Here's why unemployment's still high- and why it'll be difficult for anyone to do anything about it.
1. Houses. It's finally turning the corner, but it'll still be a few more years before this market recovers. The industry is simply still underneath too many bad debt rocks.
2. Technology. Companies have figured out how to do more with less. GDP, both overall and per capita is at an all time high. In other words, the macro economy, as Obama has said, is "fine". Actually, except for the 1990s, unemployment, over the last 40 years has AVERAGED 7%. So, much as I hate the "new normal" cliche, unemployment in the 4s and 5s may be optimal, at best. Average for good economic times, for most of our lifetimes has been unemployment rates in the 6s; bad times, in the 7s. From 1974 to 1994 unemployment was under 6% for a total of a mere 24 months. It would help people who lament thee current rates to know these grim facts.
3. "Hard money". Banks have taken a "once bitten twice shy" approach to lending. After making money ridiculously easy to get, circa 2003, it's now equally as impossible. Businesses that rely on credit are still struggling because of this.
4. States are broke. It's estimated that unemployment, right now, would be between 6.9% and 7.3% but for layoffs in state government jobs, and perhaps, if the cumulative effect of this were considered, much lower- perhaps as low as 6.5%. Some of this is overreaction to Obama's election in conservative parts of the country, and part of it is overreaction to macroeconomic irresponsibility. Americans are angry, and austerity seems a silver bullet. Most of it, though, is necessity. Unlike the Fed, states cannot print money, and carry trade deficits. Some states even require balanced budgets, prohibiting deficits, altogether. Good idea when money is abundant; BAD IDEA when it's scarce. You don't borrow money when you don't need it. Further, in recent years, the housing boom caused many states to shift nearly all of their revenue bases to housing. Moreover, because many states did not anticipate the housing bust, and figured budgets years in advance, this caused a massive overbudgeting. The good news is that many states are now solvent. The bad news is that this solvency came at a very steep price not only for the states, but for their citizens, as well.
Sunday, August 12, 2012
Why Obama Isn't Losing
I've had several of my conservative colleagues in recent weeks ponder why Obama isn't by now buried. Allow my retort.
1. Many of the conservative arguments against him are terribly disingenuous- and the public isn't stupid. The best example of this I can give are three common conservative canards:
a) Gas Prices. First of all, many of the conservatives who complain about this were just fine with $4.00/gal. gas under George W. Bush. It never bothered them then. They'll even go so far as to evaluate Obama's performance on this by citing $1.50 gas when he took office. Most people will realize that the low gas prices in the winter of '09 were temporary, and that they were $4.00 the previous summer. Gas under Obama, compared to what it had been in recent years, has, mostly been steady. The argument also presupposes that high gas is indicative of a recession. The problem with this is that it isn't 1977, anymore. High gas can be just as prevalent in a boom as it can be during harder times. Also, it's highly dependent on things completely out of our control- weather, natural disasters, global demand, and global politics. All of these things affect gas many times more than domestic policy. Which brings me to my next point, which is that Obama's drilled more oil than any president in nearly 40 years. He's also increased alternative energy production to the point where the US is now the world's leader. Further, our dependence on foreign oil has DECREASED. Why, then is gas higher? Well, actually, it isn't. When you adjust it for inflation, it's been about the same the last 5 or 6 years. Over 30 years, the average over the last 6 years has exceeded the trendline by about $0.20, or roughly 6%. In other words, high gas prices aren't crippling the economy because we're not as dependent on them as we used to be, they're just as high in a recession as they are normally, and they're not really that high.
b) Taxes. This argument is just a lie. Taxes are the lowest they've been since 1958.
