Economic growth, in theory, can solve the two most niggling problems facing the country – unemployment and a soft housing market. Growth can lead to more demand, forcing businesses to hire to keep up the supply. Paradoxically, this would lower corporate profits from 2010, where they hoarded cash. Spending that cash would increase overall growth. Similarly, growth would be the biggest cure for the housing sector. It would create more single-domicile families, prevent more foreclosures and defaults, tighten supply and increase demand for housing. While supply is very large right now, after it gets absorbed you would even see new construction and housing starts, which feeds back on job creation. Growth, then, in this reading, is the key indicator. And everyone is predicting economic growth in 2011.
That would hold as long as we were talking about spectacular growth, and as long as the economy was not coming out of a Depression-like state. But as Paul Krugman explains, the kind of growth needed – and the current state of the economy – are not in that place right now.
First of all, we have to grow around 2.5 percent a year just to keep up with rising productivity and population, and hence keep unemployment from rising. That’s why the past year and a half was technically a recovery but felt like a recession: G.D.P. was growing, but not fast enough to bring unemployment down.
Growth at a rate above 2.5 percent will bring unemployment down over time. But the gains aren’t one for one: for a variety of reasons, it has historically taken about two extra points of growth over the course of a year to shave one point off the unemployment rate.
Now do the math. Suppose that the U.S. economy were to grow at 4 percent a year, starting now and continuing for the next several years. Most people would regard this as excellent performance, even as an economic boom; it’s certainly higher than almost all the forecasts I’ve seen.
Yet the math says that even with that kind of growth the unemployment rate would be close to 9 percent at the end of this year, and still above 8 percent at the end of 2012. We wouldn’t get to anything resembling full employment until late in Sarah Palin’s first presidential term.
It’s really just a simple math equation. But the stories behind that math will break your heart. You’re talking about millions of families suffering. They’re not likely to get much of a lifeline from any government programs, particularly if they’re long-term unemployed; as Krugman says, the best-case scenario for fiscal policy is that it doesn’t actively harm anybody. And a return to the growth which can speed hiring will only make the market for jobs for the unemployed more competitive, as people return to their job searches.
Not to mention that there’s the matter of criminal fraud in the housing markets, which will become ever more apparent as the year goes on.
2011 could represent a return to long-term growth; it won’t represent anything like a return to normalcy.




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the USA economy can not continue to be centered around the building of homes
eventually the USA has to start making stuff like following
televisions
cameras
washing machines
furniture
computers
cars
etc.
the USA labor force has not been educated to build space ships yet, so we need to get back to the basics
the current USA economy struture will keep the USA moving toward a THIRD WORLD NATION, a lot of the USA is already THIRD WORLD.
the home building economy develop because, the chinese could not make homes in china and ship them to USA to be sold. “YET”
I hate to post and run, but I received a note from Paypal, said my donation for the fdl author’s deal was still sitting unclaimed. If anyone else had this problem, let fdl know. I emailed Jane but haven’t heard back.
Hate to see them not get paid.
and the republicans, now that they have sole title to one Barack Obama’s political hiney, are NOT going to let him do anything that will get him off the hook with the voters.
He is a political footnote.
Hoover is too well known…maybe Harding, or Harrison? One of those guys whose names are almost impossible to recall, along with any of their accomplisments.
Which brings us to this: if we try to fool the voters with him again, they will punish us severely, for being such idiots. And we’ll deserve it.
As I discuss in this diary, I think a lot of the jobs coming down the road in 2011 are going to be part time minimum wage retail jobs.
Obama first needs to decide what his economic plan is and then get in front of a camera and tell everyone. Then he needs to set Congress on a path to get it done.
Since this has not happened in two years time, let’s not forget all the fighting between Sumner and Geither with the WH, it is not likely to take place now. Unless, Obama grows a gigantic set and becomes a leader.
Let’s bust this myth that the corporations could unleash the hiring potential of all of their hoarded cash and create millions of jobs! Even if the economy was raging and employment was returning, we would not be back to levels of employment that we had before the Crash until 2021.
For the government to sit on its hands and not to create jobs for the unemployed is a crime against the jobless and their families.
But the United States has a demand constrained economy. First, effective demand in the United States would need to appear before industry invested in job creating enterprises. Second, the federal government would need to discipline American capital such that it doesn’t just chose to import goods to satisfy this demand.
Where would this effective demand originate? In government spending, of course.
You’re right, it is a crime.
