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Robert Reich
NationofChange / Op-Ed
Published: Saturday 2 February 2013
More jobs and faster growth should be the most important objectives now. With them, everything else will be easier to achieve—protection against climate change, immigration reform, long-term budget reform. Without them, everything will be harder.

The Jobs Report and Why the Recovery has Stalled

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We are in the most anemic recovery in modern history, yet our political leaders in Washington aren’t doing squat about it.

In fact, apart from the Fed – which continues to hold interest rates down in the quixotic hope that banks will begin lending again to average people – the government is heading in exactly the wrong direction: raising taxes on the middle class, and cutting spending.

The Bureau of Labor Statistics reported Friday that American employers added only 157,000 jobs in January. That’s fewer than they added in December (196,000 jobs, as revised by the Bureau of Labor Statistics). The overall unemployment rate remains stuck at 7.9 percent, just about where it’s been since September.

The share of people of working age either who are working or looking for jobs also remains dismal – close to a 30-year low. (Yes, older boomers are retiring, but the major cause for this near-record low is simply the lack of jobs.)

And the long-term unemployed, about 40 percent of all jobless workers, remain trapped. Most have few if any job prospects, and their unemployment benefits have run out, or will run out shortly.

Close to 20 million Americans remain unemployed or underemployed.

It would be one thing if we didn’t know what to do about all this. But we do know. It’s not rocket science.

The only reason for employers to hire more workers is if they have more customers. But American employers have not had enough customers to justify much new hiring.

There are essentially two sources of customers: individual consumers, and the government. (Forget exports for now; Europe is contracting, Japan is a basket case, China is slowing, and the rest of the world is in economic limbo.)

American consumers – whose purchases constitute about 70 percent of all economic activity – still can’t buy much, and their purchasing power is declining. The median wage continues to drop, adjusted for inflation. Most can’t borrow because they don’t have a credit record sufficient to allow them to borrow much.

And now their Social Security taxes have increased, leaving the typical worker with about $1,000 less this year than last.

The Conference Board reported last Tuesday consumer confidence in January fell its lowest level in more than a year. The last time consumers were this glum was October 2011, when there was widespread talk of a double-dip recession.

The only people doing well are at the top – but they save a large part of what they earn instead of spending it.

Overall personal income soared by 8 percent in the final three months of 2012 compared to an increase of just over 2 percent in the third quarter, but this income didn’t go into the pockets of the middle class. It went into the pockets of people at the top.

Wages and salaries grew a measly six-tenths of one percent.

Most of the rise in personal income in the last quarter was from companies rushing to pay dividends before taxes were hiked in 2013, and from an upturn in personal interest income. Both these sources of income went mostly to the well-to-do.

This explains why consumer spending is dropping. The Commerce Department said Thursday consumers’ spending rose 0.2 percent last month. That’s slower than the 0.4 percent increase in November.

So if we can’t rely on consumers to stoke the economy, what about government? No chance. Government spending is dropping, too.

The major reason the economy contracted between the start of October and end of December 2012 was a major reduction in government spending in the fourth quarter.

Government spending has declined in nine of the last ten quarters, but it took a precipitous drop in the last quarter. This was mainly because military spending fell 22.2 percent. That’s the largest fall-off since 1972 (mainly due to reduced spending on the war in Afghanistan, and worries by military contractors about further pending cuts). State and local spending also continued to fall.

Personally, I’m glad we’re spending less on the military. It’s the most bloated part of the government. Major cuts are long overdue. But the military is America’s only major jobs program. Cutting the military without increasing spending on roads, bridges, schools, and everything else we need to do simply means fewer jobs.

What’s ahead? More of the same. So what possible reason do we have to suspect the recovery will pick up speed? None.

Don’t count on consumer spending. Wages and benefits continue to drop for most people, adjusted for inflation. States are hiking sales taxes, which will hit the middle class and the poor hardest. Deficit hawks in Washington are contemplating additional tax hikes on the middle class.

Housing prices are stabilizing, thankfully. But one out of five homeowners is still underwater, and the ranks of people renting rather than owning are rising. Health-care costs are also rising for most people in the form of higher co-payments, deductibles, and premiums.

Don’t count on government, either. Government spending continues to head downward. The White House has already agreed to major spending cuts, some to go into effect this year. Coming showdowns over the next fiscal cliff, appropriations to fund government operations, and the debt ceiling will likely result in more cuts.

