To: "UWSA" <UWSA@calneva.com>
Subject: Excellent analysis from The Political Junkies
http://thepoliticaljunkies.net/JunkieUp.htm
JANUARY 9, 2004 UPDATE
DOOH NIBOR
TPJ has adamantly contended that Bushs economic policy of staggering
national debt and letting the dollar free fall against other major currencies
is going to have significant economic consequences. Here is ONE example
that is starting to develop.
Crude oil prices closed above $34.00 a barrel today. What does that have
to do with Bushs economic policy? A lot:
Oil prices climbed well above $34 a barrel on Friday as traders responded to
colder weather in the Northeast, tight supplies and the high cost of natural
gas.
The weak dollar is also pushing energy prices higher, analysts said.
"It gives OPEC countries less buying power and literally no incentive to
make any increases in output," of crude, which is denominated in dollars,
said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.
Crude oil for February delivery was up 60 cents to $34.58 in afternoon trading
on the New York Mercantile Exchange.
The front-month oil futures contract has not closed above $34 on Nymex since
March 17, just a few days before the invasion of Iraq. ABC News
(emphasis added).
Today, the US Dollar continued to bounce at near record lows. The dollar
has come under intense downward pressure in the past few months due to concerns
about the U.S. current account deficit and expectations that U.S. interest
rates will remain low for some time, while the euro has risen aided by a
hands-off approach by European policymakers. Reuters
In the coming months, many citizens are going to pay more for gasoline and
heating oil. Bushs tax cuts for most Americans will not even make up for
the increase in petroleum products that is coming. Recall that:
For the four out of five families and individuals making less than $73,000
this year [the tax cut is] averaging about $350 this year . . . . -- Citizens for Tax Justice
(emphasis added).
Who will
profit from the increase in crude oil prices. If you guess American oil
drillers and American energy conglomerates you would be right.
_____________________________________________
JANUARY 8, 2003 UPDATE
BUSHS ECONOMY DROWNING WAITING ON THE TRICKLE
More warnings are surfacing in the face of Bushs economic
recovery. The new warnings are coming former government officials.
First, John Atcheson, who has held various policy position in the
government, sounds alarm bells. He makes salient points:
Mr. Bush's recovery is - a giant borrowing binge. . . . In February, the
administration buried a report from its own Treasury Department that said our
current fiscal policies, the ones Mr. Bush likes to claim are bringing on a
"recovery," would create more than $44 trillion in chronic
debt. As the London Financial Times noted, $44 trillion is roughly
equivalent to 10 times the publicly held national debt, four years of U.S.
economic output or more than 94 percent of all U.S. household assets. No wonder
things seem good. We've cashed in everything we own at the Bush Pawn Shop, and
now we're flashing a serious wad of walkin' around money. . . .
Mr. Bush likes to say the jobs will come. They'd better. Because right now, all
he's managed to do is spend about $350 billion of "your money" to
hire 328,000 checkout clerks and greeters at the local Wal-Mart. Meanwhile,
we've shipped some 2.6 million high-paying manufacturing jobs overseas since
January 2001. . . .
So if we're cutting taxes by $350 billion a year in order to stimulate the
economy and the economy is growing, but we're only getting an anemic response
in employment, what's up? Kenneth L. Lay's stock portfolio, for one thing. And
the portfolio of those Bush pioneers we hear so much about. And, of course, Mr.
Bush's campaign contributions. As for the rest of us?
Mr. Bush seems to think people can eat gross domestic product. But a growing
economy doesn't mean a whole lot if it's not creating jobs. Unless you happen
to be Ken Lay or one of those Bush pioneers who don't need a job to earn money.
For them, so long as the rest of us keep mortgaging our future, they can keep
getting richer. Sunspot
Second, former Treasury Secretary Robert Rubin presented over the weekend
at the meeting of the American Economic Association. Mr. Rubin and his
co-authors Peter Orszag of the Brookings Institution and Allan Sinai of
Decision Economics argue:
The United States, they point out, is currently running very large budget and
trade deficits. Official projections that this deficit will decline over time
aren't based on "credible assumptions." Realistic projections show a
huge buildup of debt over the next decade, which will accelerate once the baby
boomers retire in large numbers.