And I know you know this, but I want to repeat it for other. The reason corporations and big business have been sitting on all of that cash is because demand hasn’t picked up sufficiently to FORCE them to hire more people.
This isn’t rocket science. NO company is going to just out of the blue hire workers, even if you shower them with cash. WTF? Would you? If you were running a business and you were meeting demand just fine you mean you intentionally create more expense (by hiring new people) just because the government asked you to or gave you tax breaks??? If you did, you wouldn’t be in business long.
This is the great FAILURE of supply side economics. It doesn’t work because economies are driven by DEMAND, not supply.
The folks that have been selling that bullshit for the last three decades are criminals too IMO. They have committed FRAUD.
Assholes.
I like your sentiment but the wages paid in Asia are a good deal less than here. So who is going to hire Americans to build things here?
I don’t think things are going to get much better until we start seeing soup lines on the evening news.
And will all the 99ers, it might now be too long.
Though, they might spring up and be ignored by MSM.
this depends on what you mean by growth, if obama grew public sector jobs so people could go to work, that would obviously solve both problems, it would pull the nation out of unemployment and solve the economic/housing problems all in one fell swoop
but he is a priviteer, he doesn’t want public sector jobs so that’s out of the question
still, it is the solution whether he wants to broach it is another matter
I agree the gov needs to do something, but is all that corporate cash in the US or overseas? If overseas, they likely would have to pay taxes on it.US companies only pay taxes on US earnings until they bring the profits (cash) back home. Some companies want a special incentive to bring it home. Do you want to give it to them? The bill passed at year end is intended to encourage companies to invest in capital here in the US. That may also encourage them to repatriate cash, though I doubt it.
I would bet my last dollar that had Obama and the Democrats DOUBLED the original stimulus, and made it ALL direct spending, with at least HALF in direct government jobs (infrastructure, infrastructure, infrastructure) AND passed a REAL health care reform bill, not only would the Republicans not be in the majority in the House and on the verge of recapturing the Senate and Presidency, I believe they would’ve been relegated a regional party unable to compete nationally, the Democratic gains would’ve been so huge.
Local news stations cover some of it. They did a good job at Christmas time with the shelters and how they were all over filled and needed help with space and food.
It’s the MSM, cable stations that have been ignoring it.
Yeah, and that is a very sad commentary.
I agree except for one item, he wouldn’t have had to double it, the amount he gave to the banksters and criminals that caused the problem was probably enough to solve the problem, IF he followed the template you just mentioned, and this is not hindsight, it was pointed out to him before he made his rediculous economic policy
Might as well continue to the Reagan part of the story since he was the leader for the private enterprise=good, government=bad, ideology. I recall how he hurt air traffic controllers and all future government employees by firing them when they were striking. 1980. 1990. 2000. 2010. How long, Lord?
“Then he needs to set congress on a path to get it done.”
I giggle. Did you go for a vacation on Uranus on last Nov. 1st, and have only now returned?
I mean, when he had those big majorities in congress, the republicans were setting Obama on the path THEY wanted. Now that those are gone, the idea that he’s going to detemine ANY path, is laughable.
No. I’m just pointing out what he should have done and the mistake he made by not doing it.
Oh, 0kay.
I was gonna point out that his new path (actually, not that new…) is that’s he’s caving on more drilling with reduced regulation, for the oil companies:
http://apnews.myway.com//article/20110103/D9KH5NQG0.html
The thing I have a hard time getting my head wrapped around is how fast we lost all those jobs. It seemed like they were gone overnight. But I think we were proly losing them over a longer period than I remembered.
He had already said he would let the drilling go ahead in a limited way.
I know everyone is very concerned and is trying to think of ways to get our economy going again. As long as there is a market here for their goods the corporations will ignore us and continue to use cheap labor in foreign countries. We have to stop purchasing their crap until they pay attention and want the US market again.
But if they make products here it will cost more and they will sell less and have lower profit?
I’m sure right now Obama is giving everyone a sign of the next year’s economic policies as we speak:
http://www.hu
ffingtonpost.com/2011/01/03/william-daley-obama-chief-of-staff_n_803895.html#comments
Would have put the link in properly but it doesn’t want to do it. Glitch? Anyways, here’s his new ideas!!
I don’t know…doesn’t want to put the link in properly
Agree. The problem is with demand, not supply. We’ve been saying this ad nauseum at FDL for ages, but bulk of the populace is completely ignorant about this, including those who are truly “small business” owners (several of my family members fall into this category). Traditional business has all but dried up in the USA with some minor exceptions. Everyone’s out there scrounging around after crumbs and bones.
