Friday, July 02, 2010
The credit crisis blog Calculated Risk has a nice write-up on today's unemployment report with lots of helpful graphs, including this monster: "Unemployed over 26 weeks." There's a lot of pain out there.
Insty link round-up here.
I'll generally spare you the tedious repetition of my usual point -- that regulatory overhang is sucking the animal spirits out of the economy and making employers extremely reluctant to add heads -- other than to note that it has caught on as a talking point among both Republicans and pro-business journalists (such as on CNBC's "Squawkbox"). Doubt I had much to do with that, although my posts on the subject go back to last fall and long predate the GOP's adoption of the argument.
Regarding the headline unemployment rate, there is a good chance that it declines sharply in the next few months even while underlying employment grows more slowly than the population. Why? Because the Congress has finally drawn the line at extending unemployment benefits. That will mean that more people will no longer need to assert that they are looking for a job in order to collect insurance, so they will honestly report themselves as not in the labor force according to the usual definition.
The White House and the Congressional Democrats will, of course, claim the inevitable decline in the headline rate (attributable to the surge in "discouraged" workers) as improvement, and most mainstream journalists will happily go along with the deception.
The Congress hasn't "drawn a line against extending unemployment benefits," the dems will just have to try a different approach.
These benefits are the bribes that dems pay blacks and unemployed union members.The dems have to pay them. So, I look to bribes to Pubbies. What would it be worth for Kagen to withdraw, Holder to resign or 25,000 troops get sent to the border? What was it in health care death rationing, the Nebraska Kickback?
Never underestimate the corruption of Bami and the dems!!
Good point about "regulatory overhang" -- although regulatory self-destruction might be more descriptive.
Problem is, the idea has not taken root. Even when faced with a crystal clear example (drilling moratorium = hundreds of thousands of jobs lost, untold tax revenues lost), there is no broad acceptance of the link between over-regulation cause & poverty/unemployment effect.
In a world where (1) higher tax rates won't boost tax revenues, (2)lower government spending is not seriously being considered, (3) lenders are getting nervous, then the only real option left is to boost growth by careful rollback of excessive regulation.
But that option is barely on the radar.
Burdonsome regulatory overreach is felt by comparitively few voters (directly), and it's only when GOP politicians can articulate the connection with unemployment and low job creation that the mass of voters will require change. That could take a while.
@TH: In a world that nearly went through a great depression, and one that may be going through a lengthy recession, because banking regulation was gutted in the 1990s (1930s regulations dumped), I just don't see how you think that over-regulation is the cause.
Certainly it has a cost. But not having the regulations has a cost. It costs a lot to bring a drug to market through the FDA approval process (thus my former boss's pushing of the Orphan Drug legislation), but it costs a lot to have people walking around with fins as appendages (thalidomide).
What I don't hear is your prescription. Tell me, Glass-Steagall or no? Bank Holding Company Act, or no? FDA three stage process or no? Meat-packing inspections (Sinclair Lewis)?
My own view is that while there never be actual achievement of the golden mean in any area (of regulation), the U.S. system is principally one of putting in place laws which act as deterrents ... a private law system in effect with minimal ability of government to actually enforce the laws (the honor system on the whole). I think that's a pretty cheap way to do it.
Or take the '33 Securities Act and the '34 Securities Exchange Act. I love to be able to read those 10-Ks, 10-Qs, and 20(f)s. They are often opaque when it comes to MD&A but at least you know what the numbers are at some level of granularity.
I'll stop here to give you a chance to respond.
Here's one guy's response.
"because banking regulation was gutted in the 1990s (1930s regulations dumped)" That's a canard.
Un-separating commercial and investment banking (traditional Glass-Steagall) wasn't a root cause of any of the problems. Instead, we failed to regulate new things like derivatives, and mis-applied existing regulations to other things badly. A root cause was the explosive growth in sub-prime mortgages and related securitization -- you could see this problem coming, but no regulator stepped-up.
The problem was more in the regulators than in the regulations. SEC Chairman Cox is a poster-child fuck-up, to cite one example.
I'm a fan of the Bank Holding Company Act.
The FDA process is broken. In most cases we'd be better off with smaller, more detailed studies that included better assessment of efficacy. That's because patient variability is a big factor in treating chronic illness -- it's lost in the FDA process. But that kind of change will never happen given the state of Congress and Washington DC.
The EPA has become a political body. It's been subverted. We may need to disband it and start over, it's that bad.
THe Department of Homeland Security is useless.
Both parties have wormed their political aparatchiks into major agencies over the years -- it's as bad as the old Soviet Union. Even the Department of Justice has been politicized. We need major house-cleaning.
The political class -- mostly based in DC -- are mostly rent-seeking toll collectors. Like the old Soviet Union, they're going to go bankrupt.
I still think the root cause of today's economic distress was simply lending a lot of money to people who couldn't pay it back. This was encouraged by the same people who now say that more regulation is the solution to our problems.
*Maybe* - and I'll admit I may be a little out of my depth here - without all the derivatives, CDOs and other exotic financial instruments we would not have had the dramatic monetary meltdown of 2008. But we would still be trying to painfully unwind all that debt. The route might have been a little different but the destination would be the same.
Relevant to this thread, Obama just spoke to the June employment report.
The full text is here
Obama says that we've seen the sixth straight month of job growth in the private sector, 600,000 new private sector jobs so far this year -- even though total jobs fell in June. Until now, Obama had been relying on temporary census workers for spin. "That's why we're continuing a relentless effort across multiple fronts to keep this recovery moving." Don't worry, be happy.
The sole specific example Obama cited for this "relentless effort" was government-funded projects to bring broadband to rural areas. "So we're investing in our people and we're investing in their future." Until recently, Obama had been touting doubling our exports in the next five years as a solution.
We're running unprecedented federal deficits right now. Ordinarily a trillion or more of excess demand would spike GDP growth through the roof. Larry Summer's Okun Law-based models would say that unemployment should be below 8.0%.
So there's a disconnect, politely put.
"Now, make no mistake: We are headed in the right direction."
" ... 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."
These too are disconnects, politely put. Expect them to be used in Republican attack ads come November.
Outside of the Beltway, all the indicators are pointing down. California is running out of money. Illinois already has. Things will only get uglier between now and November. Interestingly -- except in the greater DC-area -- the pain is more in the Blue states than the Red.
What's also developing is our collective realization that Obama is the Great Dissembler ... or as my mother would say ... "a lying sack of shit." This too will have consequences, when we hit a tipping point. Back in the late 1970s, no one thought Jimmy Carter was a liar or a conniver.
"or as my mother would say ... "a lying sack of shit." "
Would your mother really have said that? Now *I've* said it many times. But I can't imagine my mother saying it. Maybe she did when I wasn't around.