Evans Politics

Why Won’t Obama Give You a Job, AlterNet, November 17, 2009, by Joshua Holland, excerpt quoted verbatim:

Wall Street’s raking in massive profits and paying its execs and traders record bonuses, thanks in part to government cash. What about ordinary Americans?

Working Americans continue to suffer from the worst financial crash since the Great Depression, and Washington has so far offered up only band-aids to help them out — extended unemployment benefits, small stimulus checks and deeply flawed mortgage relief programs that have done little to stem the tide of foreclosures.

The stimulus plan passed earlier this year appears to have been too modest in scope, as many economists warned at the time. While it helped halt the economy’s free-fall collapse, unemployment still topped 10.2 percent last week, and analysts warn us that “bleak data point to a stark future for job seekers and employers.”

But while caution’s prevailed in Washington when it comes to bailing out “Main Street,” Wall Street’s enjoyed a degree of socialism that would make Hugo Chavez blush. The Obama administration has essentially continued Bush’s policy of loading up dump trucks with tax dollars at the Treasury and dropping them on the banks with little oversight and next to no strings attached.

And it’s had an effect, at least on the banks’ bottom lines. AIG, the insurance giant whose near-collapse last year almost brought down the entire financial system, reported its second consecutive quarterly profit after being rescued by Uncle Sam. Unlike American workers, the company is getting back on its feet after an injection of an almost impossible-to-grasp number of tax-dollars.

AIG’s fortunes are not unique. All of Wall Street’s survivors are raking in massive profits and paying their execs and traders record bonuses.

The disconnect between the banks’ fortunes and those of working Americans makes the question posed by a recent “news analysis” by Washington Post staff writer Alec MacGillis so relevant: “Why Won’t Obama Give You a Job?”

MacGillis writes that while the White House says the stimulus passed earlier in the year “created or saved” 640,000 jobs, the “national unemployment rate has now hit 10.2 percent,” and asks:

Why has a White House that talks so much about boosting employment steered clear of the most direct strategy that could keep Americans on the job?

Since taking office, the Obama administration has studiously avoided paying people to go to work, which could be accomplished by subsidizing workers’ private-sector employment or by creating new government-paid jobs. There are programs in a handful of states that financially compensate employees who cut their hours … But the Obama administration has so far opted not to expand this initiative. And aside from a small summer employment program for young people, it has not sought to create jobs on the public payroll, something the country did in the 1930s and 1970s.

MacGillis offers that “engaging in more forthright job creation could invite some political pitfalls (such as those constant accusations of socialism),” and then asks: “but is double-digit unemployment any less a political risk?”

It’s the kind of rationalism that can blind political observers, and ultimately MacGillis leaves the disconnect between policy and politics unaddressed.

There are competing explanations for Democrats’ habitual timidity when they have an opportunity to govern. Take your pick: internal party politics — skewed Rightwards by the influence of the Blue Dogs — the Dems’ reliance on fat campaign contributions from Wall Street; an institutional fear of “those constant accusations of socialism”; the organizing skills of their conservative opponents or the fact that the White House policy apparatus is packed with Clinton administration vets, former Wall Streeters and other adherents to classical economic orthodoxy.

Whatever the case, the moves they’ve made to offer relief to ordinary working families haven’t been as bold as their interventions in the financial sector. Not only did many economists view the stimulus package as too small relative to the depth of our economic malaise, but a good chunk of the funds went for tax cuts, and for long-term investments, like “green energy” subsidies, which have limited bang for the buck in terms of generating jobs over the short haul.

Continue reading this article on AlterNet, here.

See Wall Street Recovers Quickly — Unlike the Rest of the Nation, L.A. Times, November 17, 2009, by L.A. Time Money & Company: “The city’s four largest investment banks — Goldman Sachs Group, JPMorgan Chase & Co., Morgan Stanley and Merrill Lynch (now part of Bank of America Corp.) — have earned $22.6 billion so far this year versus a loss of $40.3 billion in 2008, according to the report.

