Tag: Barack Obama

A lot of names have been floated for treasury secretary, but the three names that are most interensting to me are current FDIC Chairwoman Sheila Bair, former Clinton Labor Secretary Robert Reich and two Nobel Prize-winning economists, Paul Krugman and Joseph Stiglitz. You could do worse that choosing from this quartet. All are focused on homeowners, taxpayers and citizens — the consumers in this corporate economy — and believe that the people who took the risks that led to the banking meltdown should pay the price.

A Rutgers report issued yesterday confirms the obvious: We are in an economic sinkhole that appears to have no bottom.

According to the Sitar-Rutgers Regional Report, the state has been hemorrhaging private sector jobs all decade, a reality that is unlikely to change anytime soon.

Given current national and state economic trend lines, this could turn out to be New Jersey’s lost employment decade. It could be — and we stress could be at this point in time — the first time since the 1930s’ Great Depression that we may have fewer private-sector jobs at the end of a decade than at the beginning. Thus, in the understatement of the moment, this has not been the decade of employment growth in New Jersey. To put this understatement in perspective, during the final two decades of the twentieth century — 1980-1990 and 1990-2000 — New Jersey gained on average 437,000 private-sector jobs per decade. Labor market gains in the current post-2000 decade pale in contrast.

The report breaks the decade into three phases, the first — December 2000 through March 2003 — saw a loss of 84,800 private-sector jobs. The next 57 months — through last December — saw the state recoup 88,600 private-sector jobs, enough to offset the earlier losses but what the report calls “very modest and below-average employment growth”.

The most recent nine-month period, however. (ending in September), has not exactly been kind to the state.

Starting in December 2007, employment began a steady retreat, with 18,700 private-sector jobs lost through September 2008. Overall, the combination of two contractionary phases and one expansionary phase resulted in the loss of 14,900 private-sector jobs — between December 2000 and September 2008—with significant additional losses expected to occur over the next 18 months or so.

That’s obviously not good news for New Jerseyans, though we are not alone in this. The current downturn — which has featured not only the meltdown of the financial and housing sectors, but a crisis for the auto industry and the manufacturing sector as a whole — has driven unemployment up to its highest rate in 14 years, with the total “number of unemployed Americans” jumping by 603,000 in October to 10.1 million — “the largest number since 1983.”

The American economy lost another 240,000 jobs in October, the government reported Friday, as cash-strapped consumers pulled back and businesses hunkered down, intensifying the distress gripping much of the country.

The unemployment rate spiked to 6.5 percent from 6.1 percent, the highest level since 1994. Many analysts now expect unemployment will reach 8 percent by the middle of next year.

Coupled with revisions to September’s data — which now show a loss of 284,000 jobs, down from an initial estimate of 159,000 — the economy has shed 1.2 million jobs since the beginning of the year. More than half the job losses have been in the last three months.

“The economy is slipping deeper into a recessionary sinkhole that is getting broader,” said Stuart G. Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “The layoffs are getting larger, and coming faster. We’re likely to see at least another six months of more jobs reports like this.”

The unemployment rate, however, does not provide a full picture of how bad things have gotten.

The so-called underemployment rate — which includes people working part-time for lack of full-time positions and those who have given up looking for work — rose to 11.8 percent, up from 8.4 percent a year earlier.

“What you see now is this cascading of unemployment moving from hours cut to hiring freezes to layoffs,” said Jared Bernstein, senior economist at the labor-oriented Economic Policy Institute in Washington. “At this point, we have a very toxic combination of all of the above. There’s almost no economic activity out there that’s going to generate jobs right now. This is the front edge of the deeper trough of the recession. It’s going to get worse before it gets better.”

And it’s not like people are finding work quickly.

More than 22 percent of all unemployed people have been out of work for six months or longer — another level not reached in a quarter-century.Only 32 percent of all unemployed people were drawing state benefit checks in October because of restrictions on eligibility for part-time workers and those who were not in their jobs long enough to qualify. More than half of all unemployed people drew benefits in the 1950s, and about 45 percent received state checks during the last recession in 2001.

“It’s a national shame, the state of our safety net,” said Andrew Stettner, deputy director of the National Employment Law Project in New York. “We need to be helping these families avert financial disaster, and help make up for the loss of consumer demand, and the best way we can do that is to get people unemployment checks.”

Then there is the other side of the ledger. Even as workers see their incomes stagnate or shrink, they are also being forced to spend more on necessities. Time reported that the year-to-year change in “weekly wages for rank-and-file workers — those not in supervisory or managerial positions — grew 2.9 percent from October 2007,” while a Times story from mid-October pegged the year-to-year increase in consumer prices at 4.9 percent — a figure that could have been higher had fuel prices not dropped sharply in recent months.

To put that in real terms, one just needs to consider the “The Real Cost of Living in 2008: The Self-Sufficiency Standard for New Jersey,” a report issued by the The Legal Services of New Jersey Poverty Research Institute. The standard attempts to quantify what it takes to live in different counties and cities in the state, accounting for housing and child-care costs, taxes and tax credits, transportation, food, health care and some miscellaneous expenses. The cost to live, according to the report, was $1,283 per week in Middlesex County and $1,332 in Mercer County — which works out to $66,713 in spending for the year in Middlesex and $69,241 in Mercer.

