces and start moving forward again.  It was critically important and credit is due for that decisive action

The auto-maker bailout also was helpful.  While there is plenty of honest debate that could be had about whether GM or Chrysler “deserve” a bail-out or how it was managed, laying off vast swathes of the nation in the middle of economic collapse isn’t helpful.

Credit also goes to the Bush administration and Obama administration for laying the groundwork of the biggest hydrocarbon revolution in our nation’s history.  By deregulating the industry and opening up huge tracts of land for drilling, technological advancement has helped the US has become nearly the largest exporter of oil and gas on earth.  As a matter of fact, oil and gas is our #3 export to the world, behind only machinery and electronic equipment.  It’s expected to be the #1 export by 2016.  Much of our economic recovery has been oil and gas-based, with cheap natural gas consumption aiding many struggling state economies.

Debate can and should be had about whether this is a “good” thing.  Becoming a hydrocarbon export behemoth with the future of the globe’s climate at stake is not smart or particularly ethical, but it has been very good for the economy.

The Bush administration and Obama administration also deserve some credit for muscling through the bank bailouts.  Yes they were flawed.  Yes it played favorites.  Yes bank and wall street firms should have been held accountable or wound down or officers held accountable for their actions.  But that said, this particular wad of money acted as a clamp to the fatal bleeding of the patient on the operating table.  The stimulus then stopped the bleeding, allowing the patient to stabilize.

And…..well that’s pretty much it.  All of this groundbreaking activity occurred prior to 2010.  Since then, nothing much of significance has occurred.  Right after the economy stabilized, the Democrats lost their filibuster-proof majority and then in November 2010 lost the House of Representatives.  The GOP ushered the President and Democrats out of the operating room and locked the doors, relying on the US economy to recover on its own.  Slowly, painfully and with the hard work of business and labor, the American economy has dragged itself off the operating room table and stands tottering, but alive to face another day.

“RECOVERY”

BG-not-looking-for-work-2014-chart-2-825

 

Yes, this is chart from the Heritage Foundation, but its also an accurate picture of the recovery.  This is has been the slowest economic recovery of any post-WW2 recession.  It took 77 months to get employment back to pre-recession levels.  Why?

Gap between what the economy is producing and what it is capable of producing
Gap between what the economy is producing and what it is capable of producing

The American economy was capable of producing much more than it did, as noted by the GDP chart above.  Why didn’t it?

ABANDONMENT

There is no more productive worker in the world than the American worker.  America is the 4th easiest place in the world to do business (according the annual World Bank rankings).  There are no more profitable corporations in the world.  If business and labor are all doing what they feel in is their best interest, then why has the recovery lagged so much compared to other recoveries?

Many conservatives would have you believe that the economy is STILL a disaster due to the reckless policies of the Obama administration.

Many liberals and moderates would have you believe that the economy is now humming along in the right direction due to the wise stewardship of the Obama administration.  These same liberals and moderates wax nostalgically for the good old Clinton days which were the impetus for the collapse of 2008.

What neither groups seem to realize (or admit) is that this is simply what the economy looks like when left to its own devices.  Nearly all of the tax laws and regulations that were in place prior to the recession are still in place.  Even Dodd-Frank is a toothless outline of laws 75% of which are still being dickered over in slow, endless Congressional committee meetings.  The ACA has had nearly no impact on the picture because nearly all of the main components of the law didn’t take place until 2013.  Essentially the economy has been left alone to heal itself for almost 4 years.  It is a testament to the American spirit and work ethic that we’ve managed to heal ourselves to the extent we have!

NOT JUST ABANDONMENT, BUT MALPRACTICE

However, the economy would look even better than it does now if Congress had simply ignored it.  Congress is the single most powerful fiscal body on the face of the earth.  There is not even a close second.  When significant legislation passes both houses, the ripple effects are felt around the globe.  The initial bailout of the American banks, investment firms and insurance companies and the subsequent foreign bank bailout by the Fed can arguably take credit for saving the global economy for nearly every person on earth.  The repeal of Glass/Steagall and other regulations by Congress also led to this disaster, but the point is made regardless.

When the private sector lies in ruin and cannot manufacture the economic activity needed to keep the economy moving forward, it is Congress’ job to inject the money and activity into the system until the private sector can.  When the economy is overheating, it is Congress’ job to pull back on spending and activity to cool the economy down.  This is how Reagan ended his recession, with massive tax cuts and massive government spending.  He and his advisors knew that when the private sector cannot, government must.