c) The debt has tripled. So...he inherited a debt of $11T, and it's currently at $15T, and 11*3=....I don't understand this one at all. Yes, the debt is higher. But no matter who was elected president, the nearly $1T stimulus was going to pass. And Obama has very little control over "entitlement" spending; and the Bush tax cuts; and several other budget items. In other words, this number was going up if an automaton had been elected president. This spending was "baked into the cake". Conservatives have it backwards. The deficit didn't cause the Recession. The Recession caused the deficit. One reason it's increased is because the loss of jobs and the depleted housing market has decimated the revenue base. The expenses, as I indicated above have been the same, but the revenue has decreased. Cutting spending isn't going to bring in more revenue. Which brings me to...
d) Jobs. Obama inherited an economy that was shedding 600,000 jobs a month...and dropping. Within 3 months of taking office, it peaked at 800,000, and began turning back. Within 14 months of tkaing office, the economy was adding jobs. It would take nearly 12 more months of job growth before it would make a dent in the rising unemployment rate. Since then, it's nickeled and dimed, but it's down nearly 2 percentage points from its high of 10.4%. Continuing at the current pace, it wouldn't be unreasonable to expect unemployment in the low 7s by this time next year. I've used this analogy before, but to understand Obama's task on unemployment, imagine him taking control of a car going 100 mph in the wrong direction, and accelerating. He takes over the car, but it still accelerates a little bit before he's able to slow it down. He throttles, but the car still rides a feww hundred yards before coming to a stop. He stops it, and turns it around, but he can't get it to go as fast in the opposite direction. But it is accelerating back in the right direction, it's just not yet back to the point where he took over yet. Most Americans get this. If Romney can sell them on the idea that he can make the car go faster, he'll win. But so far, instead, what he's proposed, is that we turn the car back around, and floor it, in the wrong direction, again.
2. Conservatives still don't get it about Bush. Most Americans don't like him. If Romney comes within a mile of Bush, policywise, it'll turn most Americans off.
3. Most Americans actually like Obama, and give him good marks on areas other than the economy. Think about this for a second. Imagine, Obama fights Romney to a draw or even a closee loss on the economy. Sure, it's the most important issue, but if Romney's only marginally better, if better at all, but Americans judge Obama to be better on nearly every other issue, who'll they vote for? Americans have accepted that there isn't a quick fix to the Recession. It isn't low taxes and low regs, and it isn't high gov't spending. America spent 10-15 years digging itself into this hole. Wages had stagnated for decades. We were able to mask it with two income families, and credit, and later the tech boom and housing boom. Personal debt in 2007 was the highest since the Depression. Personal savings was at its lowest since the early 1980s. Digging out of this mess in 2-4 years is a little unreasonable, no? It'd be great to think we can, but the world doesn't work like that. We can't undo a decade plus of poor decisions in a couple of years.
The race is still way up in the air. It's only August, and the conventions and debates and national and world events over the next 80 days will play a bigger role in determining November's election than current polls and economic data. That said, regardless, the election looks to be close. And for Republicans lamenting the "disastrous" Obama presidency, and pondering why this may be the case, pondering why he's leading and favored to win, at least for now, it might help for them to take a long hard look at reality. At Obama and who he REALLY is...and isn't. And similarly at Romney. And, lastly, at themselves.
1. Many of the conservative arguments against him are terribly disingenuous- and the public isn't stupid. The best example of this I can give are three common conservative canards:
a) Gas Prices. First of all, many of the conservatives who complain about this were just fine with $4.00/gal. gas under George W. Bush. It never bothered them then. They'll even go so far as to evaluate Obama's performance on this by citing $1.50 gas when he took office. Most people will realize that the low gas prices in the winter of '09 were temporary, and that they were $4.00 the previous summer. Gas under Obama, compared to what it had been in recent years, has, mostly been steady. The argument also presupposes that high gas is indicative of a recession. The problem with this is that it isn't 1977, anymore. High gas can be just as prevalent in a boom as it can be during harder times. Also, it's highly dependent on things completely out of our control- weather, natural disasters, global demand, and global politics. All of these things affect gas many times more than domestic policy. Which brings me to my next point, which is that Obama's drilled more oil than any president in nearly 40 years. He's also increased alternative energy production to the point where the US is now the world's leader. Further, our dependence on foreign oil has DECREASED. Why, then is gas higher? Well, actually, it isn't. When you adjust it for inflation, it's been about the same the last 5 or 6 years. Over 30 years, the average over the last 6 years has exceeded the trendline by about $0.20, or roughly 6%. In other words, high gas prices aren't crippling the economy because we're not as dependent on them as we used to be, they're just as high in a recession as they are normally, and they're not really that high.
