Friday, July 26, 2013

Obama in Galesburg: On Jobs, Half Misguided, Half Waiting for Action

On Wednesday, at Knox College in Galesburg Illinois, President Barack Obama gave what is supposed to be the first of six speeches on the economy.  The State of the Union-like performance lasted over an hour, during which he mentioned a wide range of economic issues.  How did he do on the jobs crisis?

Near the beginning, Obama showed exceptionally good understanding of what has happened over the past 65 years, saying that in the postwar decades (the Winning by Default Years), “whether you owned a company, swept its floors, or worked anywhere in between, this country offered you a basic bargain – a sense that your hard work would be rewarded with fair wages and benefits, the chance to buy a home [and] to save for retirement.”  After that (after Work’s New Age started in 1973), “that bargain began to fray.  Technology made some jobs obsolete.  Global competition sent others overseas… The link between higher productivity and people’s wages and salaries was severed.”  He deftly captured what happened around 2000 by saying “Towards the end of those three decades, a housing bubble, credit cards, and a churning financial sector kept the economy artificially juiced up,” and did the same for the time at the end of that decade, by when “the bubble had burst, costing millions of Americans their jobs, their homes, and their savings.”  As good a summary on these years I have never seen from a politician.

Unfortunately, the speech went downhill from there. 

At three points, Obama mentioned exclusive, overriding, or number-one priorities:  reducing inequality, better conditions for the middle class, and “to make this country work for working Americans again.”  Solid words, but his ideas on how he would accomplish those things were lacking.  Once again he overreached on manufacturing, wishing openly for “rebuilding our manufacturing base,” and, though properly wanting to encourage more companies to make things in this country, he seemed to expect that sector to become more broad-based than it realistically can.  He talked for a long time about better education, probably the worst red herring in the jobs crisis as nobody can train or educate Americans to work for the benefit-inclusive $400 to $500 per month Indian call center workers are getting, and made a statement, “In an age when jobs know no borders, companies will also seek out the country that boasts the most talented citizens, and reward them with good pay,” which is therefore demonstrably false.  As is in his previous efforts, Obama seemed to yearn for what might be called old-time prosperity, imagining romantic scenes such as “the joy of etching a child’s height into the door of their brand new home.”

Barack Obama is a politician, and speaks accordingly.  Images such as the last are designed to appeal emotionally, and they often work.  However, the day when almost all Americans should own a house of their own has passed.  We may have services and capabilities, such as Facebook and free or nearly-free long distance calling, that connect us far better than before, but most of us will simply not be able to afford to buy “homes.”  Holding that up as the norm is ultimately destructive, and as I wrote two weeks ago Americans need to reduce, not increase, their expectations.  He also praised himself by saying that in the past 40 months there had been 7.2 million new business jobs, without mentioning that his selected timeframe began after the bottom point of a recession, that government had lost jobs during that time, or that population increase had absorbed about 5 million of them.  Not dishonest, but incomplete, and although Obama may be swayed by his career choice to say such things, we do not need to believe them.

The speech did have its constructive ideas.  His third major jobs solution, after more manufacturing and more education, was a national infrastructure building and repair initiative.  I see such a plan as almost certain to start over the next ten years, as conservatives won’t stand forever for seeing their country fall apart, liberals will see the jobs program as a logical way of helping the unemployed, and business people will know the labor and materials will never be cheaper than they are now.  The effort would not need to be limited to construction-related work, as millions of people are able and willing to take on social service and community service jobs which simply don’t exist now.   He also mentioned the idea of universities finding ways of shortening degree programs, something worthy of serious attention.       

Good ideas or not, though, these speeches will not be enough by themselves.  As Washington Post columnist Dana Milbank put it, this effort was “roughly the 10th time the White House has made such a pivot to refocus on jobs and growth.”  Indeed, just last week Obama was discussing racism.  The speech contained some fine challenges to uncooperative Republicans, but that wasn’t the first time for those either. 