This is how W. ended his recession, with massive tax cuts and massive government spending.

The Depression was ended by the biggest government spending program in history: World War 2.

The biggest economic collapse in nearly 100 years was initially addressed by two massive injections of money and spending by Congress.  Then a particularly vicious brand of politics took over and the American economy and its citizens were deemed acceptable casualties in the ensuing battle.

Overnight, the focus left recovery and focused on deficit reduction.

A knot of new fresh-faced, shiny-eyed GOP governors and legislatures decided that laying off thousands of public workers in the middle of economic downturn was a good idea.  Nearly 750,ooo local and state public workers (almost 300k in the education field) were laid off between 2009 and 2013.

Tax cuts for workers and consumers were briefly cut, then those cuts repealed.  Tax cuts for business, more profitable then they’ve ever been, are now being discussed made permanent.  Corporate income tax cuts now the only tax cuts on the table.

We have a $2.4 Trillion backlog of rotting infrastructure and tens of thousands of unemployed construction workers.  Bills to ease that backlog? All blocked.

Borrowing costs are at near zero.  We could have re-built our entire nation top to bottom.  Instead we got austerity.

With no one watching the store, nearly 100% of all the economic gains in our recovery are going to the top 1% of earners.  Those with the money make the rules. They like the rules the way they are.

And we cheer.  We cheer a rising stock market.  It’s nice, don’t get me wrong, but nearly meaningless to nearly 60% of the country.

The deficit has fallen by nearly 60% and we cheer, even though it’s the exact opposite of what we should be focusing on.

Democrats take credit for a falling deficit and rising stock market, (they have to take credit for something don’t they??) when dysfunction and gridlock enabled the first and self-interest and low-interest rates helped enable the second.

We should have been at this place nearly 2 years ago. The anchor of Congressional neglect, animosity and incompetence has slowed the American economy by almost $1.5 trillion per year!! Imagine if there wasn’t a Democratically controlled Senate, or a Mitt Romney presidency.  What havoc would have been inflicted on us by now?

SO, NOW WHAT?

If you are like me, you are happy that we are in a much better place than we were 5 years ago.

If you are like me, you are furious and utterly sick at heart over the squandered opportunity.  We had a once-in-300 year opportunity to completely remake our nation for the better and we wasted nearly all of that opportunity.  The GOP has deliberately embarked on a sophisticated multi-layer sabotage mission on the American economy.  The Democrats too often have delicately and politely tiptoed around this fact to their electoral detriment.  Even the very fact that the Democrats trumpet deficit reduction is a mighty victory for the GOP.  The average voter shrugs, mutters and doesn’t show up to vote.

The United States has a $17 Trillion economy.  It should be a nearly $18.5 Trillion economy by now.  Malpractice and neglect have cost the citizens of this country almost $7.5 Trillion in economic activity since 2010.  That’s $23,000 in lost economic activity for every man woman and child in the United States over the last 4 years.

The American people have been getting a very expensive lesson on how much domestic power the President really has.

Those are some pretty tough conflicting emotions to handle.  What should we do with them? How does one person have any impact on a $17 Trillion economy or on a completely broken institution like Congress

You don’t.  On a federal level, one voter has as much impact as they can through volunteering, donating money, and voting. But it is a tiny ripple in a big big pond.

Short term there is almost nothing we can do save a sudden change of heart of the 60% of the electorate that is too cynical and/or disenfranchised to engage in any meaningful way in their federal government.

Long term there is a lot we can do.  There is a lot of impact we can have.

1. Start local.  I mean really local.  With yourself!  Start examining your own beliefs and biases. Dig a little deeper and start asking yourself why things are the way they are.

Unemployment is simply a monetary deficiency.  There is always way more stuff to do than workers to do it.

Budget deficits matter, just not the way you think.  When government deficits grow, private surplus also grows.

When investing and home ownership and speculation receive more preferable tax treatment than labor and production, you get a lot more of the former and a lot less of the latter.

If the rich have too little money, they’ll stop working. Really?

If the poor have too much money, they’ll stop working. Really?

The limits to the economy are not what you think they are. Many of the political people you admire either are unaware of those limits or are actively engaged in keeping those limits in place.