All of this is conventional stuff, if anathema to administration apologists,
who insist, in flat defiance of the facts, that they have a "plan" to
cut the deficit in half.
What's new is what Mr. Rubin and his co-authors say about the consequences.
Rather than focusing on the gradual harm inflicted by deficits, they highlight
the potential for catastrophe. "Substantial ongoing deficits,"
they warn, "may severely and adversely affect expectations and confidence,
which in turn can generate a self-reinforcing negative cycle among the
underlying fiscal deficit, financial markets, and the real economy. . . . The
potential costs and fallout from such fiscal and financial disarray provide
perhaps the strongest motivation for avoiding substantial, ongoing budget
deficits." In other words, do cry for us, Argentina: we may be heading
down the same road. New York Times
The daily headlines continue to tout that the economic recovery is
gathering steam. Two stories that did not make national headlines appeared this
week belie Bushs touted recovery:
The weak U.S. job market helped nudge credit card delinquencies to a record
high in the third quarter of 2003, a banking trade association said in a report
released on Tuesday.
Credit card delinquencies rose to a seasonally adjusted 4.09 percent of all
accounts in the period from 4.04 percent in the second quarter, the American
Bankers Association said. ``The job market has been flying against strong
headwinds, lengthening the time between jobs and intensifying financial
stress,'' ABA Chief Economist James Chessen said. . . .
Delinquency rates for direct auto loans and home equity loans also rose, the
ABA said. MSN
Money
While consumer credit delinquencies are generally up, Americans are going ever
deeper into debt:
Consumer debt has more than doubled in the past 10 years to record levels,
making it hard for many families to cope.
Consumer debt hit a record $1.98 trillion in October 2003, according to the
most recent figures from the Federal Reserve. That debt which includes credit
cards and car loans, but not mortgages translates to some $18,700 per U.S.
household.
Daily headlines simply do not paint the entire picture. Bushs
administration is financing the recovery by racking up historic levels of
federal debt. Corporate profits are rebounding. Yet, the recovery
has yet to generate jobs for working class Americans. Working Americans
are going deeply into debt, which they cannot pay with increasing
frequency.
It is Republican trickle down economics with a cruel twist. Ordinary
citizens are drowning in a sea of debt waiting for the Bushs promised
trickle.
JANUARY 2, 2003 SPECIAL UPDATE
COMPASSIONATE CONSERVATIVES NEW YEAR
TRICKLE DOWN IS THE LAST DROP!
A number of TPJs readers have written wonderful comments about Thursdays TPJ
Junkie Up(date), Compassionate Conservatives New Year, which appears
immediately below. One thoughtful reader has asked TPJ how the unemployment
rate can fall if Bushs recovery is not producing sufficient jobs. Great
question!
The unemployment rate published is not quite what most people think it
is. One would logically think the unemployment rate (stated as a
percentage) is simply comprised of working age Americans who are out of work
and cannot find jobs. Wrong! The unemployment rate is the number of
people who are out of work and are searching for
employment. Consider these surprising examples:
If an unemployed worker stops looking for employment, they are
not counted in the unemployment rate.
If an unemployed worker cannot find work and returns to school, they are not searching
for work and are not counted in the unemployment rate.
If an unemployed worker cannot find full time work, but takes a part time
job at a greatly reduced salary, they are not counted as unemployed
because they have some job.
Here is a quick example. The current unemployment rate is 5.9%
representing some 8.7 million unemployed workers. If
another 4.9 million workers were unemployed but found part
time work, but want full time work, they are not counted in the
unemployment rate even though they continue to look for full time work.
The example above is part of what has actually happened. In addition to
the 8.7 million unemployed workers, there are another 4.9 million workers who
are employed part time but who want full time work. The 4.9 million part time
workers looking for full time employment is the highest number in the
past decade. LA Times
In addition to the 8.7 million unemployed workers and the 4.9 million
part time workers who are looking for full time work there are an additional
1.5 million unemployed workers who have become so discouraged
that they have simply given up searching for work. LA Times
The total is some 15 million workers. So, when Bush brags
about creating 67,000 jobs in any month, it is better than losing jobs, but job
creation at these rates will do little to alleviate unemployment and underemployment.