More jobs and faster growth should be the most important objectives now. With them, everything else will be easier to achieve – protection against climate change, immigration reform, long-term budget reform. Without them, everything will be harder.

Yet we’re moving in the opposite direction — following Europe’s sorry example of failed austerity economics.

This article was originally posted on Robert Reich's blog.



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ABOUT Robert Reich

 

ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org. Robert Reich's new film, "Inequality for All" is available on DVD
and blu-ray, and on Netflix in February.

OMG, GrandOne. What's the

OMG, GrandOne. What's the deal?

Obviously, we need both the risk-takers AND the accountants. Not to mention the musicians - of Rock, R&B, Country, Blues, Classical, Alternative, Hip-hop, Pop, Latin, Pipeland, Punk, Folk, Ragtime, World, and every other musical genre that has ever existed. THEY are The Ones who will save not only our nation, but the entire solar system. THEY are the risk-takers, the accountants, and the mighty Beat-Keepers.

Tired of "national experts"

Tired of "national experts" who can't really explain why the economy doesn't do what it used to do, but still insist it can be patched up to keep corporations powerful? Check out this article, published here in January; The Digital Disruption: Technology & Economics for the 99%
http://www.nationofchange.org/digital-disruption-technology-and-economic...
Contact at peterbuiltproductions.wordpress.com

PETERBILT, Thanks for the

PETERBILT, Thanks for the link to "The Digital Disruption---", Peter Brown's article . I hope that Robert Reich reads it and cuts completely the umbilical to his former boss, Bill Clinton, who drove millions of legitimate welfare recipients into jobs at slave wages, and onto the streets. You can't eat and still pay rent on $7.25/hour, Bubba.

Half of this nation is now on the path to using food stamps and sleeping on cardboard under the stars, or in a prison cells. According to Peter Brown machines will displace more labor and continue to crank out more stuff for which their owners can't find buyers. The key word is 'buyers'. If there are stockpiles of essentials sitting behind chain link fences and people have no money then how does 'buyers' enter the equation?

Reich says-- "The only reason

Reich says--

"The only reason for employers to hire more workers is if they have more customers. But American employers have not had enough customers to justify much new hiring."

This makes eminent sense.

Yet, Reich oddly concludes--

"More jobs and faster growth should be the most important objectives now."

Did he forget his first statement?

Clearly, his proper conclusion should be this: To get businesses to hire more, our most important objective should be "creating customers."

(Compare this to our attempts to bribe businesses into "creating jobs." Tax incentives for hiring are simply bribes, attempts to get businesses to do something they dislike. Businesses actually prefer to get rid of employees--it cuts their expenses.)

So where will new customers come from? If the wealthy don't want to spend more, and the poor and middle classes can't spend more, who's left?

The government.

And the best bang for the buck comes from, as Reich suggests, government's "increasing spending on roads, bridges, schools, and everything else we need."

The Mega-Corp, Conglomerates,

The Mega-Corp, Conglomerates, Monopolies must be broken up. Glass-Stegall reinstated to require STATE and a FEDERAL (non-profit stricter regulations, low rate bonded/loans, & computerized monitoring) banking systems and prosecute the corrupt to the full extent. No longer can a few own soo much, no longer can any mega-corporation be too big to fail that the American people must bail them out. No fiat money loans.
...
Establish - Business Angel Teams (engineers, architects, cpas's, business administrators et.al. that work with Score, the Small Business Bureau, the US Patent Office, et.al. for < NEW/VIABLE > small business ventures that WE THE PEOPLE can invest in via.. Angel Bonds. Ex: SIDEWALKS, Inc. offering a variety of sidewalks, lighted and/or moving by the energy of peoples stepping on it. Piano Stairs. Once the company is approved and established, all employee's are paid the $ame wage -- from President to Janitor.
...
Limit Washington Lobbyists to only non-profit and only up to single State sized companies.
Limit subsidies to profit or non-profit and only up to single State sized companies and based on budget/available funds.
...
Limit Congressional Servant Terms. All servants have the same social security, same health care, same educational loan program that the 'general - vast public' offering has.
...
Doing away with the Party Systems and setting up auditable, campaigns based on regional medium income, population sizes that cannot exceed their SET budget, and only have 1 candidate per occupation( 1 lawyer, 1 cpa, 1 businessman, 1 teacher, 1 fireman, et.al. ..the one with the highest signature votes for entry on the ballot).
...
Limit Social Security payout to those not exceeding 10M dollars in cash or same valued holdings. The money goes back into Social Security. Social Security funds cannot be touched by Congress for spending.
...
CHANGE the Paradym... to help restore & establish Small Businesses for local community sustainability. Cash flow revolves and stimulates Locally.

