Markets seem skittish and almost somewhat schizophrenic about the Fed’s pessimism versus growth in industry giants indicating the economy may move slowly forward after all.

Sputtering economy spreading new fears, Press Democrat.com, July 23, 2010, by Don Lee of The Chicago Tribune, excerpt quoted verbatim:

U.S. unemployment rate expected to remain high

WASHINGTON — Even with the extension of jobless benefits for millions of workers, a growing body of evidence suggests the U.S. is heading toward an economic netherworld, avoiding a slide back into recession but growing so slowly that unemployment will remain high, home prices low and incomes essentially stagnant.

Many Americans may continue to feel much as they did during the worst recession in half a century: Filled with insecurity, financial pressures and fading hopes for a quick return to better times.

“Extended unemployment benefits is helpful but hardly the booster rocket that’s needed to get out of the gravitational pull of this terrible economy,” said Robert Reich, a public policy professor at UC Berkeley.

The former secretary of labor during the Clinton administration painted a grim picture of what the continuing economic weakness will mean for large numbers of people, including those who have lost jobs.

“If they’re over age 55 (and unemployed), it’s unlikely they’ll ever be back in the workforce. Most families that depended on two wage earners will have to substantially tighten their belts for a long time. More young people will be living with their parents, and more families will be doubling up.”

Lonnie Kane, who makes fashionable women’s sportswear, has similar concerns.

“I’m more worried about not getting better than about having a double dip,” said Kane, president of Karen Kane Inc. in Los Angeles. “I see it as just staying flat — and that’s not healthy.”

Although not all economists and business leaders see a gray future, and long-term forecasts often have been wrong, concerns over signs of renewed weakness have intensified in the past few weeks.

Policymakers at the Federal Reserve recently lowered their economic outlook, as have many private economists. Fed Chairman Ben Bernanke chilled markets Wednesday by saying the economic outlook is “unusually uncertain” and predicting unemployment would remain stubbornly high for several years.

The attitude reflects a broad range of indicators that have grown increasingly anemic or negative in recent weeks: Consumer spending is softening. The trade deficit is widening. Housing sales are faltering. And manufacturing is losing steam.

The slowdown prompted Kane last month to cut by half his budget for capital spending this year. He also put off hiring more product-development workers. As for his staff of 165, Kane had intended to give them raises later this year after a two-year wage freeze.

“But now we’re having second thoughts,” said Kane, whose business is in its 31st year. “I just don’t have the confidence to spend the cash.”

Some analysts said the recent economic retreat could be a pause in the economy as it shifts from one supported by government to one buoyed by the private sector. Business spending for equipment and software remains solid. And the $34 billion bill to extend jobless benefits, signed Thursday by President Barack Obama, also would have a positive effect on the broader economy.

Even so, economic growth of less than 3 percent this year is widely forecast because of recent setbacks. And that won’t create enough jobs to make a meaningful dent in the nation’s 9.5 percent unemployment rate, given increases in productivity and the population.

“What it means is that millions of people unemployed or underemployed (and forced to work part time) or too discouraged to look for work won’t find jobs,” said Martin Regalia, chief economist at the U.S. Chamber of Commerce.

He said many of the remaining employed will face smaller wage increases and fewer opportunities to move into new jobs and boost their incomes.

Further economic stimulus by the federal government is one possible way out of the malaise, possibly including zero-interest loans to businesses and more infrastructure projects. But with deficit hawks in Congress and across the nation digging in their heels, the chances of passing major new stimulus programs anytime soon look slim.

Obama pushed through a $787 billion economic stimulus early last year, which many agree helped rescue the economy from recession. But that’s done little for Obama’s standing with the public, and he and his advisers don’t appear interested in fighting for another large-scale stimulus.

“I think they’ve decided it’s less risky to ride it out and presumably things will be better in 2012″ when Obama is up for re-election, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

It’s not that corporate America doesn’t have the wherewithal either.

Although many small businesses lack funds and credit to invest and expand, larger companies are sitting on mountains of cash earned from sharply rebounding profits in recent quarters. Much of that cash came from layoffs and other cost-cutting moves.

The Federal Reserve tallied companies’ so-called liquid assets at more than $1.8 trillion at the end of March, up nearly $400 billion from a year earlier. That’s money that could be used for more plants, equipment and staff.

But without American consumers spending more freely, many companies are holding back. While some corporations, such as Boeing Co. and Intel Corp., are building new plants or upgrading facilities in the U.S., others are buying rival businesses, which often leads to consolidation and job cuts. Still others are investing more abroad to tap markets in faster-growing economies in Asia and South America.

“It doesn’t seem like there’s going to be any reason to spend (the cash hoard) in the next 12 to 18 months,” said Ken Goldstein, an economist at the Conference Board.

The New York research group is projecting an anemic 1.5 percent to 2 percent growth rate in the second half of this year, a pace that would probably push the unemployment figure even higher.

Coming out of the last two deep recessions, in 1975 and 1982, the American economy gathered powerful steam at this stage of the recovery, and in both of those cases, all of the jobs lost during the downturns were recouped within a year.

By most accounts, the current recovery is already a year old. But apart from a brief burst of growth late last year, the recovery has been so tepid that the nation has recovered just 10 percent of the 8.4 million jobs erased in 2008 and 2009.

In one widely followed gauge, the University of Michigan said last week its index of consumer expectations fell last month to the lowest level since March 2009, when the nation still was mired in the recession.

“People focus on the double dip, but it’s sort of beside the point,” Baker said. “The main issue is we’re looking at a very weak growth. . . . It’s going to feel pretty bad even if it stays positive.”

See Foreclosure activity up across most US metro areas, AP on Yahoo News, July 29, 2010, by Alex Veiga.

See Fed eyes steps to bolster sputtering economy, © Evansville Courier and Press, July 14, 2010, by The Associated Press, excerpt quoted verbatim:

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WASHINGTON (AP) — Federal Reserve officials cut their forecasts for growth this year and signaled they stood ready to take new steps to keep the recovery alive if the economy worsens.