2. When you see someone you admire on social media (or in person!) giving credit where it is not due, or celebrating something that is actually counterproductive, bring that to their attention.  Change starts with one conversation.

3. Attend your local and county party meetings.  Start by meeting and engaging with the future Congressional reps of your party.  Start by sharing your feelings, start telling them what you think is important.  Start by making sure that school boards, precinct captaincies, county commissioners, city councils and mayoralties are staffed by people who understand what this nation needs long-term.  Better yet, do it yourself!! It may take 20/30/40 years. But change on a federal level starts from the bottom-up, not the top-down. It ain’t sexy, but its effective.

It’s how the ultra-right wing did it 40 years ago.  It took them a while, but now look where we are…

27
Leave a Comment

Please Login to comment
8 Comment threads
19 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
7 Comment authors
sillylittlemeAdLibEXFANOFARIANAMisterbadexampleNirek Recent comment authors
  Subscribe  
newest oldest most voted
Notify of
EXFANOFARIANA
Member
EXFANOFARIANA
Misterbadexample
Member

Funksands:
I’ve done a post or two on my blog regarding the gaming of the unemployment statistics. I profile the work of statistician John Williams here:
http://brooklynculturejammers.com/2013/02/14/dont-know-much-about-statistics-either/

But I’d like to refer you to Paul Craig Roberts, an economist and former Reagan treasury official who rode off the reservation about 15 years ago. His latest column calls the UI report into question on several levels. Particularly interesting–the boomers aren’t retiring. They’re taking whatever jobs they can find (part time, low-paying) to help supplement their income after their housing values crashed and their 401K’s stopped returning enough income to allow them to live.
http://www.paulcraigroberts.org/2014/10/03/bad-news-jobs-front-paul-craig-roberts/

Report this comment

sillylittleme
Member

Great article Funk. And number 3 is most important as when it comes down to it, all politics is local.

Report this comment

AdLib
Admin

Funk, what a clear-eyed, objective and smartly laid out observation that maps out where we’ve come economically and why. Well done!

You’re really hitting the mark when you note how there was an opportunity to profoundly remake our nation back when Obama first came into office. Looking back, it is a bit regrettable that he spent so much focus on being bipartisan than aggressively pushing forward the kinds of change we needed. I appreciate how insane the times were and how he opted for trying to repair the system as it was but it of course led to a magnification of the economic inequity that existed pre-crash.

As Robert Reich and others have noted, the stimulus needed to be at least twice as big as it was and it needed to be much more about spending than providing tax cuts which favored the wealthiest.

I also felt he should have done something much more creative and supportive of the 99%, changing the structure of the bailout so that banks would get their essentially free loans but homeowners would be guaranteed reductions in their loan amounts, interest rates and allowed great flexibility if they weren’t able to pay their mortgage in full for one or more months.

The main loss of equity for the majority of Americans was the crash in housing prices that was a two-fold effect, the first quick loss in value when the derivatives market crashed then the ongoing loss of equity as the foreclosure epidemic took place (not to mention the destruction of lives that caused).

And as you mention, there could have and should have been a massive infrastructure rebuilding project that would have employed so many of the housing construction workers who had lost their jobs. It would have been a win-win, for jobs and reinvigorating the economy with money through the spending of those paychecks and rebuilding and updating our crumbling infrastructure.

Now, we may have employment back to where it was in 2008 but our decaying infrastructure is 6 years older with only a fraction improved through the stimulus bill.

As for the stock market, it really reflects corporate greed more than the economic health of the nation so its being up mainly means the wealthy are making more. And one term/subject I’ve come to really dislike is “productivity”. Many people don’t truly understand what that means but it’s a bad thing for all but the top 1%. I know you know but for others less familiar with it, “productivity” means getting more work out of people for the same or less money. When productivity goes up, that means workers are essentially making less money compared to the amount of work they’re doing. And in our corrupt economy, that’s a good thing. Productivity is really a measure of exploitation, the more it goes up, the more workers are being exploited.

You know what would score the highest on a productivity chart? Slavery. And scoring highest in productivity is what corporations and for that matter, our society is trained to be rooting for.

I agree with your encouragement to work local to make a difference, just as the wealthy and RW Repubs have. It is a long road but very worthwhile.

And agree with your urging to get the word out to others about the true inequities of our system and the politicians who are protecting and increasing them.