Like a box of chocolates,

Like a box of chocolates, Corparanoid suggests some things people will like and others people won't like. I posit an argument that this is the new norm because of technology. Each of us has the tool to do 100 or more jobs in 1/100th the time. Where is the time spent calulating, researching, thinking, brainstorming, creating prototypes and testing? Where is the time. It certainly is not real time. We have models of models and endless digital prototypes.
The human run time has been dimished to a keyboard (I was going to say programming but that is now done for us as well). So, why pay people (interfaces) a living wage? Why give raises? Why loan money at all?
Our base is 1960 not 1990. Hold war constant and you have the real economy. All else is abberation.
Look at the golden 1990s. A new, accessible, (relatively) powerful toy was in the hands of consumers. Productivity soared. Profits soared. Deficits crashed. Economies roared. It was great, it was good, it was...unsustainable.
So, we are back to the new normal (which really is the old normal). We have structural unemployment. Banks unwilling to lend. Government without a clue. Innovation obscure
Folks it all boils down to one thing. Are we a nation of risk takers? Or are we a nation of accountants. What made us great were the risk takers. What will destroy us are the accountants (nothing personal Morry).

Like a box of chocolates,

Like a box of chocolates, Corparanoid suggests some things people will like and others people won't like. I posit an argument that this is the new norm because of technology. Each of us has the tool to do 100 or more jobs in 1/100th the time. Where is the time spent calulating, researching, thinking, brainstorming, creating prototypes and testing? Where is the time. It certainly is not real time. We have models of models and endless digital prototypes.
The human run time has been dimished to a keyboard (I was going to say programming but that is now done for us as well). So, why pay people (interfaces) a living wage? Why give raises? Why loan money at all?
Our base is 1960 not 1990. Hold war constant and you have the real economy. All else is abberation.
Look at the golden 1990s. A new, accessible, (relatively) powerful toy was in the hands of consumers. Productivity soared. Profits soared. Deficits crashed. Economies roared. It was great, it was good, it was...unsustainable.
So, we are back to the new normal (which really is the old normal). We have structural unemployment. Banks unwilling to lend. Government without a clue. Innovation obscure
Folks it all boils down to one thing. Are we a nation of risk takers? Or are we a nation of accountants. What made us great were the risk takers. What will destroy us are the accountants (nothing personal Morry).

Like a box of chocolates,

Like a box of chocolates, Corparanoid suggests some things people will like and others people won't like. I posit an argument that this is the new norm because of technology. Each of us has the tool to do 100 or more jobs in 1/100th the time. Where is the time spent calulating, researching, thinking, brainstorming, creating prototypes and testing? Where is the time. It certainly is not real time. We have models of models and endless digital prototypes.
The human run time has been dimished to a keyboard (I was going to say programming but that is now done for us as well). So, why pay people (interfaces) a living wage? Why give raises? Why loan money at all?
Our base is 1960 not 1990. Hold war constant and you have the real economy. All else is abberation.
Look at the golden 1990s. A new, accessible, (relatively) powerful toy was in the hands of consumers. Productivity soared. Profits soared. Deficits crashed. Economies roared. It was great, it was good, it was...unsustainable.
So, we are back to the new normal (which really is the old normal). We have structural unemployment. Banks unwilling to lend. Government without a clue. Innovation obscure
Folks it all boils down to one thing. Are we a nation of risk takers? Or are we a nation of accountants. What made us great were the risk takers. What will destroy us are the accountants (nothing personal Morry).

Like a box of chocolates,

Like a box of chocolates, Corparanoid suggests some things people will like and others people won't like. I posit an argument that this is the new norm because of technology. Each of us has the tool to do 100 or more jobs in 1/100th the time. Where is the time spent calulating, researching, thinking, brainstorming, creating prototypes and testing? Where is the time. It certainly is not real time. We have models of models and endless digital prototypes.
The human run time has been dimished to a keyboard (I was going to say programming but that is now done for us as well). So, why pay people (interfaces) a living wage? Why give raises? Why loan money at all?
Our base is 1960 not 1990. Hold war constant and you have the real economy. All else is abberation.
Look at the golden 1990s. A new, accessible, (relatively) powerful toy was in the hands of consumers. Productivity soared. Profits soared. Deficits crashed. Economies roared. It was great, it was good, it was...unsustainable.
So, we are back to the new normal (which really is the old normal). We have structural unemployment. Banks unwilling to lend. Government without a clue. Innovation obscure
Folks it all boils down to one thing. Are we a nation of risk takers? Or are we a nation of accountants. What made us great were the risk takers. What will destroy us are the accountants (nothing personal Morry).

