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Jun 13 2011

Sunday Train: Fighting Economic Sabotage

(10 AM – promoted by TheMomCat)

Burning the Midnight Oil for Living Energy Independence

There was shocking news early this June about May economic performance: GDP growth in May was about the same as the average for the first quarter of 2011, and so employment growth was virtually stagnant, and indeed fell behind growth of the labor force.

What was shocking, of course, was that this was news to anybody. For anyone with the basics on how the economy works, it was obvious that economic growth would be sluggish.

Of course, the Republicans in Congress and the White House, both for their own reasons, completely missed the boat ~ the White House arguing if we ease off the accelerate and tap the brakes, but do it intelligently, that will eventually speed up the economy, and the Republicans insisting that, no, we have to slam on the brakes to fix things.

With such a broken political discussion, what can be done?

What Can’t Be Done

The Republicans, who were a substantial source of the sluggishness, argued that if we slam on the brakes, that will speed things up. But, no, slamming on the brakes will not accelerate the economy.

The White House, whose economic team are composed of people clever enough to have trained themselves to ignore the basics, tried to point to the one decent month this year to distract from the other four sluggish ones. Maybe they distracted some of the Village Idiots who run the mess media, but most of them are not clever enough to fall for the same nonsense that the administration economic team is clever enough to fall for …

… oh, no, most of the Village Idiots have instead fallen for the idea that slamming on the brakes will fix everything.

What is actually going on?

The story here is easy. Just look at the quarterly percentage growth rates of GDP and of contribution to that of the growth drivers in the GDP accounts:

  • Durable consumption
  • Non-residential fixed investment
  • Residential Investment
  • Exports
  • Federal Government Spending
  • State and Local Government Spending

These are available, in these terms, in automatic tables, at the Department of Commerce Bureau of Economic Analysis website. All that is required is to ignore the numbers that are mostly driven by GDP, to focus on the growth drivers. Total GDP growth will some small multiple of the sum of these growth drivers (it used to be a bigger multiple, when we made more of our own stuff and when took more of our taxes from things like capital gains tax rather than from consumption taxes):

Entry   2010Q1 2010Q2 2010Q3 2010Q4 2011Q1
Durable Cons.   0.62% 0.49% 0.54% 1.45% 0.66%
Non-Res. Inv.   0.71% 1.51% 0.93% 0.73% 0.33%
Residential Inv   (-0.32%) 0.55% (-0.75%) 0.07% (-0.07%)
Exports 1.30% 1.08% 0.82% 1.06% 1.16%
Fed. Gvt. 0.15% 0.72% 0.71% (-0.34%) (-1.07%)
S&L Gvt   (-0.48%) 0.08% 0.09% (-0.31%) (-0.39%)
Drivers 1.99% 4.43% 2.33% 2.97% 1.01%
GDP   3.7% 1.7% 2.6% 3.1% 1.8%

The White House spin that the weak GDP performance in the first three months of 2011 was some kind of speed bump on the road in an accelerating recovery is silly. Indeed, except for the inertia from growth drivers in the middle of 2010, it would have been worse than it was.

And the Republican clamor for spending cuts in the face of the damage that government spending cuts have already done so far in the past half a year amounts to Economic Sabotage. The only point at issue is whether its deliberate economic sabotage in hopes of getting a weak Republican Presidential candidate elected in 2012, or collateral damage of electing people willing to be ignorant about how the economy works in return for campaign contributions from wealthy corporations and individuals.

Our Economic Prognosis

With an administration economic team dominated by the indoctrinated clever idiocy of the likes of Geithner, unable to look up from their discredited models of economic reality to directly look at the simplest of economic realities available from their own Department of Commerce website, the White House will continue to pull for trying to speed up the economy by easing off the accelerator and ‘intelligently’ tapping on the brakes.

And the Republicans will of course continue to call for slamming on the brakes.

And what comes next is predictable. Residential fixed investment will continue to be mired in the aftermath of the Panic of 2008 and the 1980-2008 Geithneresque stupidity that permitted it to occur. Non-residential fixed investment will slow down as projects postponed for the recession are finished and many industries have little need for new capacity. The Stimulus II spending will continue to ebb with no Stimulus III spending to take its place. Sabotage of our unemployment benefits system and other balance wheel systems will continue. Rather than use increasing state revenues to restore state services, tea-party dominated states will hand out tax cuts to create further fiscal crises requiring spending cutbacks. And Federal spending will “intelligently” drop. The sluggish GDP growth and slack labor markets will then, sooner or later, cause a slowdown in growth in durable goods spending.

Without something unexpected like the US$ dropping to €0.33 and generating a big export boom, its hard to see how we get out of the doldrums.

Of course, this is stagnation by choice: if we could find a way to increase Government spending rather than letting it drop, we could have growth in the 2.5% to 3.5% range, and that would sustain ongoing durable goods consumption and would help keep non-residential investment ticking over, and we could kind of muddle through. We’d rather have some 4% to 5% growth for a few quarters to really bite into unemployment, but 2.5% to 3.5% would be better than the labor market stagnation we get at 1.5% to 2%, and far better than a double dip recession.

So, what CAN be done?