Near the end of the Galesburg effort, Obama said “we have made it through the worst of yesterday’s winds.”  That is not true.  We are four years past the end of the last recession, and there is no reason why we will not have another one, which could be at least as severe.  Yesterday’s Dallas Morning News editorial made three crucial points.  First, we need more new jobs than we have been getting.  Second, Obama needs to “get his hands dirty in the legislative trenches” by working intensely and directly with individual Congressmen, especially Republicans.  Third, speeches in themselves, without strong follow-up action, are not leadership. 

One of Obama’s remaining economic talks will be on jobs.  I am glad to hear that, and am optimistic about what he will say.  But, no matter how effective, eloquent, and technically superb it turns out to be, more than the speech itself must happen.

Friday, July 19, 2013

Farm Subsidies Stink like Fresh Bull-You-Know-What… and Cost Jobs Too

The Republicans have outdone themselves.  Last week those in the House of Representatives took a brief break from railing against big government, and split apart the latest farm bill, which, as usual, contained both the continuation of necessary, hitherto uncontroversial food stamp program with the usual obsolete, totally unjustifiable system of payments and price supports to large corporate farmers.  Was that move, as New York Times columnist Ross Douthat had first speculated, a way of separating two things which each needed legislative attention and were clearly opposite in merit?  No, it was so they could vote for just half of it.  Incredibly, that was not the stamps. 

So what is the problem with farm subsidies?  What do other observers, both left and right, think of them?
Created in the 1930s when farm incomes had then dropped two-thirds in three years, governmental support and tariff programs were meant to help safeguard small farmers.  They continued after World War II for protection from price and weather uncertainty.  From the 1960s through the 1980s, many family farms were consolidated into corporate structures without any reduction in governmental aid.  Those receiving subsidies are authorized by crop, not by size or need—as a farmer or corporation plants more, they increase.  From 1995 to 2004, 80% of commodity subsidies were for corn, cotton, wheat, rice, and soybeans. 

From 1970 to 2007, the American government funded a total of $578 billion in farm subsidies.  As of 2010, government spent $10 billion to $30 billion each year endowing farmers, mostly very large ones, with $5 billion in payments without regard to crop production, $4 billion to purchase crop insurance, and as much as $4 billion for bad-year protection.  Around 2009, farm subsidies cost the average taxpayer $322 annually.
While the payments have continued for 80 years, the nature of farming in the United States has changed greatly.  From 1932, around the time of the first subsidies, to 2002, the number of American farms dropped from 6.7 million to 2.1 million, with mean size climbing from 213 acres in 1950 to 434 in 2000.  Per capita farm income, in 1934 one-third of the American average, was in 2004 26% above it, and at the same time the share of those living on farms fell from 25% to 2%.  As of 2005, America had only 2 million farmers and just 350,000 of them worked at it full time, and the largest 150,000 American farms produced more than half of the country’s total output of food and fiber.

So who is getting the money?  As the Heritage Foundation wrote, most subsidies now go to “large farms, agribusinesses, politicians and celebrity hobby farmers.”  Subsidies, far removed from their origins of protecting poor farmers, have become the country’s chief benefit scheme for corporations, with Manulife Financial, MeadWestvaco, Chevron Texaco, and Caterpillar among those receiving at least $320,000 in 2002.  Between 1995 and 2005, 10% of subsidy recipients received 75% of the payments, averaging $91,000 per year.  In 2002, two companies in Stuttgart, Arkansas, Riceland Foods and Producers Rice Mill, received $110 million and $83.9 million, respectively.  Some people collecting more than $100,000 in farm subsidies from 1995 to 2002 included Representatives Cal Dooley, Doug Ose, and Tom Latham, Senator Mike DeWine, Sen. Charles Grassley, television network owner Ted Turner, and basketball player Scottie Pippen.
A previous farm bill, the Farm Security and Rural Investment Act of 2002, attracted comments such as “shockingly awful” from The Washington Post and “a 10-year, $173.5 billion bucket of slop” from The Wall Street Journal.  The cost of such programs to consumers is considerable; as one example, economist Daniel Sumner estimated that if subsidies and the governmental pricing system were removed, a gallon of milk sold retail in Chicago would be about 20 cents cheaper.  If tariffs alone, which cost American consumers money by stopping them from buying less expensive imported food, were discontinued, Americans would save $2 billion.