Let’s assume, for a minute, that we have a South Brunswick family earning $78,000 a year, or $1,500 a week, while spending at the level identified by the report. That would leave $217 in the bank at the end of the week. If the family saw its wages increase by 2.9 percent and its costs by 4.9 percent, the same family would be left with $197 — and that assumes a rather ascetic lifestyle.

The reality is far worse for most families, with companies instituting wage freezes and worse.

These numbers make it imperative that we put in place policies that aid workers and those who now find themselves out of work and people facing foreclosure.

President-elect Barack Obama seems to understand as much, having made his commitment to a new economic stimulus package clear to President George W. Bush on Monday:

President-elect Barack Obama yesterday urged President Bush to support immediate aid for struggling automakers and back a new stimulus package, even as congressional Democrats began drafting legislation to give the Detroit automakers quick access to $25 billion by adding them to the Treasury Department‘s $700 billion economic rescue program.

Bush, speaking privately to Obama during their first Oval Office meeting, repeated his administration’s stand that he might support quick action on those bills if Democratic leaders drop their opposition to a Colombia trade agreement that Bush supports, according to people familiar with the discussions.

The discussions raised the stakes for a lame-duck session of Congress that could begin next week and came as fears about General Motors‘ financial condition yesterday pushed the company’s stock price to its lowest level in about 60 years. Obama said last week that passage of the economic stimulus package and help for American car companies are his top priorities. The Bush administration has steadfastly pushed for trade deals before he leaves office.

Rahm Emanuel, Obama’s new chief of staff, told ABC’s “This Week” that the new president plans an aggressive agenda on the economy. Obama, he said, “plans to push ahead with a middle-class tax cut” early in his administration. He also plans to “expand health-care coverage, revamp energy policy and make education more affordable.”

“The middle class must be the focus of the economic strategy,” Emanuel said.

The Financial Times, the European financial daily, reported that Emanuel “brushed aside concerns that an Obama administration would risk taking on too much when it takes office in January.”

He said Mr Obama saw the financial meltdown as an historic opportunity to deliver the large-scale investments that Democrats had promised for years.

Tackling the meltdown would not entail delays in plans for far-reaching energy, healthcare and education reforms when all three were also in crisis, he said. “These are crises you can no longer afford to postpone [addressing].”

Mr Emanuel, Mr Obama’s first appointment after his emphatic victory over John McCain last week, added that Mr Obama would push hard during the 11-week transition before he is inaugurated for early assistance to the collapsing US car industry, which he described as “an essential part of our economy.”

Obama, himself, “emphasised the urgency both of passing a fiscal stimulus package, which could include a middle-class tax cut, and of moving swiftly ahead on long-term public investments,” FT said.

“We can’t afford to wait on moving forward on the key priorities that I identified during the campaign, including clean energy, healthcare, education and tax relief for middle-class families,” said Mr Obama. “We also need a rescue plan for the middle class that invests in immediate efforts to create jobs and provides relief to families watching their paychecks shrink and their life savings disappear.”

Given President Bush’s likely opposition to bold, progressive action, we may have no choice to wait. After all, it remains Bush’s show for another 70 days.

Paul Krugman makes the case for a new progressive era — and should be on teh short list for treasury secretary. The guy’s got a Nobel Prize in economics, you know.

Anyway, here are the basics of his argument:

Right now, many commentators are urging Mr. Obama to think small. Some make the case on political grounds: America, they say, is still a conservative country, and voters will punish Democrats if they move to the left. Others say that the financial and economic crisis leaves no room for action on, say, health care reform.

Let’s hope that Mr. Obama has the good sense to ignore this advice.

About the political argument: Anyone who doubts that we’ve had a major political realignment should look at what’s happened to Congress. After the 2004 election, there were many declarations that we’d entered a long-term, perhaps permanent era of Republican dominance. Since then, Democrats have won back-to-back victories, picking up at least 12 Senate seats and more than 50 House seats. They now have bigger majorities in both houses than the G.O.P. ever achieved in its 12-year reign.

Bear in mind, also, that this year’s presidential election was a clear referendum on political philosophies — and the progressive philosophy won.

That’s something Obama and his minions need to remember.

Mr. Obama ran on a platform of guaranteed health care and tax breaks for the middle class, paid for with higher taxes on the affluent. John McCain denounced his opponent as a socialist and a “redistributor,” but America voted for him anyway. That’s a real mandate.

As for backtracking in the face of deficits, Krugman reminds us that “standard textbook economics says that it’s O.K., in fact appropriate, to run temporary deficits in the face of a depressed economy.” Responding to the crisis offers “a chance to advance the progressive agenda,” a chance to remind America that “conservative ideology, the belief that greed is always good, helped create this crisis” and “”good morals are good economics.”

Helping the neediest in a time of crisis, through expanded health and unemployment benefits, is the morally right thing to do; it’s also a far more effective form of economic stimulus than cutting the capital gains tax. Providing aid to beleaguered state and local governments, so that they can sustain essential public services, is important for those who depend on those services; it’s also a way to avoid job losses and limit the depth of the economy’s slump.

So a serious progressive agenda — call it a new New Deal — isn’t just economically possible, it’s exactly what the economy needs.

The bottom line, then, is that Barack Obama shouldn’t listen to the people trying to scare him into being a do-nothing president. He has the political mandate; he has good economics on his side. You might say that the only thing he has to fear is fear itself.