A new document, released Wednesday, revealed a more cautious mood among the Fed policymakers in light of Europe’s debt crisis, a volatile Wall Street, a stalled housing market and high unemployment.

With risks growing, Fed officials at their June 22-23 meeting saw the need to explore new options for bolstering the economy. That’s a turnaround from earlier this year when they were moving to wind down crisis-era supports.

No new specific steps were disclosed or agreed upon at that time.

However, if the recovery were to deteriorate, Fed policymakers have options. They could revive programs to buy mortgage securities or government debt. They could lower the rates banks pay for emergency Fed loans. The Fed also could create a new program to spark more lending to businesses and consumers in a bid to lure them to ratchet up spending and grow the economy.

The economic and political hurdles for taking such action would be high, economists said.

“If the economy takes a nasty spill, then yes, it would take new policy action. But if we continue to see kind of mediocre, ho-hum growth, then that won’t be enough for them to move,” said Michael Feroli, an economist at JPMorgan Chase.

See Hope For Economy In Strong Manufacturing Reports, WSMV Channel 4.com, July 22, 2010, by ALAN ZIBEL, AP Business Writers, excerpt quoted verbatim:

Hope For Economy In Strong Manufacturing Reports

Leading People aren’t spending money like they used to. Unemployment is still flirting with double digits. And the housing market is still shaky. So the future looks bleak for the economy, right?

Not necessarily.

A handful of surprisingly good earnings reports Thursday suggested that some of the major U.S. companies that make things and move them around – including Caterpillar, 3M and UPS – could lead the way to an economic recovery.

It would be an unusual path back to better times. Consumer spending and housing usually lead the way.

But all three of those economic bellwether companies, plus AT&T and Union Pacific railroad, indicated business was picking up. And most said they expected it to get even stronger later this year.

Peter Buchanan, a senior economist at CIBC World Markets, said executives have taken pains lately not to raise hopes too high for big profits in future quarters. That spread fear among investors that the economy might stall.

But he says earnings results from UPS and Union Pacific should help ease such worries.

“If you’re moving stuff, it’s a broad indicator covering spending by both businesses and consumers,” Buchanan says. “Companies are erring on the side of caution in their forecasts … but on the ground the real results don’t look so bad.”

See Markets fall down after Fed economic report, AP on Kansas City.com, July 28, 2010, by Associated Press.

See Selfish and Stupid, Dubya’s Nightmare That Has Been Allowed to Continue, Daily Kos, July 28, 2010, by Badabing, excerpt quoted verbatim:

Nothing ever surprises me anymore….I am beyond the pale as they say, when I find out that Goldman Sachs, has gotten away with a bullsh*t $550 million dollar slap on the wrist, when I find out that now, according the MSM, that most ‘Americans’ think that the ‘Wars’ are ‘boring’ (so that they hope we do not pay attention to the new ‘Pentagon Papers’ of our century by WikiLeaks), or more recently, what the MSM has said: The BP Oil is now all ‘underwater’ where it does not ‘show’…you know..it must be………….wow……just ‘gone’ while BP just took $10 Billion of a subsidy paid by our own f**king government to pay off their $20 Billion so called ‘escrow account’……

Both parties, hope that if we can just ‘blame the Tea Baggers and the huge Right Swing’ in our own party’ (aka as the Blue Dogs) as being just another ‘strange beast’ that has shown up out of no where….we will all believe that same sh*t.

So I find it amazing, and hysterical that the Republicans are now calling the new Bio- Dubya’s New Book being called, ‘Selfish and Stupid’…….Let me tell you what ‘Selfish and Stupid’ really is: …

Read BP taking $10 billion tax credit from Gulf spill, a Discussion board over at Democratic Underground.

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The Great Decoupling of Corporate Profits from Jobs, Robert Reich.org, July 26, 2010, by Robert Reich, used with permission, quoted verbatim:

Second-quarter earnings reports are coming in, and they’re making Wall Street smile. Corporate profits are up. And big American companies are sitting on a gigantic pile of money. The 500 largest non-financial firms held almost a trillion dollars in the second quarter, and that money pile is growing larger this quarter. Profits that plummeted in the recession have bounced back. Big businesses have recovered almost 90 percent of what they lost.

So with all this money and profit, they’ll start hiring again, right? Wrong – for three reasons.

First, lots of their profits are coming from their overseas operations. So that’s where they’re investing and expanding production.

GM now sells more cars in China than it does in the US, but makes most of them there. The company now employs 32,000 hourly workers in China. But only 52,000 GM hourly workers remain in the United States – down from 468,000 in 1970.

GM isn’t just hiring low-tech assembly workers in China. Last week the firm broke ground there on a $250 million advanced technology center to develop batteries and other alternative energy sources.

You and I and other American taxpayers still own over 60 percent of GM. We bought GM to save GM jobs, remember?

GM officials say no American taxpayer money is being used to expand in China. But money is fungible. Because of our generosity, GM can now use the dollars it doesn’t have to spend in the United States meeting its American payrolls and repaying its creditors, for new investments in China.

Second, big U.S. businesses are investing their cash in labor-saving technologies. This boosts their productivity, but not their payrolls.

Last Friday, for example, Ford reported a $2.6 billion second-quarter profit. The firm is already more than two-thirds the way to equaling its record 1999 profits. But due to labor-saving technologies, Ford now has half as many employees as it did a decade ago.

Wall Street analysts are happy with Ford’s “commitment to keeping capacity in check,” according to the Wall Street Journal. Ford shares rose 5.2 percent Friday. “Keeping capacity in check” is the Street’s way of saying “no new hiring.” In fact, the Street is advising investors to sell the stocks of companies that talk openly of expanding capacity.

Finally, corporations are using their pile of money to pay dividends to their shareholders and buy back their own stock – thereby pushing up share prices.

Last Friday, GE announced it would raise its dividend by 20 percent and reinstate its share-buyback plan. It’s GE’s first dividend increase since the company cut its dividend in early 2009. As a result, GE shares are up more than 5% in the past few days.

Bottom line: Higher corporate profits no longer lead to higher employment. We’re witnessing a great decoupling of company profits from jobs.