Nothing will change as long as the elites maintain control of our govt. As we’ve witnessed, nothing is ever “enough” for the elites. They want it all; they want it now; and they don’t give a sh*t about anyone but themselves.
Possibly if there is widespread highlighting of bread lines & soup kitchens, *something* might change… maybe. Right now, though, we still see conservatives in criminal miserliness blasting the unemployed as lazy, shiftless creeps out to rip off the system whilst lolling about and “enjoying” themselves.
And so: on it goes….
Nah. IF they pay living wages, true living wages, then their profits will rise as they have in years past. I don’t believe that line of thought and the reason I don’t is because I’ve researched enough corporation history and Value Lines in the past 15 years.
Their so called giant tax burden is a lie too.
William Daley Reportedly Being Considered By Obama To Be New Chief Of Staff
President Barack Obama is considering naming William Daley, a JPMorgan Chase & Co. executive and former U.S. Commerce secretary, to a high-level White House post, possibly as his chief of staff,
If you purchase all your goods from small local farmers, shop owners, and anyone that is not a giant corporation they lose market share.
They want your business, they just don’t want to employ you, nor pay taxes in your country to support the communities.
When corporations have become too greedy the only way to get their attention is to put a hold on their market.
There’s been gradual attrition for over a decade, at least. We saw a lot of jobs disappearing after the dot.com bust in the late 1990s; that’s when the companies stopped pressuring Congress for H1(B) visas based on the falsehood that they (i.e., Microsoft, Oracle, etc) simply couldn’t find properly trained workers (i.e., software engineers, IT types, etc) in the USA. When Congress actually did the right thing and stopped or slowed down the visa programs, then the companies (those who think Bill Gates is such a “great savior” because of his present philanthropy should reconsider that) just set up shop in India and elsewhere.
A LOT of our economy in the latter years prior to the 2008 crash was propped up by the construction industry… and what a falsehood that was.
In the meantime, tons of smaller manufacturing jobs have been leaving this nation in droves, including over the past few years.
But you might also recall the Mexican Maquilladoras of the late 1980s and early 1990s. some work still goes to Mexico, albeit these days with the drug wars going on there, a lot of the manufacturing there has de-camped for more “stable” third world countries.
It’s been a long, slow trickle that picked up speed after 2008.
Giant tax buden is untrue mostly b/c they leave the profit overseas, say in Ireland and pay 12% instead of 35% here. The fact of lower wages overseas is hard to escape though. Companies will do whatever maximizes their profits. That usually means making it with a lower wage bill, and sometimes lower taxes. I do think our corporate tax policy needs to be looked at to eliminate loopholes.
Figures. Probably won’t even need Rahm to give him various expletives to hurl at us DFH’s. This guy’s probably got enough of those already on his own.
I am trying to get a database of American companies still making/manufacturing in the US. I am also trying to promote local farmers, artist, craftsman, etc. We have some of the most skilled and knowledgeable furniture makers in the world. They have been displaced by big industry looking for foreign labor.
Nice synopsis. But I am still surprised at what happened in 08 and 09.
I think it took a great many of people by surprise. At that time, people thought when they got the pink slip they would be able to find another job. And some of them did so the crisis was not as evident.
Even before they went overseas, their profits were still there. They just had to meet some wall street analyst desire for bigger profits each year. I don’t mean bigger in the way of 100,000′s of dollars, I mean by the millions. You see, they play this game with which company is good to invest in now and put out feeds on it for investors. Most of it is false and that also leads unscrupulous CEO’s to falsify their accounting and yearly perspectus.
I should have added the “Buy, Sell, Hold” coming from the analysts. Or the anal yists. ;-)
Yup, but I will quibble. H-1Bs are “more expensive” than outsourced labor, so all these bastards were outsourcing anyway. In fact, the H-1Bs were used as conduits for outsourcing.
The solution to the unemployment problem is simple: Trade War! (really managed trade, but that would cause a trade war.) Lets see, $40.18 billion trade deficit in Dec. which has been going on forever. When you are bleeding money year after year after, accounting wise, it makes more sense as a nation not to trade at all!
