Posted on 09/17/2009 3:38:15 AM PDT by Kaslin
"The level of unemployment is unacceptably high. And will, by all forecasts, remain unacceptably high for a number of years."
Who do you suppose said that? A Republican political operative? A Fox News political analyst? One of those several hundred thousand Tea Partiers who assembled in Washington on Sept. 12? No, it was Lawrence Summers, the director of Barack Obama's National Economic Council and, by common consent, one of the world's leading economists
Summers made this gloomy forecast in the course of arguing that our economy is headed to "sustained recovery." And while it sounds like self-protective political rhetoric, it is also in line with the thinking of Democratic economists who bemoaned a "jobless recovery" during the first Bush term.
They argued then that a variety of factors -- big increases in the incomes of high earners, the crowding-out of wage increases by the fast-rising costs of health insurance -- prevented the rapid job growth that followed previous recessions. There was something to these arguments.
But it's also true that job creation accelerated in 2004 and kept going for another three years. Perhaps, although Democrats would not like to admit it, the Bush economic policies had something to do with that.
And perhaps the rather different policies of the Obama administration and the Democratic Congress may help Summers' gloomy predictions come true.
Tax policy is one example. The Bush tax cuts are scheduled to expire next year, and the Democratic Congress will surely allow income tax rates on high earners to go up to 39.6 percent again, or even more if it enacts the administration's proposed policy of limiting high earners' charitable deductions.
These increases will produce revenue that the government needs to reduce the enormous budget deficit, though surely not as much revenue as static economic models indicate. But they will also depress economic growth to some non-trivial extent, and thereby depress job creation.
Then there's trade protectionism. A week ago Friday, late at night, the Obama administration slapped import tariffs on Chinese tires. The Chinese retaliated by imposing tariffs on auto parts and chickens -- take that, United Auto Workers and Tyson Foods! Upshot: American consumers will pay more for tires, and auto-parts and chicken-processing jobs will be at risk.
And more of that may be in store. "The smell of trade war is suddenly in the air," writes The Wall Street Journal, and Global Trade Alert reports that 130 protectionist measures are ready to be implemented by countries around the world. Are we seeing a repeat of the job-destroying protectionism that followed the Smoot-Hawley tariff of 1930? It's starting to look like it.
Then there are the additional burdens on the private-sector economy that would be piled on by the congressional Democrats' health care bills and the cap-and-trade legislation passed by the House in June. In the job boom of the middle years of this decade, these policies looked like something we might be able to afford. They look less like that now.
Meanwhile, it's plain that consumers are not going to spend money anytime soon at the rates they did when their house prices were bubbling up and that the $787 billion stimulus package passed last February was not -- how to put this? -- optimally designed for job creation.
The Obama administration, along with the Federal Reserve, deserves credit for stabilizing financial markets. But administration policies have put us on the path to increasing the national debt from 40 percent to about 80 percent of gross domestic product -- a level we haven't seen since the years just after World War II. Interest rates are low now, but when they rise it's going to take an uncomfortably large chunk of federal revenues just to service this debt.
"After the health care debate ends, and whatever its outcome may be," writes William Galston, deputy domestic adviser in the Clinton White House, "the administration and congressional Democrats would be well advised to turn their attention back to the economy and ask themselves whether there is anything more to be done to jumpstart job creation."
Good advice, but why wait? The Office of Management and Budget now projects unemployment at 9.7 percent, the same as last month, in the fourth quarter of 2010, when the off-year elections take place. Maybe the administration and congressional Democrats should consider job-creating rather than job-destroying policies right now.
Ping
Enter Arthur Laffer. A tax increase will reduce revenue and employment simultaneously. It's tough being a democrat on the backside of the Laffer Curve.
Still Bush’s fault, right?
Don’t you understand? Our dear leader has personally saved over 1,000,000 jobs since elected! In fact many of these jobs were, and are, “shovel ready!” s/
Its gotten to the point that I don’t know what to make of this clown. He’s either as dumb as a post or as smart as a fox. In either case we are collectively headed down the wrong way of a one way street to oblivion.