The next supply-side economist who tells you companies need more incentive (i.e. lower taxes) before they’ll hire is living on another planet.

The reality is this: Big American companies may never rehire large numbers of workers. And they won’t even begin to think about hiring until they know American consumers will buy their products. The problem is, American consumers won’t start buying against until they know they have reliable paychecks.

Watch Foreclosures on Pace for Record, AP Video on YouTube — 1:01

Robert Reich was the nation’s 22nd Secretary of Labor under Bill Clinton and is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations. In 2008, Time Magazine named him one of the Ten Most Successful Cabinet Members of the century. He has written eleven books, including “The Work of Nations,” which has been translated into 22 languages. His latest book is “Supercapitalism.” For Professor Reich’s book page for Supercaptialism at Amazon, go here. The above article is from Reich’s new blog, and can be viewed here.

Thanks to Professor Reich for permission to publish his articles on an ongoing basis.

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Extension of Benefits for the Jobless Clears Senate Hurdle, © The New York Times, July 20, 2010, by Carl Hulse, excerpt quoted verbatim:

WASHINGTON — The Senate broke a stalemate on Tuesday over extending unemployment benefits for Americans who have been out of work for six months or more, voting to override Republican objections that the bill’s costs would add to the federal deficit.

On a vote of 60 to 40, the Democratic-led Senate agreed to cut off debate on the $34 billion plan to distribute added unemployment compensation through November for those who have exhausted their standard 26 weeks of aid.

The 60 yes votes were the minimum required to overcome the threat of a filibuster and advance the bill to a final vote, expected later on Tuesday, when it is all but certain to pass. Two Republicans, Senators Susan Collins and Olympia Snowe of Maine, joined 56 Democrats and two independents in voting for the legislation; 39 Republicans and one Democrat, Senator Ben Nelson of Nebraska, opposed it.

An estimated 2 million Americans have seen their benefits run out over the past two months while the legislation has been stalled in the partisan impasse.

“Finally, finally, finally,” said Senator Barbara Milkuski, Democrat of Maryland. She called the unemployment insurance program a social compact with American workers that means, “when you hit a speed bump and have to be laid off through no fault of your own, there will be a safety net so that you do not fall.”

Republicans said they backed the idea of extending benefits, but were determined to prevent the costs from being piled onto the mounting deficit.

“We believe the federal debt has grown to an alarming level, where it is threatening the future of our children and grandchildren,” said Lamar Alexander of Tennessee, the No. 3 Republican in the Senate.

After the Senate completes its final vote on the measure, the House must still act on it, a vote that is expected to come on Wednesday. President Obama would then quickly sign the bill into law at the White House, freeing the aid.

The Senate action came just minutes after Carte Goodwin was sworn in as the new Democratic senator from West Virginia, replacing the late Robert C. Byrd. While the seat was vacant, Democrats lacked the votes to overcome the Republican filibuster.

At age 36, Mr. Goodwin, a former legal adviser to Governor Joe Manchin III, becomes the youngest member of the Senate, replacing the eldest.

Read the full article, here.

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As economy takes toll, mental health budgets shrink, Stateline.org, July 19, 2010, by Christine Vestal, used with permission, quoted verbatim:

Mental health policies in America have changed radically over the past 60 years. A one-time emphasis on caring for patients in large institutions has shifted to treating them in outpatient settings in the community. The ways mental disorders are diagnosed and categorized have changed. And the use of psychotropic medications is more prevalent than it used to be.

But throughout the decades, one thing has remained the same. States have taken the lead role in publicly funded care for the mentally ill, and paid the majority of the expenses. Even through recessions, the states have steadily increased their mental health budgets every year to meet increasing demand.

Now, as states face their biggest fiscal challenge in modern history, the trend has reversed. For the first time in more than three decades, mental health funding is declining. The drop-off is translating into a reduction in the number of psychiatric hospital beds, as well as fewer services for mental health emergencies and longer waiting lists for housing for the chronically mentally ill. The cuts are coming just as some experts say economic pressures are creating an increase in mental illness.

Although no national numbers are available, hospital emergency rooms, juvenile courts, child welfare agencies, local jails and homeless shelters are reporting bulges in the number of mentally ill people who end up on their doorsteps after failing to get help elsewhere.

In addition, a recent national survey showed that the weak economy is taking a toll on the mental health of Americans, with unemployed people four times as likely as those with jobs to report symptoms of severe mental illness.

“States are chipping away at their already very fragile mental health system,” says Michael Fitzpatrick, executive director of National Alliance on Mental Illness, (NAMI) which advocates for improved mental health care. “More people will be unable to find even basic services that allow them to stay out of the hospital or involvement with police. It’s a dire situation that we’ve never seen before.”

Funding fluctuations

Since the 1950s, when states cared for more than 500,000 people in psychiatric hospitals, state mental health programs have included more and more community-based services. Those include a wide array of services, such as suicide prevention and 24-hour crisis centers, treatment for drug and alcohol abuse, housing and work supports, counseling and violence-prevention programs. Although advocates maintain that only half of those in need are receiving public mental health services, states have made progress by serving more people in the community at about half the price of committing them to institutions — and with better outcomes. Today, only 50,000 people reside in state mental hospitals while millions are served on an outpatient basis.

Still, states have had to increase their budgets to keep pace with demand. Despite fluctuations in funding for nearly every other social service, state mental health budgets have increased nationally by about 6 percent per year for the past 30 years.

Now, for the first time, states are pulling back mental health spending. These unprecedented cuts — nearly 4 percent as a national average between 2008 and 2009 — come at a time when other public agencies such as child welfare, law enforcement and housing also are experiencing budget cuts and can ill afford to handle the overflow.

According to the National Association of State Mental Health Program Directors, 2010 spending appears to have fallen nearly 5 percent compared to 2009. Early indications are that 2011 mental health budgets may sink by 8 percent or more.

Exacerbating the mental health budget crisis is uncertainty over whether Congress will decide to extend an increase in the federal match for Medicaid services under the stimulus program, which a majority of states have counted on to stretch their overall health care budgets.

