In today’s RealClearPolitics, John Stossel looks at why the economy isn’t recovering.
“Corporate profits are soaring. Companies are sitting on billions of dollars of cash. And still, they’ve yet to amp up hiring or make major investments.”
So writes The Washington Post about the recession’s stubborn refusal to go away. The statisticians at the National Bureau of Economic Research declared the Great Recession over — but tell that to people who can’t find jobs. Today, businesses replace equipment and inventory, but they are reluctant to hire new workers. Investment that does occur aims at replacing the use of labor by adopting advanced technology. In a growing economy, that’s a sign of progress. Freed-up workers are then available for new projects. But lately, those new projects aren’t being launched.
Why isn’t the economy recovering? After previous recessions, unemployment didn’t get stuck at close to 10 percent. If left alone, the economy can and does heal itself, as the mistakes of the previous inflationary boom are corrected.
The problem today is that the economy is not being left alone. Instead, it is haunted by uncertainty on a hundred fronts. When rules are unintelligible and unpredictable, when new workers are potential threats because of Labor Department regulations, businesses have little confidence to hire.
In at least three big areas — health insurance, financial regulation and taxes — no one can know what will happen.
[Economist and historian Robert] Higgs says: “Unless the government acts soon to resolve the looming uncertainties about the half-dozen greatest threats of policy harm to business, investors will remain for the most part on the sideline … consuming wealth that might otherwise have been invested.”
Yesterday, the Washington Postreported that the 2010 census came in $1.6 billion under budget:
Higher-than-anticipated response rates and an overqualified temporary workforce helped the U.S. Census Bureau keep the 2010 Census at least $1.6 billion under budget, officials announced Tuesday.
Congress appropriated $14.7 billion over 12 years for the 2010 head count, which began with planning meetings in 1999. More than half of the money was spent this year.
This year’s census was still the most expensive in U.S. history, but census budgets have climbed every decade since 1950 as the population and number of households increase. The Census Bureau managed to return $305 million from a $7 billion total budget in 2000.
The actual amount of money that will be returned to the government is still unknown, because census operations are scheduled to continue through the end of September. The amount will be no less than $1.6 billion and Congress will have the final say on what happens to the money, officials said.
In another round of disappointing jobs news, the Labor Department’s July unemployment report shows that the recovery remains sluggish. Here’s a roundup of stories addressing the numbers:
The nation’s economy continued to sputter as private-sector employers added just 71,000 jobs in July, according to a report released Friday by the Labor Department.
The small increase in private-sector employment was more than offset by the loss of 143,000 temporary Census jobs, and the nation’s unemployment rate remained unchanged at 9.5 percent. Overall, the nation shed 131,00 jobs in July.
Joblessness, which reached a 26-year high of 10.1 percent in October, will take time to recede as the number of previously discouraged jobseekers returning to the labor force exceeds the number of available jobs.
Revisions of June’s unemployment numbers were also released. According to the Wall Street Journal:
The June data was revised down significantly. Payrolls fell 221,000 that month, more than the 125,000 drop previously reported, as only 31,000 jobs were added in the private sector.
In today’s Washington Post, David Broder laments Congress abandonment of its long-term budgeting responsibilities.
On June 30, the Congressional Budget Office issued its long-term outlook, predicting that deficits would come down for the next few years as the need for counter-recession spending eased and revenue improved. But then, it warned, “unsustainable” red ink would flow again, creating debts not seen since World War II.
The next day the House of Representatives passed a one-year budget resolution rather than the normal blueprint committing the government to a fiscal plan of at least five years.
For all the publicity that goes to earmarks and other spending gimmicks, this was a far worse dereliction of duty. And the cynicism of the maneuver just made it worse.
The terrible irony in all this? More and more people are seeing that what this agonizing situation requires is a limited and temporary measure to pump more life into the economy and create jobs, along with a serious commitment to impose real spending discipline and hold down deficits in the long term — exactly what a five-year budget resolution could provide.
Of all the times for Congress to abandon its responsibility for long-term fiscal planning, this is the worst.
Today’s Washington Post reports on the Pentagon’s attempt to cut spending by $100 billion:
Pentagon officials said Monday that they plan to try to cut as much as $100 billion over the next five years out of the billions of dollars spent annually in buying weapons systems and other services from outside contractors.
Gates said the effort is part of his plans in “reforming the way the Pentagon does business.” He said he has asked Pentagon officials over the past month to “take a hard, unsparing look at how the department is staffed, organized and operated. . . . As a matter of principle and political reality we must do everything possible to make every taxpayer dollar count,” he said.
“The savings we are seeking will not be found overnight,” Carter said. “It has taken years for excessive costs and unproductive overhead to creep into our business processes, and it will take years to work them out.”
Please click here to read the entire Washington Post article.
Today’s Washington Post discusses the U.S.’ greatest fiscal challenge — stabilizing the US debt:
An international push to cut deficits in half by 2013 may sound impressive, but the United States already is on track to meet that target without significant policy changes. The harder task for President Obama will be achieving a second goal adopted by the nation’s largest economies over the weekend: stabilizing the soaring U.S. debt.