Like a box of chocolates,

Like a box of chocolates, Corparanoid suggests some things people will like and others people won't like. I posit an argument that this is the new norm because of technology. Each of us has the tool to do 100 or more jobs in 1/100th the time. Where is the time spent calulating, researching, thinking, brainstorming, creating prototypes and testing? Where is the time. It certainly is not real time. We have models of models and endless digital prototypes.
The human run time has been dimished to a keyboard (I was going to say programming but that is now done for us as well). So, why pay people (interfaces) a living wage? Why give raises? Why loan money at all?
Our base is 1960 not 1990. Hold war constant and you have the real economy. All else is abberation.
Look at the golden 1990s. A new, accessible, (relatively) powerful toy was in the hands of consumers. Productivity soared. Profits soared. Deficits crashed. Economies roared. It was great, it was good, it was...unsustainable.
So, we are back to the new normal (which really is the old normal). We have structural unemployment. Banks unwilling to lend. Government without a clue. Innovation obscure
Folks it all boils down to one thing. Are we a nation of risk takers? Or are we a nation of accountants. What made us great were the risk takers. What will destroy us are the accountants (nothing personal Morry).

Like a box of chocolates,

Like a box of chocolates, Corparanoid suggests some things people will like and others people won't like. I posit an argument that this is the new norm because of technology. Each of us has the tool to do 100 or more jobs in 1/100th the time. Where is the time spent calulating, researching, thinking, brainstorming, creating prototypes and testing? Where is the time. It certainly is not real time. We have models of models and endless digital prototypes.
The human run time has been dimished to a keyboard (I was going to say programming but that is now done for us as well). So, why pay people (interfaces) a living wage? Why give raises? Why loan money at all?
Our base is 1960 not 1990. Hold war constant and you have the real economy. All else is abberation.
Look at the golden 1990s. A new, accessible, (relatively) powerful toy was in the hands of consumers. Productivity soared. Profits soared. Deficits crashed. Economies roared. It was great, it was good, it was...unsustainable.
So, we are back to the new normal (which really is the old normal). We have structural unemployment. Banks unwilling to lend. Government without a clue. Innovation obscure
Folks it all boils down to one thing. Are we a nation of risk takers? Or are we a nation of accountants. What made us great were the risk takers. What will destroy us are the accountants (nothing personal Morry).

Like a box of chocolates,

Like a box of chocolates, Corparanoid suggests some things people will like and others people won't like. I posit an argument that this is the new norm because of technology. Each of us has the tool to do 100 or more jobs in 1/100th the time. Where is the time spent calulating, researching, thinking, brainstorming, creating prototypes and testing? Where is the time. It certainly is not real time. We have models of models and endless digital prototypes.
The human run time has been dimished to a keyboard (I was going to say programming but that is now done for us as well). So, why pay people (interfaces) a living wage? Why give raises? Why loan money at all?
Our base is 1960 not 1990. Hold war constant and you have the real economy. All else is abberation.
Look at the golden 1990s. A new, accessible, (relatively) powerful toy was in the hands of consumers. Productivity soared. Profits soared. Deficits crashed. Economies roared. It was great, it was good, it was...unsustainable.
So, we are back to the new normal (which really is the old normal). We have structural unemployment. Banks unwilling to lend. Government without a clue. Innovation obscure
Folks it all boils down to one thing. Are we a nation of risk takers? Or are we a nation of accountants. What made us great were the risk takers. What will destroy us are the accountants (nothing personal Morry).

Not a pretty picture and yet

Not a pretty picture and yet for some unfathomable reason (Fed artificially boosting prices with QE's via member bankers) the stock market (bubble) is reaching for all time highs despite crappy earnings ratios and the backdrop Reich has painted. Looks like the slow rolling depression is about to reach North America in earnest as the power elites continue with their globalization of poverty for the masses and their drive for imperial world hegemony. Time for the people to get back into the streets but this time in critical mass.