In 2008, states spent $36 billion on mental health services to care for 6.4 million people, about half the number of people advocates say are in need of care. Of the total, about $17 billion came from Medicaid, the federal-state health care program for the poor, $500 million came from federal grants and the balance was funded through state general revenues. Not counted in the total is funding from county and local budgets, much of which also sits on the chopping block.

Where the cuts are

Although a few states have minimized mental health cuts and targeted less essential services, many states are closing psychiatric hospitals, eliminating 24-hour crisis centers and tightening eligibility for subsidized medications and services that affect thousands of adults and children with severe mental illness.

Here are some examples of states that have made big cuts:

To fill a $1 billion hole in its 2011 budget, Arizona slashed this year’s budget for mental health services by $36 million — a 37 percent cut. As a result, advocates say 3,800 people who do not qualify for Medicaid are at risk of losing services such as counseling and employment preparation. In addition, more than 12,000 adults and 2,000 children will no longer receive the name-brand medications they take to keep their illnesses in check. Other services such as supportive housing and transportation to doctor’s appointments also will be eliminated.

Arizona has been considered a progressive state because it provides the vast majority of mental health services through cost-effective outpatient community programs. By slashing these programs, experts say the state will force more people to use emergency rooms or end up in the criminal justice system, which will cost the state more.

In Illinois, where Democratic Governor Pat Quinn is trying to bridge a $13 billion budget gap, a proposed mental-health budget cut of $91 million was reduced to $35 million after patients and practitioners protested at the governor’s mansion earlier this month. Even so, advocates say more than 70,000 people, including 4,200 children, are in danger of losing basic community services, which may result in more instances of hospitalization. The cuts come on the heels of a court settlement requiring the state to transfer 4,500 severely mentally disabled patients out of nursing homes and into community residential facilities following a string of rapes and assaults on elderly residents.

Mississippi has cut its mental health budget by about 8 percent for three consecutive years, resulting in the closure of a residential mental health facility for adolescents, elimination of 184 beds in one of the state’s biggest psychiatric hospitals and consolidation of six crisis centers with existing community mental health centers. In the fiscal year that started July 1, the state plans to further cut funding to localities for mental health services. Prior to the recession, Mississippi lagged far behind most states in funding community services and housed the highest percentage of people with mental illness in state institutions.

—Contact Christine Vestal at cvestal@stateline.org

See related stories:

With Medicaid, states face painful cuts and few choices (5/26/2010)

States make deep cuts to health (8/5/2009)

Watch NAMI Connection: All About The Program, YouTube video – 9:25.

Advice from someone who has been there:

Visit NAMI, the National Alliance for the Mentally Ill. This is the premier connection on the web to get help and access resources. As someone who suffered from mental illness all my adult life, getting better only in recent years, I wish so much that I had accessed NAMI and the support it can provide, when I was much younger. If you think you might be suffering from a mental condition, or if you are the parent of a child who may be mentally ill, PLEASE visit this website. One sixth of Americans at some time during their lifetimes are clinically depressed so that they need medication to overcome it. There is no shame in mental illness any more than there is shame in breast cancer. These are organic and generally genetic conditions. NO, you are in NO WAY inferior if you suspect you are mentally ill. Don’t let anyone tell you that, and don’t you dare think it.

Seek help with NAMI! You’ll be so glad you did. You know and I know that there is a lot of craziness out there on the street. Only about one half of mentally ill people in the United States are getting any real help. Help yourself. Visit NAMI. What can it hurt to explore? Isn’t it better than suffering alone? If you need someone to talk to, email me or call me at 330-202-7661. At the least you will get a friendly voice and the knowledge of someone who has been there and mostly overcome his illness…. I would be glad to talk with you. And I will try to direct you to professional resources in your area. Sometimes it just takes a little caring, and a gentle little push to begin treatment that may save your life. What are you waiting for?

We have attempted to make a separate and more comprehensive page for you about Mental Illness Resources and advice that we hope might be helpful. ~ Evans Liberal Politics owner Paul Evans

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Taking Your Message to the World

Robert Reich: Why We Can’t Rely on Foreign Consumers to Rescue American Jobs, and Why Today’s “Jobs for America Summit” is a Bad Joke., Robert Reich.org, July 14, 2010, by Robert Reich, used with permission, quoted verbatim:

Fred Hochberg, president of the Export-Import Bank of the U.S., thinks I’m wrong to worry about a trade war, and that the President’s goal for doubling U.S. exports over the next five years is on track. Writing in the Huffington Post, Hochberg says:

Reich’s argument contradicts the message I’ve heard from leaders of the world’s emerging economies who know that American innovation will help sustain their rapid infrastructure growth.

According to data released yesterday by the Department of Commerce, U.S. exports of goods and services increased by 17.7 percent during the first five months of 2010, compared to the same period last year. If this trend continues, the President will meet his goal of doubling exports in five years. The key: targeting export markets strategically.

At the Export-Import Bank, we’re focused on countries that have weathered the global recession and want to grow in areas where U.S. companies have a comparative advantage…. Commerce’s May data illustrate the potential of an export strategy tailored to countries and sectors that suit our strengths.

With due respect, Mr. Hochberg is being misleading. The same Commerce Department report shows that America’s trade deficit with the rest of the world has continued to widen. American businesses sold $152.3 billion of goods and services overseas in May (an increase of just over 2 percent from April) but the U.S. imported $194.5 billion (a jump of 2.9 percent).

In fact, according to the Commerce Department, America’s trade deficit expanded in May to its highest level in 18 months — rising 4.8 percent to $42.3 billion. Our monthly trade deficit with China alone jumped $3 billion, to $22 billion.

When the President promised to double exports over five years in order to create more jobs in the US, most people assumed he was talking about net exports – that is, exports minus imports. A doubling of net exports would help fill the demand gap caused by American consumers who can’t spend what they used to spend because they can no longer borrow to the gills.