However it IS true that marginal-rate tax decreases always increase societal wealth, potentially increasing tax revenue and certainly increasing employment towards its theoretical maximum of 95%.
Job-Killing Policies Could Doom Democrat Hopes
A Captain Obvious headline if ever I saw one.
at at = that at, d’oh.
The economic notion of the "point of diminishing returns" would definitely apply here. Few but true leftists dispute that tax decreases have stimulated economic activity and increased tax revenues. We seem to be bouncing from the low to the high 30%s as a marginal tax rate.
When the Dims raise it back to 39% (where Clinton had it), or higher, a future Republican administration can again take it to around 30% and again increase economic activity and tax revenue. But there is a point where further decreases in tax rates will decrease tax revenues, probably somewhere between 25% and 30%, the point of diminishing returns.
But, once again, the Dims are setting things up for future Republican tax decreases and revenue increases, and they will stall any economic recovery next year by increasing taxes back to 39% or higher.
Hey buffoon... I mean Barrone... Bush times were the BEST ECONOMIC TIMES OF MY 39 YEAR BUSINESS EXPERIENCE... People that worked hard and were smart, became rich and had homes, boats, vacation homes, RV’s, motorcycles and cars PAID FOR! Today... our 401k’s look like 101k’s... some of us are having to struggle to make ends meet and put food on the table... of course you in the beltway are insulated and diseased. You seem to never quite see the entire truth... EVER!
LLS
We rail against untrue, unfair and simplistic slogans such as ‘The GOP is racist,’ ‘Conservatives are Klansmen’ etc. but unfortunately too many of our fellow citizens cannot process political thought beyond this most basic level.
Therefore, establishing and repeating a mantra such as ‘Democrats kill jobs’ is essential since it will take several years to permeate the national consciousness. It has the added virtue of being true.
Imagine some elitist hack like Larry Summers telling everyone the economy is “recovered” if you are among the 10% unemployed, another 6% or more underemployed, and the tens of millions more wondering when the ax is going to fall on them or their spouse.
If all that stuff was paid for, then they all still have the stuff, right?
Today... our 401k’s look like 101k’s...
Indexes are around their 2001 levels right now, aren't they? So we had these numbers early in GWB's term. Yeah, there was a runup to 2007, but like the glory days of the late 90s, it turned out to be a bubble. Tech bubble in the 90s, housing bubble in the 00s, both helped along by Greenspan.
And anyway, the market goes through cycles. A 401K is going to ebb and flow. Theoretically, the dips are good news. That's when you get the good end of dollar-cost averaging. Isn't it better to be buying stocks now than it was in 2007, at the top? In the long run?
some of us are having to struggle to make ends meet and put food on the table.
Maybe if some of those "smart" people had put money away for hard times, instead of buying vacation homes, boats, rvs, etc.... Did they think the good times would last forever? Do they ever?
Some of us smart people put our money away for hard times- into IRA’s 401K’s and mutual funds.
We lost half our savings since last September and it isn’t coming back anytime soon. What do the experts say? 5 years? 10 years? 30 years?
I wish I would have bought a vacation home and an RV instead.
No, you didn't lose any of your savings. You lost half your investments. Maybe that's the problem--people can't seem to tell the difference between saving and investing. All investments come with risk.
And anyway, the market always goes through cycles. Secular bears, securlar bulls, cyclical bears, cyclical bulls. Everyone knows it. The idea is not that your going to cash out at the top of a bull market. The idea is that buy investing incrementally over time, you'll get an average return somewhere above the bear market lows, and somewhere beneath the bull market highs.
It's a phony euphoria to look at your 401K valuation during a bull market and think that it has any permanence to it. It doesn't. It's silly to think it does. All you're trying to do is get a better return than the bank. If over the years, your average return ends up around 7%, you've done well. Because those 30% and higher returns that got everyone all giddy are balanced out when things turn south. Duh.
