Tuesday, December 18, 2012
50 and Unemployed: A Rock and a Hard Place
The GOP proclaims to be the experts at capitalism and accuses the Democrats of Socialism. But the GOP must not know beans about “supply-side economics” because they’re still preaching "trickle-down".
When people have extra money in their pocket and they spend it on stuff, then the "job creators" hire more people to accommodate the increase in "demand".
But when these supposed “job creators” ship jobs to China for cheaper labor, or have one employee do the work of two ("increasing worker productivity"), or instead, automate or hire robots to do the work of humans, then it means that less people are working --- and so therefore, they don't have extra money in their pockets to spend.
That sounds like perfect common sense, right? But not to multi-millionaires like Bill O’Reilly.
Most Republican politicians (receiving government salaries from government jobs) and those champions of the “job creators” over at Fox News say there are plenty of jobs, and that Americans who are unemployed are just lazy and want a free ride. (Just ask Mitt Romney, he’ll tell you.)
Republican politicians and Fox News commentators: Dumb and dumber. And many are millionaires, so how can someone so stupid become so wealthy, as opposed to some people who are very intelligent but remain so poor? One might think some good luck and God’s good graces might have something to do with it.
In an economic system that uses the principles of "supply and demand", the consumers provide the demand for goods and the "job creators" provide the supply. Simple. Sounds like perfect common sense, right?
Nick Hanauer, a multi-millionaire entrepreneur and venture capitalist, tried to explain this simple economic theory to Neil Cavuto at Fox News, but Nick Hanauer was rudely talked over by a know-it-all Neil Cavuto. (The video is here at my YouTube channel).
Just as Nick Hanauer once explained in a speech he gave at TED University, "Somebody like me makes hundreds or thousands as times much as the median American, but I don't buy hundreds or thousands of times as much stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and shirts a year like most American men. Occasionally we go out to eat with friends."
The Republicans hounded President Obama for the past 4 years: "Where are the jobs?" But why didn't they ask the "job creators"? They have over $2 trillion parked overseas from foreign profits and don’t want to pay the taxes.
I heard that the $600 billion-a-year defense budget creates a lot of jobs (and a lot of profits for defense contractors too). As a matter-of-fact, the government hires more people than Wal-Mart and McDonalds combined; so maybe "government” really does create jobs.
During the latest recession (the Great Recession) the "rebound" in employment has been weaker than the previous two recessions --- and G.D.P. growth in the current "jobless recovery" has also been much slower.
Laura D’Andrea Tyson, professor at the Haas School of Business at the University of California, Berkeley writes: "The loss of jobs in the most recent recession was more than twice as large as in previous recessions, meaning a slow recovery has also meant a much higher unemployment rate. Most economists believe that it's because of weak aggregate demand."
What? Did she say "demand"? That makes too much sense!
The 2008 recession resulted from a systemic financial crisis rooted in banking corruption that resulted in an asset bubble that gripped the housing market with particular ferocity. So private sector demand contracted sharply.
The large and persistent decline in private-sector demand that began the 2008 recession explains why the painfully slow recovery is so apparent in the private-sector financial balance — net private saving — the difference between private saving and private investment.
The private-sector financial balance swung from a deficit of −3.7 percent of G.D.P. in 2006 (near the height of the last stock market boom) to a surplus of about 6.8 percent in 2010 — and about 5 percent today. This represents the sharpest contraction and weakest recovery in the private sector since post-World War II.
But the Republicans and those at Fox News ignore the facts and blame the jobless for being unemployed, rather than the banks or “job creators” who’d do anything to save or make a dollar.
Growth in private consumption has been especially slow in this recovery compared with the average for previous recoveries (meaning, far less demand = far less spending = far less hiring).
And weak investment demand cannot be explained by low profits and/or high taxes either. After all, corporate profits just recently hit another historic peak and taxes on investment income are now at historic lows. (Some guy who once ran for president once said, "I'm not concerned about the very rich, they're doing just fine.")
Another factor contributing to the slow pace of the current "recovery" has been the relatively weak growth of government spending on goods and services — by both state and local governments, and by the federal government. (The GOP has been ruthlessly whining about government spending and government employees ever since Obama was first elected.) And the contraction in government spending and decline in public-sector employment have also been major headwinds restraining G.D.P. growth.
Stronger demand now would encourage more private investment and stem the loss of skills and productivity resulting from long-term unemployment and the drop in the labor force’s “participation rate”. (More on that below.)