But regardless of how much we export, if imports continue to exceed that amount, we’re heading in the opposite direction. Trade can’t possibly be a source of new American jobs. To the contrary, it reduces overall demand in the United States. The widening trade deficit remains a drag on the nation’s economic growth.

As a practical matter, the widening trade imbalance means no more trade agreements because Americans, worried about their jobs, don’t want to risk losing more of them to foreign workers.

Today (Wednesday), leaders of big business are meeting with the President and Vice President (along with former President Bill Clinton) to urge that the White House push stalled trade-opening agreements with South Korea, Panama, and Columbia. And the U.S. Chamber of Commerce is holding a so-called “Jobs for America Summit” to pressure the Administration.

The irony is that many of America’s surging imports are coming from these same American-based companies. They’re either employing foreign workers to make things for sale in the U.S., contracting with foreign companies to do so, or contracting for parts and supplies. Jobs for America Summit? These executives don’t care about American jobs. They care about their own bottom lines. That’s what they’re paid to care about.

But their bottom lines have little or nothing to do with good jobs for Americans. They have to do with good returns for American investors.

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Not all corporate executives are marching to the same drummer. Recently, Andy Grove, chairman of Intel, wrote that America should levy an extra tax on the product of offshored labor and give the money to American companies that will use it to grow their U.S. operations and create more jobs in the United States. The only small problem with this idea is it violates international trade law and would almost certainly lead to retaliatory tariffs against American exports. Grove doesn’t seem too bothered. “If the result is a trade war,” he writes, “treat it like other wars—fight to win.”

But trade wars damage everyone, as we should have learned in the 1930s from Smoot-Hawley. What Grove doesn’t say is that over 70 percent of Intel’s revenues now come from its sales abroad. A trade war is the last thing Intel (whose share prices are rocketing) needs.

Yes, America must keep the pressure on our trade partners to open their markets and not manipulate their currencies. By the same token, America also has to reduce its dependence on oil (which accounts for a large portion of our trade imbalance).

But the essential point is we can’t expect foreign consumers to fill the shortfall in demand left by American consumers who can no longer maintain their pre-recession standard of living. The only answer is to lift the standard of living of Americans. How?

That question has direct bearing on the other part of the business agenda at the faux “Jobs For America Summit” at the U.S. Chamber of Commerce. Business executives (all of whom are now raking in just about the same seven- and eight-figure salaries and bonuses they did before the recession) are also telling the President to hold off increasing taxes on the rich (that is, ending the Bush tax cuts that had been scheduled to end this year) and to cut the budget deficit.

But the only way the President could meet both these objectives – other than by cutting Medicare, Social Security, and defense spending, which he won’t – would be to cut back even further on services going to the lower middle class and poor, including those that rely on federal support to state and local governments. Without these, including extended unemployment benefits, tens of millions of Americans are being forced trim their family budgets even more than they did last year. And that means fewer customers to purchase what these companies are selling in the United States.

Someone should remind business executives that their plan for America is eroding their customer base in America.

The way to get jobs back is to increase federal spending in the short term in order to make up for the gap left by consumers and businesses (the fastest way to get this money into circulation is by extending unemployment benefits and aiding stranded state and local governments).

Over the longer term, we can lift the wages of the vast majority of Americans by expanding and extending the Earned Income Tax Credit — an income supplement — up through the middle class, and pay for it by a higher marginal income tax rate on the top. And while we’re at it, exempt the first $20,000 of income from payroll taxes, and pay for that by lifting the cap on Social Security taxes on all incomes in excess of $250,000.

Beyond that, and over the still longer term, America’s vast middle class and the poor more need to be more productive and innovative, so they can add more value to an increasingly integrated global economy. That means better education. Instead of firing school teachers, closing libraries, and increasing tuitions at public universities, we have to do exactly the opposite.

Watch Foreclosures on Pace for Record, AP Video on YouTube — 1:01

Robert Reich was the nation’s 22nd Secretary of Labor under Bill Clinton and is Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations. In 2008, Time Magazine named him one of the Ten Most Successful Cabinet Members of the century. He has written eleven books, including “The Work of Nations,” which has been translated into 22 languages. His latest book is “Supercapitalism.” For Professor Reich’s book page for Supercaptialism at Amazon, go here. The above article is from Reich’s new blog, and can be viewed here.

Thanks to Professor Reich for permission to publish his articles on an ongoing basis.

See Lost decade: The new threat to the U.S. economy, CNN Money, July 15, 2010, by Chris Isidore, excerpt quoted verbatim:

NEW YORK (CNNMoney.com) — The risk of a double-dip recession is getting a lot of attention recently, but even that grim prediction could prove a little too optimistic.

Disappointing job reports, weakness in housing and consumer spending and problems in world financial markets have raised concerns about the U.S. economy stalling out later this year. Now some economists are starting to talk about an even worse fate: a prolonged period of very weak growth, a so-called “lost decade.”

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. We’re going to keep pounding three or four of these into a lot of our articles. Feeling discouraged and need some motivation? Sure you can read a self help book, but for me, listening to these four speeches makes all the difference to how my day goes:

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The Root of Economic Fragility and Political Anger, Robert Reich.org, July 13, 2010, by Robert Reich, used with permission, quoted verbatim:

Missing from almost all discussion of America’s dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June’s decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.

In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.

Meanwhile, a much smaller group of Americans’ earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.

We’re back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground.

And as long as this trend continues, we can’t get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.

America’s median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class could boost its purchasing power was to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn’t pay their bills, and banks couldn’t collect.

Each of America’s two biggest economic downturns over the last century has followed the same pattern. Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation’s total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America’s total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928—with 23.5 percent of the total.

We all know what happened in the years immediately following these twin peaks—in 1929 and 2008.

Yes, China, Germany and Japan have contributed to America’s demand-side problem by failing to buy as much from us as we buy from them. But to believe that our continuing economic crisis stems mainly from the trade imbalance—we buy too much and save too little, while they do the reverse—is to miss the biggest imbalance of all. The problem isn’t that typical Americans have spent beyond their means. It’s that their means haven’t kept up with what the growing economy could and should have been able to provide them.

