June’s employment report was disappointing. Though the national unemployment rate fell slightly””it’s now at 9.5% from 9.7% in May””the report reveals deep structural problems that go beyond the number of those who remain without jobs.
Almost half of unemployed Americans have been without a job for over six months. The average duration of unemployment, which hit a post-World War II record many months ago, continues to go up. Last month it clocked in at 35 weeks. Unemployment is particularly severe among the young: A quarter of Americans between 16 and 19 years old in the labor market are without a job.
The longer it takes to understand and address these issues, the more likely the U.S. will get stuck in a protracted low growth/high unemployment trap. In addition to considering the welfare cost of substantial joblessness, policy makers should keep in mind the following four facts….
Interesting leader but not terribly helpful since the lead takes us to a site which requires a subscription to “read it all”.
Interesting perspective from Harvard professor and financial historian Niall Ferguson here:
Professor Ferguson is right, but I don’t see that the US will make the proper choices. It seems that enough of those in power believe, somewhat obscurely, that deficit reduction invites technological innovation and entrepreneurship.
Niall Ferguson gave another talk at St Paul’s Cathedral in London on Tuesday. The topic was ‘Men, Money and Morality’. For anyone interested, the website of the St Paul’s Institute has video. It was interesting to hear, but I don’t put much faith in the business ethics courses he extols.
The deficit per se probably has no effect on technological innovation and entrepreneurship. What hammers those two engines of growth are regressive taxation, burdensome regulations, government red-tape, and constipated capital markets burdened with a high capital gains rate.
Translated: get the government out of peoples way and out of their daily lives and let them freely innovate and compete for consumer dollars.
Chris Christie of New Jersey is pointing the way with baby steps. The blueprint for all of this still exists: it’s called the Constitution of the United States of America. You can find it online and read it if you are not familiar with it.
The problem is not a deficit, but persistent, endless, reckless deficit spending. It seems that when times are good, the government spends more than it needs to. It expands programs and salaries. Then, when times are bad, it doesn’t cut those programs, but increases spending to “stimulate” the economy.
As Margaret Thatcher is reputed to have said: the problem with Socialism is that you run out of other peoples’ money to spend.
I didn’t read the article because I didn’t want to subscribe. But the persistent unemployment is worrisome when you read articles about how many types of jobs are gone forever, many due to technological advances. Personally, as a former journalist/editor, I’m pretty freaked by the swift decline of publishing and the numbers of magazines and newspapers that have gone under or are in bankruptcy. People are used to getting information for free on the Internet: I can’t imagine that paid online periodical subscriptions are going to catch on for a while, if ever. Besides that, it was always the ad revenue that kept publications in business, not subscriptions.
But we have a big problem. Technology is displacing workers, the cost of a university education is skyrocketing and becoming out of reach for many (lenders are cutting educational loans), and the budget deficits many states and municipalities are running mean that K-12 educational services will have to be cut, too. Education provides the means for self-improvement and retraining. What happens in a climate of high unemployment, disappearing jobs, and limited or no access to further education?
And what happens to displaced older workers who have seen their retirement savings dwindle in the stock market?
I hope that jobs keep disappearing. Keypunch used to be a decent-paying job. Gone forever. A generation ago someone who understood [i]’mkdir'[/i] garnered a rather nice wage. No more, and I say “good.” I keep checking the listings for work as a telegrapher because I can send Morse Code at something approaching 30 wpm, which would have got me a very nice job in 1910, but nobody wants a good telegrapher anymore. Must be age discrimination.
The issue is not one of jobs [i]disappearing.[/i] More jobs disappeared in the 2000-’02 recession than this one. A decade ago, however, unemployment levels never came anywhere near those of the last year or two because new jobs were created almost as fast as the old ones disappeared. What has changed is the job [i]creation[/i] part of the equation.
As a business owner, why would I hire people right now? Most of my customers are facing an immense tax increase, even the ones in the 10% bracket — soon to be 15%. Sales taxes just increased by 1% around here, which economist Christina Romer (an Obama administration official, BTW) has estimated will decrease economic activity by 3%. New taxes remove discretionary spending power.
On top of that, the federal government threatening all manner of new taxes and regulations. Two examples:
a) the Section 179 deduction, by which small business people can expense out small-to-medium capital purchase (like a back-up electrical generator) is being almost completely eliminated. Instead I will have to establish government-approved depreciation tables.
b) any business transactions in excess of $600 will soon have to be documented with a Form 1099. If I purchase an $800 ventilation fan I will have to generate a 1099 to the company who sold it. If I sell $605 of tomatoes to a restaurant, they’ll have to send me a 1099. This was embedded in the “health care” bill, BTW.
Net result of just these two things? My administrative load will soar, and if I happen to have a really good year much of it will be taxed away because I can no longer expense out capital purchases.
In this environment, why on earth would I attempt to expand or improve anything. It was business capital purchases that led us out of the last recession. Not this time, folks, not this time. Similarly, do you think I’m actually going to hire someone? I’m gonna have to come up with significant cash to deal with these higher taxes. It will have to come from our labor budget.
Persistent unemployment at these levels is a direct result of current federal government policy, exacerbated by the struggles of state and local governments to keep their unionized employees content.
We shouldn’t be surprised. Unlike previous administrations of both parties, the current outfit are a bunch of militant idealogues, the crushing majority of whom have never even run a lemonade stand.
Bart, if people are buying your product, it seems that you might have more income so that you can hire an administrator. That’s your choice whether you want to or not. You may also have fewer expenses on other ends. But, I’ll have to agree that that’s an unwise law.
The examples you offer are pretty bad. I hope they change those laws. But it does not follow that all taxes are bad, or that government is bad. Some taxes are useful; the government may imperfectly operate programs that benefit everyone, but nobody wants to pay for. Rights have costs, and everyone has to pay for them.