It’s kind of amazing to me how almost matter-of-factly so many Americans are about having a lower standard of living thrust on them and a lesser standard of living forced upon their children. It’s as if they have given up and assume that things naturally can only get worse.

No. Not if enough people refuse to go along with the Kochs & Co. scheme. We do not have to accept a lesser standard of living for each subsequent generation, it’s only happening because there is too much apathy in this country.

If enough stonewalling Repubs in Congress were voted out and a Dem Congress could pass infrastructure and social program spending, if the tax system was fixed to close loopholes for the wealthy and corporations, if a higher and self-adjusting federal minimum wage law was passed….all things that are possible in the near future, we’d have quite a start towards making things better for the 99%.

Change is possible but the powerful and wealthy will fight it hard. We need the strength of our numbers to beat their financial numbers in changing the course of our nation and economy. Hopefully, that sensibility will continue to grow.

Report this comment

sillylittleme
Member

If only, Ad. We’ve done it before and it can be done again. Calling on a Roosevelt to run for president. That could turn those who remember the depression and their seemingly selfish children who don’t appreciate what their parents went through (although they probably heard more stories than I have re: the Holocaust). [To clarify, in no way am I trying to attempt to conflate the two, just pointing out that the boomers probably heard as many Depression stories as I did Holocaust stories.]

Report this comment

Misterbadexample
Member

Funksands, this is a really good summing up of where we are. People shouldn’t be giving each other high fives over the current unemployment rate when it really isn’t counting folks who’ve fallen out of their 26 weeks. I give props to the administration for what they have done, but unemployment hit a sort of Rubicon a couple of years ago with the labor participation rate. Our adult labor participation rate is where it was in 1978 and before, when it only took one wage-earner to support a middle-class family.

My fear is that the current unemployment situation, with cooked stats and a large and growing group of people who can’t find fulltime work, will become the new normal. And if middle-class wages don’t come back, neither will middle-class tax receipts for SS payments. The federal budget cannot be balanced with the taxes from people working as Wal-Mart clerks and waiters.

Report this comment

Nirek
Member

Funk, I disagree with giving any credit to the bush administration for any good that has happened. I do blame them for all the troubles this country has had. Obama came in when the economy was in a free fall and turned it around. He gets credit for any good in the economy, at least from me.

Otherwise your article is excellent, btw.

Report this comment

EXFANOFARIANA
Member
EXFANOFARIANA

Totally agree with you,Nirek!

Report this comment

kesmarn
Admin

Best article on economics ever, funk!

Not being an economist, I tend to relate a lot of economic concepts to what I do know.

So to me, the country seems to be like a patient that has been involved in a tremendous (Bush-related) train wreck. There are broken arms and legs and there’s been a great deal of blood lost. This patient needs to get to the emergency room fast. And those bones have to be set. He needs multiple transfusions and probably fluids, pain meds and antibiotics.

But Dr. G. O. P. Austerity, who believes that suffering builds character, and wants to pocket the money that would have gone to treating this patient, without actually doing any — well — treating, decides that instead, he will put the patient in a lawn chair in the parking lot, with a bowl of jelly beans next to him and wait it out. This is what ancient doctors used to refer to as “Tincture of Time.”

Handsome young Dr. Obama substitutes spinach for the jelly beans, but Dr. Austerity won’t let him do much more.

Days pass. Weeks. Months. To everyone’s amazement, the patient doesn’t die. Thanks to Dr. Obama’s spinach his hemoglobin gradually starts to rise. The sunshine in the parking lot helps the broken bones to begin to heal. Slowly the patient starts to take a few tottering steps — long after he really should have been up and walking vigorously.

But Dr. Obama has completed his residency and is moving on. Dr. Austerity is standing there in the shadows over by the dumpsters, rubbing his chin.

There’s an intern applying for Dr. Obama’s job. Dr. Austerity’s been very impressed. He’s not a young upstart like Dr. Obama. He’s got the proper “values.” (Learned them from his rich uncles — Charlie and Davie Koch.)

“Paging Dr. Romney… Paging Dr. Romney…”

Report this comment

Nirek
Member

Kes, good analogy. Except I sure hope Dr. Romney stays out to lunch…

Report this comment

kesmarn
Admin

I do too, Nirek. I do too. And his cousin Dr. Ryan as well.

Report this comment