Oh please stop yelling about

Oh please stop yelling about the federal debt level. It is, simply put, not a real problem. As of now, the debt service on the federal debt is about 3% of GDP. That means that only 3 cents out of every dollar of Gross Domestic Product is needed to pay the interest on the debt. How many businesses or families can you think of that have so low a debt service factor? Not many. So let's stop the hand wringing about the debt. Sure, there are ways to reduce government spending without a negative impact on the economy. There are hundreds of military missions abroad which have little value other than spending US dollars overseas. Let's cut the number of such missions by at least half. We have spent more than $20 Billion over the last decade on a failed drug policy. And the waste goes on daily. Let's change the policy, spend the money on educating our youth and upgrading worker skills. We would get a lot more bang for the buck. It is time to tell the Wall Street crowd that they can not and will not be allowed to rule this country. New rules are required to regulate how they operate and how they contribute to the political process. Finally, how about some legislation to protect the rights of working folks to form collective barginning organizations (unions)? Can we at least stop demonizing the unions? And can't somebody put a cork in the Koch Bros. propaganda machine?

Larr, But at what percent of

Larr, But at what percent of revenues is the debt service? Some have said it's as high as 100%, or every nickel the Federal government takes in goes to the bankers before a nickel is borrowed to pay for services. Perpetual indenture of the American taxpayer to and for the banking class if that is the case.

Don't worry folks, President

Don't worry folks, President Obama has our backs, and has already launched the solution. It's a new thing called "Permanent Trickle Down Economics."

You see, back in 1981 Reagan gave the wealthy huge tax cuts. Repeal of the Bush cuts on incomes over $400K preserved two thirds of the huge tax cuts the wealthy have enjoyed since 1981. In other words, "trickle down economics" have only had a temporary 31 years to work, so President Obama has made them permanent! And he has promised that some money will start trickling down to us no later than 2044.
Also, President Obama has an ace up his sleeve. Remember all the trillions the wealthy have offshored so as to avoid taxes? Well, by 2044 there will be so many more trillions offshored that Bill and Hillary Clinton's daughter will be announcing at her coronation that the wealthy will be given a tax credit of $5 for every dollar they transfer back to the USA. Surely some of that will trickle down, so it won't be a problem for us to do away with social security to pay the wealthy their tax credit.
Like I said, President Obama has our backs, and before you know it we'll all be swimming in trickle down money! All we have to do now is vote for Hillary Clinton in 2016, and wait for Chelsea Clinton's coronation in 2044!
Three cheers for President Obama!

Well you have gotten what you

Well you have gotten what you wanted Mr Reich have you not. Obama has been elected and we will get the same shit as the last four years have reaped.
The American people need to demand elimination of the two party system and the creation of State run banks not for profit and the elimination of interest that we pay to the banks so they can profit off of us all and diminish our entire economy. We should demand a news station free of the networks and only funded by the people to let the people running for office speak without raising money to speak as they are just whores now to cbs msnbc fox and the like.
Now is the time to demand a change as the old way is turning us all into slaves
for the rich. I believe that the higher education institutions are partly to blame as well and believing that a democrat or republican in the white house will change anything.

Washington oligarchy puppets

Washington oligarchy puppets are doing exactly what their masters want.

The jobs picture would look

The jobs picture would look at least somewhat brighter if the war on public sector employees, from teachers to first responders to Federal career employees would stop. Job cuts in those areas led to the lower net gain in jobs overall.

"And now their Social

"And now their Social Security taxes have increased, leaving the typical worker with about $1,000 less this year than last."

I would have written: "Since Obama and Congress' 2 year raid of Social Security funding to allow extension of the Bush tax cuts for the rich was allowed to expire, the typical worker can expect about $1,000 less this year in her/his paycheck"

But otherwise, you've given a brilliant description of end-stage industrial-growth corporate capitalism, Robert. The cheap fossil-fueled madness is winding down.

May I (again!) direct your attention to a major piece of the solution?
http://steadystate.org/

So again I ask, why not

So again I ask, why not endorse High Value Platinum Coin Seigniorage (HVPCS) as a way to pay down the national debt, obliterate the debt ceiling as an economic break, and fund a full employment-green economy? Can you blog about this?

Who's going to take that

Who's going to take that coin? Even if it is legal tender? I've been turned down at convenience stores with a $50 bill... where can I spend a trillion-dollar coin? It would be worth more for the platinum...

The Federal Reserve bank of

The Federal Reserve bank of New York is required to take any legal tender minted at the Treasury. They already have several billion dollars in uncirculated state $1 coins and other coins that the mint has struck but no banks want. Joe Firestone at New Economic Perspectives has written extensively about HVPCS and why the Fed must take any and all.

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