A second parallel links 1929 with 2008: when earnings accumulate at the top, people at the top invest their wealth in whatever assets seem most likely to attract other big investors. This causes the prices of certain assets—commodities, stocks, dot-coms or real estate—to become wildly inflated. Such speculative bubbles eventually burst, leaving behind mountains of near-worthless collateral.

The crash of 2008 didn’t turn into another Great Depression because the government learned the importance of flooding the market with cash, thereby temporarily rescuing some stranded consumers and most big bankers. But the financial rescue didn’t change the economy’s underlying structure — median wages dropping while those at the top are raking in the lion’s share of income.

That’s why America’s middle class still doesn’t have the purchasing power it needs to reboot the economy, and why the so-called recovery will be so tepid—maybe even leading to a double dip. It’s also why America will be vulnerable to even larger speculative booms and deeper busts in the years to come.

2

The structural problem began in the late 1970s when a wave of new technologies (air cargo, container ships and terminals, satellite communications and, later, the Internet) radically reduced the costs of outsourcing jobs abroad. Other new technologies (automated machinery, computers and ever more sophisticated software applications) took over many other jobs (remember bank tellers? telephone operators? service station attendants?). By the ’80s, any job requiring that the same steps be performed repeatedly was disappearing—going over there or into software. Meanwhile, as the pay of most workers flattened or dropped, the pay of well-connected graduates of prestigious colleges and MBA programs—the so-called “talent” who reached the pinnacles of power in executive suites and on Wall Street—soared.

The puzzle is why so little was done to counteract these forces. Government could have given employees more bargaining power to get higher wages, especially in industries sheltered from global competition and requiring personal service: big-box retail stores, restaurants and hotel chains, and child- and eldercare, for instance. Safety nets could have been enlarged to compensate for increasing anxieties about job loss: unemployment insurance covering part-time work, wage insurance if pay drops, transition assistance to move to new jobs in new locations, insurance for communities that lose a major employer so they can lure other employers. With the gains from economic growth the nation could have provided Medicare for all, better schools, early childhood education, more affordable public universities, more extensive public transportation. And if more money was needed, taxes could have been raised on the rich.

Big, profitable companies could have been barred from laying off a large number of workers all at once, and could have been required to pay severance—say, a year of wages—to anyone they let go. Corporations whose research was subsidized by taxpayers could have been required to create jobs in the United States. The minimum wage could have been linked to inflation. And America’s trading partners could have been pushed to establish minimum wages pegged to half their countries’ median wages—thereby ensuring that all citizens shared in gains from trade and creating a new global middle class that would buy more of our exports.

But starting in the late 1970s, and with increasing fervor over the next three decades, government did just the opposite. It deregulated and privatized. It increased the cost of public higher education and cut public transportation. It shredded safety nets. It halved the top income tax rate from the range of 70–90 percent that prevailed during the 1950s and ’60s to 28–40 percent; it allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax and escape inheritance taxes altogether. At the same time, America boosted sales and payroll taxes, both of which have taken a bigger chunk out of the pay of the middle class and the poor than of the well-off.

Companies were allowed to slash jobs and wages, cut benefits and shift risks to employees (from you-can-count-on-it pensions to do-it-yourself 401(k)s, from good health coverage to soaring premiums and deductibles). They busted unions and threatened employees who tried to organize. The biggest companies went global with no more loyalty or connection to the United States than a GPS device. Washington deregulated Wall Street while insuring it against major losses, turning finance—which until recently had been the servant of American industry—into its master, demanding short-term profits over long-term growth and raking in an ever larger portion of the nation’s profits. And nothing was done to impede CEO salaries from skyrocketing to more than 300 times that of the typical worker (from thirty times during the Great Prosperity of the 1950s and ’60s), while the pay of financial executives and traders rose into the stratosphere.

It’s too facile to blame Ronald Reagan and his Republican ilk. Democrats have been almost as reluctant to attack inequality or even to recognize it as the central economic and social problem of our age. (As Bill Clinton’s labor secretary, I should know.) The reason is simple. As money has risen to the top, so has political power. Politicians are more dependent than ever on big money for their campaigns. Modern Washington is far removed from the Gilded Age, when, it’s been said, the lackeys of robber barons literally deposited sacks of cash on the desks of friendly legislators. Today’s cash comes in the form of ever increasing campaign donations from corporate executives and Wall Street, their ever larger platoons of lobbyists and their hordes of PR flacks.

3

The Great Recession could have spawned another era of fundamental reform, just as the Great Depression did. But the financial rescue reduced immediate demands for broader reform.

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Obama might still have succeeded had he framed the challenge accurately. Yet in reassuring the public that the economy will return to normal he has missed a key opportunity to expose the longer-term scourge of widening inequality and its dangers. Containing the immediate financial crisis and then claiming the economy is on the mend has left the public with a diffuse set of economic problems that seem unrelated and inexplicable, as if a town’s fire chief deals with a conflagration by protecting the biggest office buildings but leaving smaller fires simmering all over town: housing foreclosures, job losses, lower earnings, less economic security, soaring pay on Wall Street and in executive suites.

Much the same has occurred with efforts to reform the financial system. The White House and Democratic leaders could have described the overarching goal as overhauling economic institutions that bestow outsize rewards on a relative few while imposing extraordinary costs and risks on almost everyone else. Instead, they have defined the goal narrowly: reducing risks to the financial system caused by particular practices on Wall Street. The solution has thereby shriveled to a set of technical fixes for how the Street should conduct its business.

What we get from widening inequality is not only a more fragile economy but also an angrier politics. When virtually all the gains from growth go to a small minority at the top — and the broad middle class can no longer pretend it’s richer than it is by using homes as collateral for deepening indebtedness — the result is deep-seated anxiety and frustration. This is an open invitation to demagogues who misconnect the dots and direct the anger toward immigrants, the poor, foreign nations, big government, “socialists,” “intellectual elites,” or even big business and Wall Street. The major fault line in American politics is no longer between Democrats and Republicans, liberals and conservatives, but between the “establishment” and an increasingly mad-as-hell populace determined to “take back America” from it.