b) Taxes. This argument is just a lie. Taxes are the lowest they've been since 1958.
c) The debt has tripled. So...he inherited a debt of $11T, and it's currently at $15T, and 11*3=....I don't understand this one at all. Yes, the debt is higher. But no matter who was elected president, the nearly $1T stimulus was going to pass. And Obama has very little control over "entitlement" spending; and the Bush tax cuts; and several other budget items. In other words, this number was going up if an automaton had been elected president. This spending was "baked into the cake". Conservatives have it backwards. The deficit didn't cause the Recession. The Recession caused the deficit. One reason it's increased is because the loss of jobs and the depleted housing market has decimated the revenue base. The expenses, as I indicated above have been the same, but the revenue has decreased. Cutting spending isn't going to bring in more revenue. Which brings me to...
d) Jobs. Obama inherited an economy that was shedding 600,000 jobs a month...and dropping. Within 3 months of taking office, it peaked at 800,000, and began turning back. Within 14 months of tkaing office, the economy was adding jobs. It would take nearly 12 more months of job growth before it would make a dent in the rising unemployment rate. Since then, it's nickeled and dimed, but it's down nearly 2 percentage points from its high of 10.4%. Continuing at the current pace, it wouldn't be unreasonable to expect unemployment in the low 7s by this time next year. I've used this analogy before, but to understand Obama's task on unemployment, imagine him taking control of a car going 100 mph in the wrong direction, and accelerating. He takes over the car, but it still accelerates a little bit before he's able to slow it down. He throttles, but the car still rides a feww hundred yards before coming to a stop. He stops it, and turns it around, but he can't get it to go as fast in the opposite direction. But it is accelerating back in the right direction, it's just not yet back to the point where he took over yet. Most Americans get this. If Romney can sell them on the idea that he can make the car go faster, he'll win. But so far, instead, what he's proposed, is that we turn the car back around, and floor it, in the wrong direction, again.
2. Conservatives still don't get it about Bush. Most Americans don't like him. If Romney comes within a mile of Bush, policywise, it'll turn most Americans off.
3. Most Americans actually like Obama, and give him good marks on areas other than the economy. Think about this for a second. Imagine, Obama fights Romney to a draw or even a closee loss on the economy. Sure, it's the most important issue, but if Romney's only marginally better, if better at all, but Americans judge Obama to be better on nearly every other issue, who'll they vote for? Americans have accepted that there isn't a quick fix to the Recession. It isn't low taxes and low regs, and it isn't high gov't spending. America spent 10-15 years digging itself into this hole. Wages had stagnated for decades. We were able to mask it with two income families, and credit, and later the tech boom and housing boom. Personal debt in 2007 was the highest since the Depression. Personal savings was at its lowest since the early 1980s. Digging out of this mess in 2-4 years is a little unreasonable, no? It'd be great to think we can, but the world doesn't work like that. We can't undo a decade plus of poor decisions in a couple of years.
The race is still way up in the air. It's only August, and the conventions and debates and national and world events over the next 80 days will play a bigger role in determining November's election than current polls and economic data. That said, regardless, the election looks to be close. And for Republicans lamenting the "disastrous" Obama presidency, and pondering why this may be the case, pondering why he's leading and favored to win, at least for now, it might help for them to take a long hard look at reality. At Obama and who he REALLY is...and isn't. And similarly at Romney. And, lastly, at themselves.
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