To end the mass corruption, fraud and greed that has overtaken our country and to put America on sound footing in the 21st century, President Obama needs a vision –
1. Enact Fair Elections Now Act ($100.00 maximum donation, matching funds for federal office candidates – strictly voluntary to comply with present laws)
2. The public owns the airwaves. FCC mandate that all political advertising is a public service and therefore free
3. Permanently ban anyone who has served in the federal government from becoming a lobbyist
4. Break up the big banks
5. End ALL wars and lower the bloated defense budget
6. Enact The Bipartisan Tax Fairness and Simplification Act of 2010 – (Eliminate $1 trillion in tax givaways. Change the top tax bracket to 70% to help pay down deficit)
7. Reduce health care costs by adding the public option. Allow Medicare to purchase drugs. Allow drug re-importation. Move away from fee-for-service
8. Climate Change Legislation – put a heavy price on carbon to encourage alternative energy investments
9. National Infrastructure Bank – Run by engineers, not politicians. Find $2 trillion over 10 years to create jobs now and increase productivity later. Put millions back to work. Fund with a millionaire’s tax
10. Federal government make massive investments in R & D to create quality jobs long term in areas like biotechnology, alternative energy, IT, materials, science, alternative-fuel automobiles, and clean technology
11. Enact entitlement reform by seriously means testing Social Security, Medicare and adjusting retirement age.
12. Raise educational standards through a national core curriculum. Advocate the firing of the the bottom 10% of teachers nationwide and replace them with good teachers. Make higher education free to families that can’t afford it to encourage upward mobility in society
And just how does that work..Governments do not create jobs.
And, just how do we pay for these government jobs??
And watch us default and turn into Greece in less than 2 years..In your dreams. These are the 12 worse ideas I have ever read.
You keep spamming that comment.
11 and 12 are completely ill-thought from the get-go, and the opening statement that “Obama needs a vision,” while true, escapes the factual bases of establishing any of the enumerated ideas.
Job creation is not the solution. The solution is to reduce hours of work to 32 or even 24 hours. Unemployment would disappear the moment this measure took effect.
Nah, they’d just ship even more jobs overseas. The design of our entire system is what’s killing us.
There’s really very little hope so long as we permit unregulated global monopolies and cartel’s to run amuck.
are you crazy? this is genius!
If you don’t have a home, where are you going to put your:
televisions
cameras
washing machines
furniture
computers
cars
etc.
?
Put it in the backpack on the end of your stick?
Then who are all those teachers, police officers, fire fighters, government office and maintenance workers and military personnel working for?
Ever heard of the Manhattan Project or the space program? Were those guys all volunteers?
What makes your comment spectacularly ignorant and uniformed (note to Mods – I’m specifically applying the adjectives to the comment) is that corporations are sitting on hoards of cash that they are not using to create jobs which puts the lie to your implication that the private sector can be entrusted with maintaining the employment levels our society requires.
The same way we pay for the wars in Afghanistan and Iraq, all the corporate welfare we dispense to Wall St, the banking industry and military contractors. Government spending creates economic activity. In the case of direct government employment, the workers pay taxes and use their income to purchase goods and services in the private sector. Furthermore, government spending to support public infrastructure can (if spent properly) be a critical stimulator of private sector economic activity – think the interstate highways, the internet, etc.
Economics can be different in different countries – Greece does not have its own currency – it is effectively a state.
The US has its own currency and owes no one in some other currency – so indeed it can just create gov jobs via money creation – as long as we are not near full employment there is no danger of inflation – the famous money equations are fake with “velocity of money” the fudge factor – supply and demand re money does not kick in to result in inflation until you get to full employment.
Indeed “debt crisis” cutbacks in gov spending is the one way to condemn the US to a 10 year recession.
Bailing out GM not only saved executive and worker jobs in Detroit, but also saved over a thousand dealerships around the nation (as well as overseas sites selling GM models).
What is interesting, though, is that a survey of the dealerships showed that over 95 percent of the dealership owners voted for, or donated to, Republicans.
So, to put it simply, when Republicans in Washington opposed the Democratic Party helping out Detroit, which would have caused a chain reaction of bankruptcies throughout our society with tens of thousands (hundreds of thousands? millions?) of American workers being adversely affected as tens of thousands (hundreds of thousands?) of businesses were hit hard, with some going under, the Republicans were actually attacking dealership owners who more often than not voted for, or donated money to, Republican political campaigns.
This is how crazy the current crop of Republicans have become.
And after our government helped keep GM afloat with a government loan, GM either has paid most of it back or is on track to pay it all back. Meaning that President Obama and the Democratic Party saved a whole lot American businesses, stopping the unemployment rolls from getting even larger, while getting the government’s temporary loan paid back in full.
And the Republicans hate this. Our government actually did something right for a huge segment of our society, Republicans and Democrats alike. The Republicans are beyond absurd.