When they understand where this is heading, powerful interests that have so far resisted fundamental reform may come to see that the alternative is far worse.

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Republicans Want as Many Unemployed People as Possible, Because They Think It Will Get Them Elected, AlterNet, July 7, 2010, by Dean Baker of the Guardian, quoted verbatim:

From now until Nov. 2, the Republican Party will be the party of unemployment.

From now until Nov. 2, the Republican Party will be the party of unemployment. The logic is straightforward: The more people who are unemployed on Election Day, the better the prospects for Republicans in the fall election. They expect, with good cause, that voters will hold the Democrats responsible for the state of the economy. Therefore anything that the Republicans can do to make the economy worse between now and then will help their election prospects.

While it might be bad taste to accuse a major national political party of deliberately wanting to throw people out of jobs, there is no other plausible explanation for the Republicans’ behavior. The Republicans have balked at supporting nearly every bill that had any serious hope of creating or keeping jobs, most recently filibustering on bills that provided aid to state and local governments and extending unemployment benefits. The result of the Republicans’ actions, unless they are reversed quickly, is that hundreds of thousands more workers will be thrown out of work by Election Day.

The story is straightforward. Nearly every state and local government across the country is looking at large budget shortfalls for their 2011 fiscal years, most of which begin July 1, 2010. Since they are generally required by state constitutions or local charters to balance their budgets, they will have no choice except to raise taxes and/or make large cutbacks and layoff workers to bring spending and revenue into line.

State and local governments have cut their workforce by an average of 65,000 a month over the last three months. Without substantial aid from the federal government, this pace is likely to accelerate. The Republican agenda, in blocking aid to the states, may add another 300,000 people to the unemployment roles by early November.

The blockage of extended unemployment benefits promises similar dividends. Unemployment benefits are not just about providing income support to those who are out of work, they also provide a boost to the economy. Since unemployed workers generally have little other than their benefits to support themselves, this is money that will almost immediately be spent. The benefits paid to workers are income to food stores and other retail outlets.

Unemployment insurance provides the sort of boost to demand that the economy desperately needs. That is why neutral parties like the Congressional Budget Office or economist Mark Zandi, a top adviser to John McCain’s presidential bid, always list unemployment benefits as one of the best forms of stimulus.

Republicans give two reasons for opposing benefits. First, they claim that benefits discourage people from working. Second, they object that the Democrats’ proposal will add to the national debt.

On the first point, there is a considerable amount of economic research. Most indicate that, in periods when the economy is operating near its capacity, more generous benefits may modestly increase the unemployment rate. However, they are less likely to have that effect now. The reason is simple: The economy does not have enough jobs. The latest data from the Labor Department show that there are five unemployed workers for every job opening.

In this context, unemployment benefits may give some workers the option to remain unemployed longer to find a job that better fits their skills, but they are unlikely to affect the total number of unemployed. In other words, a $300 weekly unemployment check may allow an experienced teacher the luxury of looking for another teaching job rather than being forced to grab a job at Wal-Mart.

However, if the teacher took the job at Wal-Mart, then this would simply displace a recent high school grad who has no other job opportunities. That might be a great turn of events in Republican-econ land, but it does not reduce the overall unemployment rate, nor does it benefit the overall economy in any obvious way.

The other argument the Republicans give is that these bills would add to the national debt. For example, the latest extension of unemployment benefits would have added $22 billion to the debt by the end of 2011. This means that the debt would be $9,807,000,000 instead of $9,785,000,000 at the end of fiscal 2011, an increase of the debt to GDP ratio from 65.3 percent to 65.4 percent.

It is possible that congressional Republicans, who were willing to vote for hundreds of billions of dollars of war expenditures without paying for them, or trillions of dollars of tax cuts without paying for them, are actually concerned about this sort of increase in the national debt. It is possible that this is true, but not very plausible.

The more likely explanation is that the Republicans want to block anything that can boost the economy and create jobs. Throwing people out of work may not be pretty, but politics was never pretty, and it is getting less so by the day.

Dean Baker is co-director of the Center for Economic and Policy Research and author of the new book, False Profits: Recovering from the Bubble Economy (PoliPointPress, 2010).

See Republicans Spar Over Health of Tea Party Movement, AlterNet, July 6, 2010, by David Edwards and Daniel Tencer: South Carolina’s Republican senators take issue over the Tea Party movement: Lindsey Graham says it’s destined to “die out.” Jim DeMint begs to differ.

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Calculated Risk Stunner: No Double-Dip If Recession Isn’t Over, Daily Kos, July 3, 2010, by Bob Swern, used with permission, quoted verbatim:

This evening, Calculated Risk has posted a rather stunning (and IMHO elegantly simple, albeit frightful) explanation of how the National Bureau of Economic Research‘s Business Cycle Dating Committee (the “NBER,” whose Business Cycle Dating Committee is the group “officially responsible” for dating recessions in the U.S.) reviews quantitative data about our economy, and how they may very possibly reach a conclusion–given that the conventional wisdom of many economists is for the second-half of 2010 to be much more sluggish than the first six months–that our economy is still in a Great Recession, and therefore we can’t be entering into a double-dip recession.Putting it even more simply: the official organization for determining periods of economic recession in the U.S. may, instead, determine that the Great Recession never “ended,” in the first place.

Starting off their observations tonight, the folks over at CR pointed to a quote from NBER Chair Robert Hall from an AP story from yesterday, in: “Recession Dating and a ‘Double Dip’.”

Yesterday an AP story quoted Robert Hall, the current Chairman of NBER on a “double dip”: So what exactly is a ‘double-dip’ recession?“The idea — hypothetical because it has yet to happen — is that activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle.”

CR points us to the most recent “double-dip,” in the early 1980′s, when the NBER dated those as two separate recessions. You may read the NBER’s announcement, from July 8th, 1981, declaring  the end of the recession in 1980 here: “Business Cycle Trough Last July.”

And here’s their declaration announcing the beginning of the 1981-1982 recession: “Current Recession Began in July.”