Savings, in my view of the term, is not invested in at-risk securities. It's saved, in the bank. CDs. Money Market Accounts. FDIC insured. That's what you put away for bad times. Actual money. You invest money hoping that you'll get a slightly better return over the long haul. And you take the company match because it's there. If you hedge your bets, you can do ok. But most people were buying stocks during the boom, not gold (which was at $400/oz.) Now, stocks are low, and people are buying gold at 1000/oz. Makes no sense. It's completely backwards.
And unless you cashed out your IRA and 401K, you haven’t “lost” anything. You’ve just seen it’s valuation correct downward after a boom/bust cycle. Get used to it. YOu’re not entitled to 30% returns. 7-10% is better than par.
“”If all that stuff was paid for, then they all still have the stuff, right?””
Not really... many Americans have had to sell off assets to cover other expenses... second homes have been defaulted on to try to do something the fed cannot... balance their budgets. Boats and motorcycles have been sold to pay tuition and insurance bills... have you seen the glut of used travel trailers and motor homes? No, these things have vanished much as have the savings and investments made when Capitalism was actually being practiced in America.
“Today... our 401k’s look like 101k’s...”
“Indexes are around their 2001 levels right now, aren't they?”
Portfolios are worth less than half of what they were in 2007. Money lost is money lost... you sound like axlerod!
“So we had these numbers early in GWB’s term. Yeah, there was a runup to 2007, but like the glory days of the late 90s, it turned out to be a bubble.”
I made the right moves... I became a millionaire under Bush... I still am one... but it is hard to remain so... and my three businesses are struggling... employees jobs are on the line... hyper inflation has started at the wholesale level and business defaults are growing daily... malls are empty... consumers are not spending... and the fed lied about consumer spending growth two days ago... 100% of the increase came from rising gas prices... means less discretionary spending... less growth.
“and Tech bubble in the 90s, housing bubble in the 00s, both helped along by Greenspan.”
I agree... mr andrea mitchell was a dumbass.
“And anyway, the market goes through cycles. A 401K is going to ebb and flow. Theoretically, the dips are good news. That's when you get the good end of dollar-cost averaging. Isn't it better to be buying stocks now than it was in 2007, at the top? In the long run?”
There will be no private investment if hussein gets his agenda through. You talk like this is 1995... you had better wake up... it may already be too late. WEALTH TAXES ARE COMING and the truly wealthy are already moving assets away from America. hussein surrendered to russia today... Europe is angry at America and her betrayal... the Czech President stated that their mistake was trusting America's word... there is not chance of economic growth for years... maybe decades. Our way of life is teetering on the edge of a chasm.
“some of us are having to struggle to make ends meet and put food on the table.”
“Maybe if some of those “smart” people had put money away for hard times, instead of buying vacation homes, boats, rvs, etc.... Did they think the good times would last forever? Do they ever?”
Many did... I can retire tomorrow... many of my friends are in the same position... but when you do not work for someone else, having a job that insulates you from major risk and personal mandatory debt... when one is actually an entrepreneur and IS his or HER business... one can go from solvent to insolvent in a matter of months.
LLS
That “greed” was a win-win for savers and for the economy. That invested money seeded a lot of companies and businesses. Now I guess Bernanke can seed them with freshly printed greenbacks, ‘cause we're never coming back, long or even mid term. We don't have the time or trust to play games with Goldman Sachs private casino aka, the NYSE. Nor do many boomers
Buy and hold? LOL. Make the money, take the money. It's the new ethics. That's a lot of uninvested wealth siting on the sidelines that could be going into growing companies and businesses. But it's not.
It may however go into a vacation home an RV during the coming deflation ahead. After that, inflation should do a good job on those 7 year 3% CD’s being held by the next generation of “smarter” savers, in banks run by the bankrupt US government.
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