The bad news does not stop there. A lot of workers who are employable in
good times but who have physical or mental impairments are some of the first to
lose their jobs in a recession. What becomes of them?
A substantial number of impaired workers simply quit looking for work and apply
for Social Security Disability benefits. Research by the
economists David Autor at the Massachusetts Institute of Technology and Mark
Duggan at the University of Maryland shows that once Congress began loosening
the standards to qualify for disability payments in the late 1980's and early
1990's, people who would normally be counted as unemployed started moving in
record numbers into the disability system a kind of invisible unemployment.
Almost all of the increase came from hard-to-verify disabilities like back pain
and mental disorders. As the rolls swelled, the meaning of the official
unemployment rate changed as millions of people were left out.
By the end of the 1990's boom, this invisible unemployment seemed to have
stabilized. With the arrival of this recession, it has exploded. From 1999 to
2003, applications for disability payments rose more than 50 percent and the
number of people enrolled has grown by one million. Therefore, if you correctly
accounted for all of these people, the peak unemployment rate in this recession
would have probably pushed 8 percent.
The point is not whether every person on disability deserves payments. The
point is that in previous recessions these people would have been called
unemployed. They would have filed for unemployment insurance. They would have
shown up in the statistics. They would have helped create a more accurate
picture of national unemployment, a crucial barometer we use to measure the
performance of the economy, the likelihood of inflation and the state of the
job market. . . .
Take the revised numbers released by the Commerce Department [recently]. They
showed that output in the third quarter grew at a rate of 8.2 percent, an
extraordinary pace, and productivity grew even faster. Almost no one
noted, though, that Social Security also announced the latest data on
disability applications. Almost 200,000 people applied in October up 20 percent
from the previous month tying the highest level ever. Despite the
blistering growth of the economy, the invisible unemployment problem continues.
New York
Times (emphasis added).
Not even counting the number of unemployed workers who are approved for Social
Security Disability benefits, the (1) unemployed workers, (2) part time workers
looking for full time work and (3) those workers who are unemployed and
have given up looking equates to an unemployment rate of 9.7% UP from 9.4% a
year ago. LA Times
Where is America headed? The worst [scenario] is that companies continue
to eliminate jobs faster than they create them, setting up a game of musical
chairs for the labor force.
That prospect alarms Erica Groshen, an economist with the Federal Reserve Bank
of New York. "If you plot job losses versus gains on a chart, it's
shocking," she says.
Losses are running at about the same rate they were in 1997 and 1998, two good
years for the economy. But job creation in the first quarter of 2003 the
most recent period available was only 7.4 million, the lowest since 1993.
"If this goes on too long, you'd have to worry there's something
fundamentally wrong," Groshen says. Although the economy has picked up
since March, "so far I haven't seen anything that suggests job creation is
picking up." LA Times
What does it all mean? It means:
1.
Bush is the steward over the first Presidential administration since Herbert
Hoover and the Great Depression that has lost more jobs than the economy
created over net 2 million jobs lost. It is inconceivable
that Bush will be able to rectify that record before the 2004 election.
2.
The recovery thus far is stratified. Corporate profits are up and the
wealthiest Americans who got the lion share of Bushs tax cuts had money this
Christmas to spend at the upper scale stores as noted in Krugmans article
below.
3.
For the vast majority of Americans, the recovery is a phantom thus far.
Unemployment, underemployment and disabled workers combined remain high.
Unemployed workers getting jobs are not increasing their incomes (advancing up
the economic ladder). Most people are hanging on, in many cases working
part time jobs at less salary and without health insurance benefits.
4.
The rate of new jobs being created is not in line with recoveries from prior
recessions. Something is amiss as Erica Groshen, an economist with
the Federal Reserve Bank of New York, noted above. That something is, in
part, the export of high paying jobs, including those in the technology sector,
oversees. In short, the jobs that are being created in the United States are
trending down to lower wage positions.
This is classic Republican trickle down economics. For those readers who
are not as old as Junkie, trickle down economics is essentially the theory that
if those corporations and individuals at the top of the economic ladder become
wealthier that wealth will trickle down to those of at the bottom of the
ladder.