“The short-term goal is neither particularly ambitious nor particularly relevant. You get most of the way there just from the economy picking up,” said Robert Bixby, executive director of the nonpartisan Concord Coalition, which advocates deficit reduction. However, to rein in the debt, Bixby said, “they really are going to have to get into undoing some policies that are popular.”
Obama has acknowledged that reining in the national debt, which now exceeds 56 percent of the U.S. economy’s annual output, may require changes to Social Security, Medicaid and Medicare — and to a “tax system that is messy and unfair,” as he said Sunday in Toronto. But Obama has sought to postpone that reckoning until after this fall’s midterm elections, creating an independent, bipartisan commission to develop a long-term plan to rebalance the federal budget.
Europe’s pivot toward government austerity is helping to fuel the anti-spending mood in Congress. Highly indebted European countries are slashing spending with varying degrees of urgency, depending on whether they have come under pressure from bond markets, such as Greece and Spain, or are working to avoid it, such as Britain.
Click here to read the Washington Post article in its entirety.
The Washington Posttoday has a story by Howard Schneider and Anthony Faiola that leaves European leaders with egg on their face: despite warnings that the continent should help Greece out of its budget hole or risk the world economy, they fiddled while Athens burned.
While this story provides an important look back at what went wrong across the Atlantic, in Washington, and in U.S. states and cities, government leaders should take it as another clear sign to wake up to what Americans already know – our nation is barreling down a dangerous fiscal path; unless we change course before the crisis hits, we face dire, perhaps irreparable harm to our economic and fiscal future.
We have another new weekly blog feature here at Public Notice. We’ll be taking a look at polling on spending and economic related issues and asking if you agree with the results. It’s a small attempt, by us, to take the “public pulse” on issues that concern your wallet.
In a recent poll of Americans’ top concerns, Gallup/USA Today found 40% believe the nation’s debt burden to be an “extremely serious” threat to the nation’s well-being. The issue tied with terrorism for first place. (The same thing is happening in Europe, where high levels of government intervention and spending have always been popular. There, fears about the country’s budget deficit have eclipsed the hot-button topic of immigration.)
According to ABC News and The Washington Post most Americans are unhappy with government. A recent poll of adults found: only 2% are “enthusiastic” about the way government works; 28% are “satisfied”; 45% are “dissatisfied”; and 25% described themselves as “angry.”
And, from The Economist:
55.8% of registered voters believe we need a “strong government to handle economic problems.” 44.2% believe free markets can handle the economy’s problems without government interventions.
49.7% of registered voters believe the “less government the better.” 50.3% believe there are more things the government should do.
As France’s government takes steps to rein in unsustainable spending, the US government continues to pretend its gluttonous spending can continue indefinitely.
France said it would cut public spending by €45 billion ($54.48 billion) over the next three years and raise its retirement age, following other European nations that have announced austerity measures.
“We’ve made a commitment to bring down our deficit [to 3% from 8%] by 2013 and we will concentrate all of our efforts on it,” Mr. Fillon told a gathering of members of his and Mr. Sarkozy’s center-right UMP party ”‘It would be cowardly of us to tell the French people that their pensions could be maintained without lengthening their working lives and without altering the symbolic retirement age of 60.”
Today’s Washington Post draws a stark contrast, noting Obama’s appeal to Congress for an additional $50 billion in “emergency” local and state spending.
So, even while politically difficult, France is taking the critical steps to reduce unsustainable public spending. It’s time for the US to follow suit.
In today’s Washington Post, Howard Schneider writes that two of Europe’s historic economic powerhouses are planning to employ major spending cuts to shore up finances:
“Two of Europe’s largest countries on Monday pledged an assault on government spending as the euro remained weak and the International Monetary Fund issued a fresh call to restructure ailing European economies. The move by officials in Britain and Germany was a reminder that the crisis over government debt in Europe is being felt not just in weak nations such as Greece, but in ones that have served as the continent’s economic pillars.”
“It also illustrated the dilemma developing over how to deal simultaneously with Europe’s weak levels of economic growth and high levels of government debt. Nations from Spain to Latvia are scrambling to show they are serious about controlling spending — if only to avoid the type of pressure from bond investors that recently left Greece faced with rising interest rates and at risk of default before a joint European-IMF rescue plan was approved.”
“In London, Prime Minister David Cameron said that the country’s finances were ‘worse than we thought’ when the new conservative government took office, and would require changes in public spending and benefits that could ‘affect . . . our whole way of life.’ In a stark speech, Cameron cast the scale of the problem in generational terms, attempting to lay the groundwork for spending cuts and policy changes to be detailed later this month. ‘The decisions we make will affect every single person in our country. And the effects of those decisions will stay with us for years, perhaps decades, to come,’ Cameron said.”
“In Germany, officials announced an $80 billion, multiyear package of cuts that would trim 15,000 workers from the public payroll, a step Chancellor Angela Merkel said was meant to ‘set an example’ for other European countries, such as Greece and Spain, that are being asked to make even deeper adjustments. Officials from the 16 countries that share the euro as a currency met in Luxembourg on Monday to agree to the final details of a trillion-dollar rescue fund they agreed to set up after Greece’s troubles.”
As we’ve pointed out, the United States is headed in the same direction that Greece has been headed. If Washington doesn’t take steps to cut spending, similar to the steps England and Germany are considering, we are facing fiscal disaster.
Please click here to read the entire Washington Post article.