At this point, I am glad that I am looking at this from a citizen perspective rather than from a passive audience perspective.

From a passive audience perspective, this looks like a recipe for repeating what happened here in Ohio, except on a national scale. Billions in corporate funding go in to the Presidential race that ignores whatever weak Republican candidate is in the field and whatever nonsense they are peddling, and simply hammers the President for falling so far short of the jobs promises made in 2008. Its on every cable channel, on all the radio stations, repeated in letters to the editor and in the editorials pretending to be news stories written by the Village Idiots. And in a close fought contest that is a referendum on whether people like how things are going, a shockingly bad Republican nominee is President, and the looting on behalf of the corporations begins in earnest.

From a citizen perspective, however, rather than worrying about what is likely to happen, the focus is on what can shift the odds. Whether that is shifting the odds from no hope to a slender hope, or from a strong position to a lead pipe cinch is nowhere is not something to get hung up on when there is work to be done and a good fight to be fought.

In the past century, we’ve seen two Presidents elected with unemployment rates as bad or worse than they are going to be by November, 2012: FDR and Reagan. FDR did it by fighting for what he saw as improvement, winning some, losing some, and making the election a choice between making progress and going back to the failed policies of his predecessor.

And, waddya know, so did Reagan, even if what he saw as improvement was often be the opposite of what I would be hoping to see.

And in both cases while unemployment levels were bad, unemployment rates were heading in the right direction.

So those are the two pieces: some improvement and some clear fight with the opposition on the wrong side of the issue in the view of the public.

Of course, the Senate keeps putting out broad hoped-fors, then negotiating down to maybe can gets. We’ve got to start aiming at targeted wedge maybe can gets first, and then follow up with demands for more than the Republicans can give us, which will be the Republicans fault for why we can’t have nice things.

The White House came out this week with the idea of tax holiday on the employee side of payroll taxes. Across the board, this is mostly just handing SSI trust fund revenue to company profits, but as a new hiring bonus, encouraging new hires rather than overworking existing staff, it might do some modest good:

  • Start out with a targeted, maybe useful, version ~ a two year payroll tax holiday on net new employment by small business, 1% holiday based for each 1% unemployment is above 5%, scaling down one cent in the dollar for each 1% over the small business threshold.
  • And then “tax bads instead of goods” ~ propose a far heftier oil profit windfall tax than the Generous to Oil Party can possibly go far, with proceeds going directly to payroll tax rebates, equally divided between employer and employee.

We need new spending from the Transportation Bill, but there’s no realistic hope of getting a “good’ Transport Bill out of this House. So:

  • Just tackle the gas tax revenues, with all of the Highway Fund tax proceeds going to bringing funded highways in a state up to good repair, or on improvements that reduce existing road maintenance costs, before any can be spent on new roadworks can be funded;
  • And all of the Transit Fund tax proceeds going to per capita accounts by municipality, county, or reservation, with freedom to borrow up to ten years ahead on qualifying projects that reduce dependence on crude oil
  • And the general transportation bill with competitive grant funding, high speed rail, Steel Interstates and etcetera funded by cutting oil company subsidies and a financial transactions tax in the “this is what the Republicans won’t let you have” bill

And its not just at the Federal level that the fight must be fought. One major counter to the “referendum on Obama” in a number of states is the “referendum on Tea Party Governors”. But to work best, those of you living in the states that are not bogged down fighting aggressive corporate plundering need to be pushing on what your state can do. By putting the right Renewable Energy Portfolio Standard in place, your state can put a Feed-In tariff in place for renewable energy generation. The best opportunity for employment growth in some states may be consumer side feed-in tariffs for selling surpluses in domestic renewable power; the best opportunity for employment growth in others may be utility grade renewable power; and some states may be able to get substantial benefits from both.

But now that the FEC has ruled that the “avoided cost” for a state electricity tariff can include avoided costs as a means of compliance with a Renewable Energy Portfolio standard, a state can determine what Feed-In tariff will generate the best jobs growth and industrial development in its state, then work backwards to what Renewable Energy Portfolio Standard is required to support that Feed-In tariff.

At the same time, its also possible to set up Connie Mae financing of energy saving improvements at the state level, where the financial reduction in operating costs due to energy saving are channeled into helping to finance a more energy efficient version of a home improvement.

And of course, the local accounts allowing leverage on Transit Fund gas tax proceeds are of most use in boosting employment immediately in a state that is aggressive in helping its localities come up with qualifying projects.

All of these are just nibbling around the edges of a Brawny Recovery ~ but with so many states deliberately pursuing strategies of economic decline as a corporate predatory government, every little bit that can be done to boost the performance of states that are not entirely in thrall to the system provides additional support for the basic message:

  • TARA: There Are Real Alternatives

The gal that the other side swears by is Tina ~ There Is No Alternative. We’ve got to make sure sure that Tara has enough visibility to be seen. Cause she may be shy sometimes, and she’s regularly snubbed by the Village Idiots in the mess media, but once people meet her, they seem to find her attractive.

Midnight Oil ~ The Power and the Passion

3 comments

  1. ek hornbeck

    I’m flattered.

  2. BruceMcF

    … what, you expected gone with the wind?

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