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Robert Reich on the Trade Imbalance with China
and Our Wishful Thinking About What this Means for American Jobs

Obama, China, and Wishful Thinking About American Jobs, Robert Reich’s blog, November 17, 2009, by Robert Reich, large excerpts quoted verbatim:

President Obama says he wants to “rebalance” the economic relationship between China and the U.S. as part of his plan to restart the American jobs machine. “We cannot go back,” he said in September, “to an era where the Chinese . . . just are selling everything to us, we’re taking out a bunch of credit-card debt or home equity loans, but we’re not selling anything to them.” He hopes that hundreds of millions of Chinese consumers will make up for the inability of American consumers to return to debt-binge spending.

This is wishful thinking. True, the Chinese market is huge and growing fast. By 2009, China was second only to the U.S. in computer sales, with a larger proportion of first-time buyers. It already had more cell-phone users. And excluding SUVs, last year Chinese consumers bought as many cars as Americans (as recently as 2006, Americans bought twice as many).

…SNIP….

In fact China is heading in the opposite direction of “rebalancing.” Its productive capacity keeps soaring, but Chinese consumers are taking home a shrinking proportion of the total economy. Last year, personal consumption in China amounted to only 35% of the Chinese economy; 10 years ago consumption was almost 50%. Capital investment, by contrast, rose to 44% from 35% over the decade.

China’s capital spending is on the way to exceeding that of the U.S., but its consumer spending is barely a sixth as large. Chinese companies are plowing their rising profits back into more productive capacity—additional factories, more equipment, new technologies. China’s massive $600 billion stimulus package has been directed at further enlarging China’s productive capacity rather than consumption. So where will this productive capacity go if not to Chinese consumers? Net exports to other nations, especially the U.S. and Europe.

…SNIP…

But the larger explanation for Chinese frugality is that the nation is oriented to production, not consumption. China wants to become the world’s preeminent producer nation. It also wants to take the lead in the production of advanced technologies. The U.S. would like to retain the lead, but our economy is oriented to consumption rather than production.

Deep down inside the cerebral cortex of our national consciousness we assume that the basic purpose of an economy is to provide more opportunities to consume. We grudgingly support government efforts to rebuild our infrastructure. We want our companies to invest in new equipment and technologies but also want them to pay generous dividends. We approve of government investments in basic research and development, but mainly for the purpose of making the nation more secure through advanced military technologies. (We regard spillovers to the private sector as incidental.)

China’s industrial and technological policy is unapologetically direct. It especially wants America’s know-how, and the best way to capture knowhow is to get it firsthand. So China continues to condition many sales by U.S. and foreign companies on production in China—often in joint ventures with Chinese companies.

China’s export policy is really a social policy, designed to maintain order. Despite the Obama administration’s entreaties, China will continue to peg the yuan to the dollar—when the dollar drops, selling yuan in the foreign-exchange market and adding to its pile of foreign assets in order to maintain the yuan’s fixed relation to the dollar. This is costly to China, of course, but for the purposes of industrial and social policy, China figures the cost is worth it.

…The dirty little secret on both sides of the Pacific is that both America and China are capable of producing far more than their own consumers are capable of buying. In the U.S., the root of the problem is a growing share of total income going to the richest Americans, leaving the middle class with relatively less purchasing power unless they go deep into debt. Inequality is also widening in China, but the problem there is a declining share of the fruits of economic growth going to average Chinese and an increasing share going to capital investment.

Both societies are threatened by the disconnect between production and consumption. In China, the threat is civil unrest. In the U.S., it’s a prolonged jobs and earnings recession that, when combined with widening inequality, could create political backlash.

Read the full article, here.

Thanks to Professor Reich, who you may recall was Clinton’s Secretary of Labor, for his kind permission to Evans Politics to republish his works on an ongoing basis.