In my neck of the woods, however, the anti-tax attitude has meant we’ve lost lots of firefighters and cops. People want services, but they don’t want to pay for them. They want government to leave them alone, but can’t figure out who’s going to pay for our wars, an independent judiciary, for watchdogs who will protect the independent shrimper from the oil company.
The rights we do have depend on cold political bargains sometimes. Some lose, some win.
[blockquote]Sales taxes just increased by 1% around here, which economist Christina Romer (an Obama administration official, BTW) has estimated will decrease economic activity by 3%. New taxes remove discretionary spending power.[/blockquote]
[blockquote]Bart, if people are buying your product, it seems that you might have more income so that you can hire an administrator. That’s your choice whether you want to or not.[/blockquote]
[blockquote]Some lose, some win. [/blockquote]
Wow….just…wow.
[i]The rights we do have depend on cold political bargains sometimes.[/i]
Absolutely not. Nor should they ever. They are inalienable rights, endowed by our Creator.
[b]No true right, except that to trial by jury, [i]ever[/i] requires anyone else to do [i]anything[/i] except leave me alone.[/b]
Anything that requires me to do something on behalf of someone else — or pay for it — is not a right of that person. Rights restrict government, they do not expand it.
Hey, Sicked and Tired of Nuance, you need to at least put a (TM) after the “Wow…just…wow” line. In fact, I think that Sarah might be charging royalties.
Reading Bart’s comments are like debriding a wound. Not fun but necessary. Saw Ben Stein who was commenting on businesses hoarding cash and not using it to hire. He stated that he travels the country talking to business leaders and the level of mistrust of Obama administration is off the charts. Saw this [url=http://krugman-in-wonderland.blogspot.com/2010/07/krugman-business-spending-and-regime.html ]interesting essay[/url] about “business hoarding” in a anti-Krugman blog by Austrian school afficianado.
Also, there is a [url=http://hotair.com/archives/2010/07/10/how-many-people-have-left-the-workforce/ ]must see graph[/url] looking at the number of “able bodies” not in the work force – unemployed seeking or not.
Heh, bart. I love the theology, and I agree with it.
But we didn’t just decide that we had inalienable rights. The US fought the British. Lots of people fought for the civil rights for blacks using politics. LBJ didn’t appeal to the magnanimity of White southerners, being God loving people. I wish I could believe that people would just honor people’s rights due to reason and interest, but I tend to see people as sinners. They need to be reminded. If someone squatted on your lawn, you can call the sheriff.
That’s the government.
Although, you could just shoot them yourself. That’s Somalia.
In other words, we had to [i]defend[/i] our natural God-granted rights, and we have risen up — even by force of arms when necessary — in order to defend them on behalf of ourselves and others.
The three ‘boxes’ of American Liberty: the soap box, the ballot box, and when necessary … the ammo box. “Eternal vigilance by the people is the price of liberty.” Andrew Jackson.
In the present environment our political elite are attempting to remove and downgrade the economic liberty of America’s productive class, whose response is evident in the unemployment numbers. This is clearly the stuff of the soap box (which you’ve already seen) and the ballot box, which you [i]will[/i] see.
If, however, the degradation of liberty becomes more active and direct — as, for example, by mandating that everyone purchase a particular product or service and then attempting to enforce such a mandate through its tax collectors — we shall be getting uncomfortably close to the time when that third box may become regrettably necessary.
Hi robroy,
LOL Didn’t you know? Sarah gets my 2 cents each time I use that phrase? Hat tip Sarah!
I have no problem with the idea, Bart, although it’s been used selectively throughout history. Some easily use the word “freedom” as in “freedom to exploit others.” Freedom to pollute the groundwater; freedom to hire undocumented workers; freedom to break the rules for one’s personal enrichment. “Leave me alone” becomes the battle cry for “your rules don’t apply to me.” I don’t, personally, idealize the wild west.
I must say, given average GDP over the last 50 years, the productive class was more efficient when there were higher classes. Perhaps the problem is that government isn’t spending enough in the private sector. Or that the government’s spending has reached fewer and fewer people. The GI bill and the Home Owner’s Loan Corporation allowed the middle class to gain a real foothold at one time. They enabled businesses to thrive.
Washington’s gotten bigger, but I suspect most of it’s gone into making weapons and not much has gone to improve the economy. It’s not Taxes or Government or Business that’s the problem. The question is how to get the money moving around. And that’s where Keynes comes in, and why he has been proven right time and time again.
We can try to be modern Ireland. They’ve done everything austere. But they’re not getting better. Or we can see how Brazil’s improved. And they have higher taxes. Whatever model you offer, should explain the difference.
[blockquote]Washington’s gotten bigger, but I suspect most of it’s gone into making weapons and not much has gone to improve the economy. [/blockquote]
This notion is often trotted out by those advocating more government spending but it is simply untrue that defense spending is the problem. In fact, it isn’t even close to the truth. The fact is that we spend a boat load of money on other things that neither make us more secure, nor improve the economy.
Defense Spending is 23% of the budget.
Medicare, Medicaid, & Social Security are 39% of the budget.
The military is specifically authorized in the Constitution. Medicare, Medicaid, and Social Security are all expensive innovations that we can’t afford to pay for. Social Security is paying out more than it takes in. Medicare is going bankrupt. Raising taxes has historically reduced tax receipts and would cause the feeble economic situation to deteriorate. The social programs are bankrupting us, just as they have Greece, and are doing all over Europe. What are France and Germany doing? Why, they are cutting spending…pushing retirements until later, etc.
I would offer the New Jersey Model. CUT SPENDING!!! It works.