Add to that, all the spending cuts scheduled for next year — the so-called “fiscal cliff” —which would also have a large negative effects on demand, output, and employment.
Nancy Folbre, economics professor at the University of Massachusetts writes:“For the past four years, this nation has tolerated levels of unemployment that have essentially made it impossible for most of those seeking paid employment to find it, with a ratio of unemployed workers to job openings of more than three to one.”
Some Republicans have long insisted that many of the jobless, relaxing in a billowy social safety net, simply aren't trying hard enough to find a job.
New York Times Economix contributor Casey Mulligancontends that the poverty rate should have risen between 2007 and 2011, but didn't because public assistance was neutralizing the effect of job loss and undermining incentives to work. (WRONG!)
Shawn Fremstad of the Center for Economic Policy and Research challenges that methodology, pointing to measurements showing that the poverty rate did rise significantly among working-age adults over this period. Furthermore, increased unemployment contributed to economic stress across most of the social spectrum, not just among the poor and near poor.
Between 2007 and 2011, average household income declined in all of the four bottom quintiles. The most recent statistics from the U.S. Census Bureau shows America’s poverty rate had a huge spike, and that nearly 50 million Americans, more than 16 percent of the population, are now struggling to survive.
But it's worse than that. The U.S. Census Bureau'slatest poverty report is far from a complete picture. One problem with the Census report is that it uses the same income threshold to determine if a person (or household) is impoverished that has been in use since 1964. The only changes have been to adjust income levels for inflation. Currently, anyone earning less than $11,484 per year is considered to be living in poverty. For a family of four, the earnings threshold is $23,021 per year. Try living on that in 2013.
When Heather Boushey and Jane Farrell at the Center for America Progress reported that "in 2011 the typical U.S. household had an income of $50,054," they are painting a much rosier picture than most other economists.
I would have said it this way: "The Social Security Administration, in its latest report, shows that 50% of the entire American workforce (those that pay payroll taxes on a W-4 form for wages) earned less than $26,363.55 a year after taxes. In other words, HALF of all Americans earn poverty or near-poverty wages.
When they (and everyone else) reports "a typical U.S. household", what they really mean is "two adults who have to work at two or more low-paying jobs at places like Wal-Mart with no healthcare insurance or pension plans --- just to pay the rent."
A single parent (with one income) would have an especially hard time...part of the 47%...those .who need food stamps (aka "free stuff").
And this really ruffles my feathers! Everybody in the media constantly parrots the same old government talking points without ever researching the real facts behind their numbers. A perfect example was AGAIN diatribed in the New York Times:
"Paralysis by discouragement is a pretty good description of a growing segment of the United States population. In general, the higher the unemployment rate in a state, the higher the percentage of discouraged workers (those who did not search for work in the previous four weeks, for the specific reason that they believed no jobs were available for them) and the higher the percentage of marginally attached workers (those who did not search for work in the previous four weeks, for any reason)."
The myth of "discouraged workers" >>> After people run out of unemployment benefits, they have no one, no place, or no government agency to report to on their current status. In reality, they are just written off as "discouraged workers" --- as people who stopped looking for work and dropped out of the labor force. (I for one didn't drop out, I was forced out.)
I have been out of work since October 2008. The unemployment rate peaked at 10.2% in October of 2009 with over 15 million Americans unemployed at the time. My unemployment benefits ran out of June 2010. Today the unemployment rate is reported to be under 8% --- when less than 5 million jobs were created since the unemployment rate peaked in 2009. That's not even enough to keep up with natural population growth, let alone the re-hiring the 8 million people who lost their jobs between 2007 and 2009. It’s called “math”.
Yes, a few went on disability or took an early Social Security retirement at 62, but…
And what about the 6 million high school and college grads from 2008 to the present, who just like the old folks, can't even get a lousy job at McDonald's? There are literally MILLIONS of Americans who have had no income at all for two years and longer (like myself), and so therefore can't buy things to grow the economy.
Rich people aren't "job creators", people with good-paying jobs that spend money and create "demand" are the REAL job creators.
The "labor force participation rate" has declined significantly since the last recession began, especially among less-educated men like myself, those who were between jobs and didn't have enough seniority to avoid a layoff, and were too old to be re-hired somewhere else, but yet too young to collect a reduced Social Security check or pension.
If you unemployed today (especially long-termed unemployed) and you only have a high school education --- and are 50 years or older --- then you’re competing with 22-year-old college graduates for a job as a Wal-Mart greeter for $8.50 an hour.
And like me, you are between a rock and a very hard place.