The folks at Calculated Risk then point us to this public domain comment from the NBER: “The NBER’s Recession Dating Procedure.”

In choosing the dates of business-cycle turning points, the committee follows standard procedures to assure continuity in the chronology. Because a recession influences the economy broadly and is not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee views real GDP as the single best measure of aggregate economic activity. …The committee places particular emphasis on two monthly measures of activity across the entire economy: (1) personal income less transfer payments, in real terms and (2) employment. In addition, the committee refers to two indicators with coverage primarily of manufacturing and goods: (3) industrial production and (4) the volume of sales of the manufacturing and wholesale-retail sectors adjusted for price changes.

Here’s where CR’s coverage of the matter becomes somewhat of a “stunner.” They provide us with a review of the NBER’s four criteria: real GDP (and real “Gross Domestic Income,” or “GDI”),  industrial production, employment, and income (real personal income less transfer payments).

Here are the inconvenient, quantitative truths:

GDP

GDP through Q1 2010…”Real Gross Domestic Product and Income: Percent of Previous Peak.”

In the early 1980′s, as CR points out, real GDP and real GDI “…returned to pre-recession levels before declining again.” This time, we’re not yet there.

Industrial Production

Federal Reserve data on monthly industrial production through May: “Industrial Production: Percent of Previous Peak.”

CR reminds us that industrial production is still 8.1% below the pre-recession peak, with growth slowing (although still expanding).  In the early ’80′s, industrial production was only about a half-point, percentage-wise, below its previous peak.

Employment

Bureau of Labor Statistics’ Employment through June: “Employment: Percent of Previous Peak.”

In the early 80′s, employment returned to its previous peak. Now, not even close. Many economists are predicting that unemployment numbers may worsen during the balance of the year.

Real Personal Income

Real Personal Income (excluding transfer payments) through May: “Real Personal Income Less Transfer Payments:  Percent of Previous Peak.”

And, lastly, we’re told that while personal income returned to its previous levels in-between the double-dip in 1980-1982, real personal income has only increased slightly this time around, and we’re 6% below the pre-recession peak.

So, it’s not surprising that Calculated Risk would come to the following conclusions:

Based on these graphs and the NBER memos, it would seem pretty easy to date two recessions in the early ’80s. However, if another recession starts this year, it will almost certainly be dated as a continuation of the “great recession” that started in 2007. If so, I’ll need more blue ink to shade all my graphs …

IMHO, more likely than not, these are the realities of our economy heading into the last four months of the 2010 election cycle.

In short, there can’t be a double-dip recession if the Great Recession never ended, in the first place.

And, for Democrats, that may be the most brutal truth of all.

See Democratic campaign committees losing big Wall Street donors, The Washington Post, July 6, 2010, by T.W. Farnham and Paul Kane.

Also see BP has steady sales at Defense Department despite U.S. scrutiny, The Washington Post, July 5, 2010, by R. Jeffrey Smith.

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President Obama on June Jobs Numbers: A Positive Six Months, The White House, July 2, 2010, by Jesse Lee, quoted verbatim. Comment by Paul Evans: I thought it was only fair to present the government’s idea of how things have been going as far as any recovery. The jobs numbers aren’t great, but the hemorrhaging has ceased, and any way you look at it, that’s a good thing, right?

In a month where one might easily be confused by the official jobs numbers, the President followed up on CEA Chair Christina Romer’s excellent explanation this morning by laying down the bottom line:

This morning, we received the June employment report.  It reflected the planned phase out of 225,000 temporary Census jobs.  But it also showed the sixth straight month of job growth in the private sector.  All told, our economy has created nearly 600,000 private sector jobs this year.  That’s a stark turnaround from the first six months of last year, when we lost 3.7 million jobs at the height of the recession.

Now, make no mistake:  We are headed in the right direction.  But as I was reminded on a trip to Racine, Wisconsin, earlier this week, we’re not headed there fast enough for a lot of Americans.  We’re not headed there fast enough for me, either.  The recession dug us a hole of about 8 million jobs deep.  And we continue to fight headwinds from volatile global markets.  So we still have a great deal of work to do to repair the economy and get the American people back to work.

Speaking at Andrews Airforce Base on his way to Charleston, West Virginia for the Senator Byrd’s memorial service, the President also emphasized another key point: the Recovery Act is still in action, and still putting people back to work.  The President took the opportunity to announce yet another component of the “Summer of Recovery”:

Secretary Locke and Secretary Vilsack have joined me here today to announce that the Departments of Commerce and Agriculture will invest in 66 new projects across America that will finally bring reliable broadband Internet service to communities that currently have little or no access.

In the short term, we expect these projects to create about 5,000 construction and installation jobs around the country.  And once we emerge from the immediate crisis, the long-term economic gains to communities that have been left behind in the digital age will be immeasurable.

All told, these investments will benefit tens of millions of Americans — more than 685,000 businesses, 900 health care facilities, and 2,400 schools around the — across the country.  And studies have shown that when communities adopt broadband access, it can lead to hundreds of thousands of new jobs.  Broadband can remove geographic barriers between patients and their doctors.  It can connect our kids to the digital skills and 21st century education required for the jobs of the future.  And it can prepare America to run on clean energy by helping us upgrade to a smarter, stronger, more secure electrical grid.

So we’re investing in our people and we’re investing in their future.  We’re competing aggressively to make sure that jobs and industries and the markets of tomorrow take root right here in the United States.  We’re moving forward.  And to every American who is looking for work, I promise you we are going to keep on doing everything that we can — I will do everything in my power to help our economy create jobs and opportunity for all people.

Now, Sunday is the Fourth of July.  And if that date reminds us of anything, it’s that America has never backed down from a challenge.  We’ve faced our share of tough times before.  But in such moments, we don’t flinch.  We dig deeper, we innovate, we compete and we win.  That’s in our DNA.  And it’s going to be what brings us through these tough times towards a brighter day.

So I want to say happy Fourth of July to everybody.  I want our troops overseas to know that we are thinking of your bravery and grateful for your service.

Amen to that! ~ Paul Evans