Bushs classic Republican policies have had their effect for major corporations
and the wealthiest Americans as the numbers above clearly demonstrate.
For the rest of us looking from below, the trickle Republican economic policy
promises appears to be just a drop.
Graphically, the Republican trickle down theory that looks like a drop is
demonstrated by this chart from the Economic
Policy Institute.
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2004 is an election year! Bad economic numbers cannot threaten Bushs
reelection. Republicans are already working on making the numbers, thus
the news headlines, look better. Read how they are accomplishing that
goal in this Sundays TPJ in Compassionate Conservatives Happy New Year Cooking
the Economy!
_____________________________________________
JANUARY 1, 2004 UPDATE
COMPASSIONATE CONSERVATIVES HAPPY NEW
YEAR
You have been reading the headlines. The Gross Domestic Product grew at a
staggering 8.2% in the third quarter, the stock market is above 10,000 and
unemployment claims are down. The headlines would have you believe that
Bushs economic policy is working and America is rebounding.
Even when the economic news is not as rosy as we would like, the spin masters
continue to paint a bright economic picture. Consider the slant on this
article just this week:
Anxiety about the job market is causing consumer confidence levels to dip,
while housing sales also are slowing. But economists aren't worried they say
the outlook for improvement remains rosy, and the pullbacks are a normal kink
in the economy's path to recovery.
The Conference Board reported Tuesday that its consumer confidence index
slipped to 91.3 in December, following a surge in November to a revised figure
of 92.5, its highest level in more than a year. A retreat had been expected,
although the latest number was below expectations; analysts had forecast the
index would come in at 92.2.
Also Tuesday, the National Association of Realtors reported that sales of
previously owned homes declined by 4.6 percent in November to a seasonally
adjusted annual rate of 6.06 million homes.
Both reports are closely watched because of the insight they provide into the
mood of consumers. Yahoo
(emphasis added).
Paul Krugman makes the point succinctly:
It was a merry Christmas for Sharper Image and Neiman Marcus, which reported
big sales increases over last year's holiday season. It was considerably less
cheery at Wal-Mart and other low-priced chains. We don't know the final sales
figures yet, but it's clear that high-end stores did very well, while stores
catering to middle- and low-income families achieved only modest gains. Based
on these reports, you may be tempted to speculate that the economic recovery is
an exclusive party, and most people weren't invited. You'd be right. New
York Times (emphasis added).
Bushs recovery is both relatively jobless and wage deficient.
First, jobless!
Krugman first notes that, [p]ayroll employment began rising in August, but the
pace of job growth remains modest, averaging less than 90,000 per month. That's
well short of the 225,000 jobs added per month during the Clinton years; it's
even below the roughly 150,000 jobs needed to keep up with a growing
working-age population. New
York Times
Recall that Bush promised that his tax cuts would create over a million new
jobs. Job Watch has documented what has really happened. The
presidents economics staff, the Council of Economic Advisers (see background documents),
projected that the plan would result in the creation of 5.5 million jobs by
the end of 2004306,000 new jobs each month, starting in July 2003. Although
jobs increased by 57,000 last month, November 2003, the "Jobs and Growth
Plan" still fell 249,000 jobs short of the administrations projection. The
administration projected that a total of 1,530,000 jobs would be created in the
first five months after the tax cuts took effect. In fact, only 271,000 jobs
were created over those five months for a cumulative shortfall of 1,259,000 jobs.
The failure of the plan is nationwide, with job creation falling short in 48 of
the 50 states (see state
data). Job Watch
One reason job creation in the United States has lagged is that
corporations are outsourcing jobs to other countries. US corporations are
picking up the pace in shifting well-paid technology jobs to India, China and
other low-cost centres, but they are keeping quiet for fear of a backlash,
industry professionals said. Morgan Stanley estimates the number of US jobs
outsourced to India will double to about 150,000 in the next three years.
Analysts predict as many as 2 million US white-collar jobs such as those filled
by programmers, software engineers and applications designers will shift to
low-cost centres by 2014. ZDNET
UK
Second, wage deficient.