When asked if there was a good case to be made for farm subsidies, Daniel Sumner’s response was “no,” claiming their only justification was traditional.  Robert J. Samuelson called agriculture “the economy’s most pampered, protected and subsidized sector,” when asked, in the event of no subsidies, if “Iowa’s cornfields and Kansas’s wheat fields [would] go fallow”, and he said the subsidies hurt national interests by impeding trade negotiations.  Author Daniel Imhoff wrote that subsidies had become “a corporate boondoggle,” and Wall Street Journal correspondents Roger Thurow and Scott Kilman called them “a matter of addiction.”
So here we are.   It is 2013, not 1933.  The total number of full-time American farmers is fewer than the attendance at an Indianapolis 500 auto race.  Farm subsidies benefit the likes of Ted Turner, and others disproportionately in red states, but help hardly any small operators, and hurt obesity by encouraging grains instead of fruit and vegetables.  They cut jobs by taking money that would otherwise be spent on goods and services, and as with other protectionist schemes, they raise prices on many to benefit a few.  In all, farm subsidies are high on the list of government programs that have outlived their justifications and are now simply costly and destructive.  

Costly and destructive government programs – sponsored by Republicans?  That’s right!  It’s time for them to shape up their attitudes, if they want to be taken seriously by those outside their faithful core.  Or by those who truly and honestly, even when it hurts them and their own, oppose big government.

Friday, July 12, 2013

Defining Prosperity Down? Yes, We’d Better Do That

The title of Paul Krugman’s Sunday New York Times column, “Defining Prosperity Down,” got me thinking, but not in the way Krugman probably intended.  It was mistitled – I expected to see the view shared by many other liberal commentators that Americans should be entitled somehow to have the same financial results they did a decade or more ago, but the column did not go that way.  It started with much the same point I made in last week’s post two days before;  Friday’s employment data was mid-range, and though the new jobs number showed progress, it would need to be the same for several years for us to see pre-2009 unemployment  rates.  He then went to his thesis that we need continued monetary stimuli, and although he flubbed by calling current times a “continuing, if low-grade depression,” elsewhere in the column he almost bought into the Work’s New Age principle that the jobs crisis is permanent and will not be solved by better times.

We do, though, have a problem now with prosperity expectations.

During the Winning by Default Years, which ran from 1946 through 1973, we picked up a mindset which warped our views on how affluent we should be.  That age included the great growth of the middle class, and its trappings – the two cars, the suburban house, easy employment for at least the husband, and no real financial threat from either health care or college tuition.  We once thought these gains were permanent, a new American birthright, and when that era ended with the energy crisis, expectations still stayed high. 

Even over the past five years, when the permanent nature of the jobs situation began becoming clear, some commentators have claimed we should still all be middle class, especially those with at least bachelor’s degrees.  On the July 3 episode of PBS’s Democracy Now, a strongly left-leaning radio program focusing on misbehavior by government and corporations, the host and others discussed that view, which they apparently shared.  Some measures they advocated were a healthy rise in the minimum wage, lowering interest rates on existing student loans and forgiving large amounts of them outright, and concocting some way of allowing graduates to choose jobs they liked instead of those most likely to help them pay off debt.  Others, elsewhere, have said Americans should almost be guaranteed owning a house, as the main near-entitlement of this middle-class package.