And there is a strong likelihood that what Republicans almost caused to happen in 2008 (another Great Depression) will occur this year, if the House Republicans have their way, because everything I’ve heard from them, so far, is the exact same crap that almost pushed us over the edge of the economic cliff in 2008.
But then, there is always war to generate full employment in America. Hey, World War II ended the Great Depression, didn’t it? This is what Republicans are saying, so it must be true, right?
Yes, World War II did make it possible to end the suffering of so many American families (while adding grieving to the mix for all U.S. soldiers killed in World War II), but World War II was funded through a huge increase in deficit spending.
Republicans also conveniently forget that FDR’s stimulus programs between 1933 and 1937 did work. The Great Depression was the ultimate in spending austerity (poverty always is, especially when so many during the Great Depression were out of work) until FDR became president and started spending our government’s money to put people back to work, to put money in their pocket, which more often than not was spent at private sector businesses, buying American products, creating demand, creating more private sector jobs, and high unemployment levels dropped dramatically between 1933 and 1937, during FDR’s first term in office as president.
Then FDR, after listening to conservative economic advisers, cut back government spending, austerity, austerity, austerity, balance the budget, no more deficit spending by our government. Unemployment levels in America shot-up again between 1937 and 1941, and then World War II began, with the war generating jobs, jobs, jobs…financed through deficit spending. After the war ended, the innovations required to fight and win the war stimulated our manufacturing base, and with other measures taken (GI Bill, Rural Electrification Act, for instance), meant that businesses bloomed and jobs were generated, leading to the U.S. finally out of the worst of the Great Depression and the war that followed.
So, are the Republicans really advocating for another war (like World War II) to break out, taking 1933-1937 federal stimulus spending off the table, both of which required deficit spending, but with the 1933-1937 government spending being far, far lower than what World War II cost (both in money and lives)?
Scarecrow is upstairs!
Late Night: GOP House Looking for an Agenda? How About This?
The United States might achieve the kind of growth needed if it actually was to do something to create that kind of growth.
The Country did it’s best when faced with doing something. Something like building the west, building a cross country rail road, winning WWII, building the interstate system, going to the moon, all of which took industry and business to buck up and make it happen. All of which not only created jobs, but created business, and made many rich at the same time.
Today the country is not being asked, or has the drive to do anything, or the will to want to do anything.
We can’t fix our problems no matter what kind they are, and seem to be able to dismiss even the biggest and most costly.
While we keep telling ourselves we are the best country in the world, and bragging mainly to ourselves the world is going to overtake us.
Our Government only knows how to spend and give away money, but has no idea what to ask for the country to get behind anything. Even the wars we weren’t ask to pay for or get behind.
Great ideas need great people to come up with them, and this country lacks these people in places to make anything happen. Business only looks at things that make a buck. Government and our politicians only look to fill their pockets. Acadamia has grand visions looking for the fantasic, but has done very little to solve any of todays needs and problems.
So that single guy, or group of people, or the populus needed to make great things happen aren’t evidently in America, but they to must have been outsourced.
In the twentieth century over 2500 automobile manufacturers, Auburn, Cord, Duesenberg, Kaiser, Hudson, Studebaker, etc. went out of business. There were no government loans or nationalization programs to save them. Yet Americans still were able to drive wherever they wished. No airliners carry the colors of Pan-Am, Western, Republic, Wien and others any longer. Even so, Americans are able to fly from one end of the country to the other and around the world. It’s called creative destruction and it’s normal. There are no longer any buggy whip factories, although there’s probably someone occupying a Washington, D.C. office with the title of National Buggywhip Inspector-General. The point is, we live in a dynamic society that, unlike its static feudal predecessor, changes rapidly. Progressives seem to wish for a return to some halcyon past, the post WWII era is frequently mentioned, rather than adapt to the inevitable changes of the immediate future. Even the huge government of the US cannot arrest, much less stop, these changes. And attempting to do so is a folly memorialized by a succession of failed empires extending from the Sumerians to the British. Better quit griping and get your act together.
Nah, there’s nothing “creative” about the destruction we have witnessed.
Most of it just amounts to the formation of monopolies and cartels via leveraged buyouts. And as soon as they are formed, all creativity dies because there is a lack of competition.
Government is required to break up or regulate these industries. Otherwise we’ll be left with a pawn shop economy.
These jobs are paid for by the working public..so, there is a negative effect to gross national product..MOST of Govt. jobs should be outsourced to the private sector. Thus increasing gross domestic product and da da da da..the greatest advantage here is getting rid of the public employees unions..
DITTO