Not only is job creation weak, wages are not rising despite significant gains
in productivity. After all, companies have been able to increase output
without hiring more workers, thanks to the rapidly rising output per worker.
(Yes, that's a tautology.) Historically, higher productivity has translated
into rising wages. But not this time: thanks to a weak labor market, employers
have felt no pressure to share productivity gains. Calculations by the Economic
Policy Institute show real wages for most workers flat or falling even as the
economy expands. New
York Times
In fact, the Economic Policy Institute reaches this damning conclusion:
Labor compensation's share of total income growth averaged 61% in previous
recoveries, and has never been lower than 55% until the most recent one, in
which labor compensation has accounted for only 29% of total income growth. Conversely,
profits' share of total income growth averaged 26% in all previous recoveries,
and have never been higher than 32% until the most recent recovery, in which
profits accounted for 46% of income growth. -- Economic
Policy Institute
In practical terms this means, [s]ince July the average hourly wage increase
for the 85 million Americans who work in non-supervisory jobs in offices and
factories is a flat 3 cents. Wages are up just 2.1 percent since November 2002
-- the slowest wage growth we've experienced in 40 years. The
American Prospect
According to a study by the U.S. Conference of Mayors, new jobs created
during the 2004-05 period are forecast to pay an average of $35,855 far lower
than the $43,629 average pay of those jobs lost between 2001-03. Increasingly,
companies are shipping well-paying manufacturing and white-collar jobs
overseas. At the same time, the productivity gains we gloat about are just code
for the fact that companies are squeezing more and more work out of fewer and
fewer workers. That means the jobs that are exported are either not replaced,
or replaced with other ones in lower-paying sectors of the economy. The result
is what Business Week calls the "Wal-Martization of America": an
economy dependent on "hiring temps and part-timers [with no benefits],
dismantling internal career ladders, and outsourcing to lower-paying
contractors at home and abroad." All told, "More than a quarter of
the labor force, about 34 million workers, are trapped in low-wage, often
dead-end jobs." AlterNet
Is it surprising then that Christmas sales at middle class stores were weak as
noted by Krugman? Not in the least.
The jobless and job deficiency of Bushs recovery is even more startling given
Bushs deficit spending is at record levels. With the federal government
spending massive amounts of money, one would reasonably think that the economy
would be roaring. It is just the opposite:
The biggest policy blunder, when it comes to strong and stable growth, has
arguably occurred with respect to federal government outlays. As households and
the economy needed better employment opportunities, the Bush administration not
only squandered the chance to implement an effective economic stimulus in 2001,
but it also mortgaged the future, and thus raised the chance of future economic
slowdowns, due to large and largely ill-advised tax cuts. The Congressional
Budget Office even called the long-term fiscal trend unsustainable in their
updated budget outlook released in December 2003. In order to return to a more
sustainable path, the government would have to raise taxes or cut discretionary
expenditures, which are already low outside of homeland security and defense.
After the deficit party of the 1980s, when deficits soared as high as 6 percent
of GDP, the U.S. economy faced a prolonged budget hangover to bring deficits
back to more manageable levels. As long as deficits are high, the economy faces
the risk of higher interest rates, of slower growth due to less private and
public investment, and of fewer stabilizing interventions when things turn
sour.
The large budget deficits, however, exacerbate the problem of the U.S. trade
deficit. A colleague recently called the U.S. record trade deficits, the trap
door under economic growth." Already, the U.S. needs to borrow about $2
billion per day from overseas investors to finance these deficits. At some
point, foreign investors will decline to lend more money to the U.S.,
especially if the federal government also runs large unsustainable deficits
that need to be financed through more debt as well. Investors may simply
require higher interest rates to continue lending, or they may start
withdrawing their funds. Higher interest rates, a rapidly declining dollar, or
both could be the result, with detrimental effects on growth and employment.
The situation is made even more worrisome by the Bush administrations ability
to offend important international allies. As unilateralism breeds mistrust, the
U.S. may have to pay a price, literally, in the form of higher long-term
interest rates. Center
For American Progress
As noted in TPJs Junkie Update from this past Tuesday (appearing below), Bushs
compassion runs to Americas corporations and Americas wealthiest
citizens. A Compassionate Conservatives Happy New Year!