However, reality makes those things impossible.  Although it may happen anyway, we cannot viably forgive the $1.1 trillion former and current American students owe for their educations.  As a result, with generally weak job prospects and high debt, we need to accept that it will be a long time before most people now in their 20s can afford houses.  Those who have borrowed a lot of money may need to find ways of paying it off, even if that means working in positions less emotionally rewarding.  And college attendance as the norm, established by the G.I. Bill in the 1940s and cemented by the Vietnam War and promises of higher lifetime earnings decades later, may need to end.  Discriminatory or not, private student loan providers must assess individual customers’ chances of becoming well employed.  Borrowing money for education, or houses for that matter, should be viewed as the speculative endeavor it is.  Cars for many people, especially in more cities, may need to be seen as luxuries instead of necessities;  indeed, younger adults’ collective attitude toward driving, which is much less enthusiastic than that of those little older, will prove appropriate. 

These are tough times, and with the next recession they will get tougher.  There is no iron rule that each generation should at least match the prosperity of the one before.  We must all make adjustments.  We can no longer afford to think, because college degrees are statistically associated with more income, that therefore almost all high school graduates should enroll.  If universities, with their huge endowments and shelter from many economic realities, will not take more responsibility for what is happening to their students after graduation, then we will need to be keenly aware of such outcomes ourselves.  Colleges have profited immensely from a common confusion of correlation with causality, in which too many people think education itself is responsible for superb results originating more from intelligence, maturity, drive, and perseverance, and they need to be held more accountable for the failures. 

As unfair as it may seem, every American is not going to be in the top half of affluence.  We will need to understand that while there are many great things about modern-day America, which usually do not get included in prosperity as we usually measure it, no guarantee of certain possessions or assurances is among them.  We all must choose what is most important, personally, for ourselves, and worry less about the rest.  That, not saddling others with obligations which ultimately cannot be fulfilled anyway, is the way to deal with the unstoppable changes we face.

Friday, July 5, 2013

June AJSN: America’s Now Short More Than 21.5 Million Jobs as Seasonal Patterns Dominate

According to this morning’s Employment Situation Summary, the United States gained 195,000 seasonally adjusted jobs last month, with unemployment staying the same at 7.6%.  The stock market was quite happy with this news, gaining 100 points from the previous close in the first few minutes.  Should we be also?

The American Job Shortage Number (AJSN), which is not seasonally adjusted, gained over 700,000 for the second straight month, reaching a four-month high of 21.572 million new jobs that could be easily absorbed.  Here is the breakdown:

JUNE 2013
Latent Demand %
Latent Demand Total
Family Responsibilities
In School or Training
Ill Health or Disability
Did Not Search for Work In  Previous Year
Not Available to Work Now
Do Not Want a Job
Non-Civilian and Institutionalized, 15+
American Expatriates


Most of the change was due to typical differences between May and June, when a lot of school semesters, and term-length jobs end.  Indeed, 946,000 more people were officially unemployed than the month before, and those not able to work for being in school or training dropped almost one third.   What we cannot blame on seasonality, though, are the rises in the number of those discouraged, up 247,000 or 31%, and in the catch-all “Other” category, up 283,000 or 41%.  On the other side, the group saying they had no interest in working, the numbers of which fluctuate a remarkable amount, fell over a million. 

Other data changed little, or worsened.  Those unemployed 27 weeks or longer held at 4.3 million, labor force participation stayed at 63.5%, and the overall share of people with jobs was unchanged at 58.7%.  The number working part-time for economic reasons, wanting full-time work instead but not finding it, jumped over 300,000 to 8.2 million, tying the post-October high.  The non-seasonally-adjusted unemployment rate reached 7.8%. 

So how happy should we be with June’s jobs numbers?  They are hardly disastrous, but show no progress.  The 195,000 new positions were well above those needed to cover rising population, but would need to be sustained for over a year to bring unemployment below a hardly inspiring 7%.  Stock prices react well to expected conditions, which in this case meant running in place with American jobs.  Neither Obama’s recent emphasis on climate change nor levels of Republican initiation and cooperation in Congress give hope for anything better soon.  We are now 21.5 million jobs short, and the crisis is continuing.