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Jobs and the Economy

The media has been crowing about how the recession is now over. But for many Americans the economic situation is not at all a good one, nor has it returned to what they would call normal. The difference between a technical definition of recovery and what regular people would call ending the recession is often ignored in media discussions, but it is a critical distinction. And given the results from Tuesday's elections, the pace and breadth of the recovery in popular opinion will be an important factor in next year's Mid-Term elections and the balance of political power.

Personal economics play a major role in how people vote. While scandals and crises may be considered, the historical perspective shows time and again that economic troubles most often cause political control to change. This was the case when the Democrats gained control of Congress in 2006, when the Republicans gained control in 1994, and many times before.

The chief difference between the technical definitions used by economists and how regular people see the economy, comes from employment. If you have lost your job or are worried about losing your job, that will naturally be your personal focus, and you will be unlikely to support anyone for office whose policies appear to make your life harder, whether in terms of finding a job, keeping your job, or in the taxes you have to pay. If you are not able to save money or pay your bills on time, the same effect will occur. The important point to note here is that you do not have to actually lose your job to feel the effects of that condition. During the Great Depression of the 1930s, on average three out of every four people who wanted to work had a job, but no one felt comfortable about the economy. Problems with banks and credit, government control which had no apparent benefit, and a general lack of confidence all combined to prolong the effects of the depression. While no one could reasonably pretend that the present recession is that serious, it is important to recognize that the same psychological elements are present here, with serious concerns about credit, bank stability, the actual effect of government actions and the simple need for people to be able to make a living. The official unemployment rate is now above ten percent, but even that unhappy number does not address the number of under-employed workers, fears of job stability among Americans, and worries among business owners about how they can keep the doors open.

The Obama Administration chose to play politics with the economy, using the Stimulus Bill to give favors to friends and alter the process by which American business operates. This is most obvious in the egregious seizure of the GM and Chrysler corporations. The Bush Administration was wrong, in my opinion, to offer tax money to these companies through TARP in order to stave off bankruptcy, but the Obama Administration was far worse, as the President violated shareholder rights and the public trust in his takeover of the corporations. Obama paid off unions, leftist special interest groups, and campaign supporters, but in so doing he doomed GM to bankruptcy and a futile strategic plan, and Chrysler to a similar fate. Obama's management of the credit crisis is hardly better, as banks continue to resist assistance to homeowners and small business, despite a flood of money from the government. The housing industry remains in crisis, along with automobiles, banks, and manufacturing. If the massive takeover of healthcare passes Congress, there is no reason to imagine that industry won't also be made worse instead of better.

But it all comes down to jobs. Despite the countless plans and programs from government at every level, the overwhelming source of new jobs is from private employers. This is due not only to the capacity of millions of business owners to provide much greater opportunity than the government can, but also due to the fact that government agencies invariably follow scripts and protocols; they are stale by character and intent. The forces which bring job growth about, innovation and ingenuity, can only come from a wellspring of such diverse perspective and thought that no government could possibly match its range and scope. None of the great products of the past century entered the marketplace because of a government office or program.

Job creation is actually pretty simple for the most part. Company owners want to make money, and they need employees to make their products, to sell the products, to perform the service that the company sells, or to provide necessary support for the products or services. The company needs more employees as it grows and expects growth. Optimism therefore leads to job creation. And therefore, all job growth theory comes down to finding ways to raise optimism, of both business owners and consumers. No matter what the statistics say, it really comes down to finding ways to encourage buyers and businesses. So the only sane policy for economic growth is a business-friendly policy.

- continued -

The Obama Administration has actually conducted its affairs in a manner clearly hostile to business. Company owners and executives are publicly mocked and harassed, several high-profile corporations have for all practical purposes been seized by the government, and sound policy has been replaced with frivolous policy focused on whims and fantasy. The Obama Administration officials have either only theoretical knowledge of the industries they are trying to direct, or worse have no relevant knowledge whatsoever, in which case political theory is used in place of economic reality. This is why the Stimulus Bill failed to control the rise of Unemployment, despite President Obama's false promise that it would do so; the bill's promised effects, even if they happen as described, will not begin to take place until late 2010 through 2013. The costs, however, began almost immediately so it is not difficult to recognize that increased costs with no benefits for 2009 would inevitably result in job loss and economic damage. Anyone who would deny this flunked second-grade math. The good news for the Obama Administration from this fact, is that the present economic condition does not automatically prevent the Stimulus Bill from achieving its intended effects, al though whether that is correct is in serious doubt among economists and accountants. The bad news for Obama's party, however, is that the inescapable short-term damage from the bill was denied, in an absurd attempt to hide reality, which damaged his credibility and calls into question his ability to make sound policy with regard to the economy. The present difficulty with China regarding the weak dollar and the trade balance comes in part from the fact that China has begun to mistrust the President's ability to understand his own economy, and therefore his promises to major nations in that arena are in serious doubt.

The only rational government approach to job creation at this time would be to lower taxes on businesses and corporations, simplify oversight and regulation to reduce compliance costs and streamline effective implementation of necessary rules, and to put aside the poisonous and hostile policies of cap and trade and eco-hysteric mandates. It remains to be seen if the lawyer from Chicago who has paid so much attention to his buddies and so little to the fundamental structure of the economy, can finally lay aside his fantasies and direct his efforts to encourage the economy through private job growth.


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Comments (15)

Sure looks like a dead cat ... (Below threshold)

Sure looks like a dead cat bounce from where I am sitting. If you don't know what that is: even a dead cat will bounce if you throw it hard enough.


I don't see much of a recov... (Below threshold)

I don't see much of a recovery ahead, jobless or otherwise, until we have more money to spend. People can't buy goods and services if they have no money to spend. I am sure there are plenty of persons in my boat, excess income is going to pay down debt. Paying down the debt, not so much as e have to much, but because we are tired of the Credit Card companies screwing with us! Wife was layed off, and is getting close to chronically unemployed. We are afloat, but since I am paying down debt, I'm not spending for vacations, Christmas Gifts, new cars etc. I am personally dreading what might happen tax wise next year, there isn't really more money for taxes too.

Two ways to loosen up the personal liqidity issues, get people back to work, and lower taxes for everyone! Lower income taxes, lower property taxes, lower sales taxes etc.

Here in central MN, or purp... (Below threshold)
gary gulrud:

Here in central MN, or purple Amerikkka, Dear Leader's swing voters are beginning to accept, with resignation, that he won't ride in to save the day.

They "wanted a change". Polite company offers no reply.

Definitions:S... (Below threshold)

Start of a Recession: "TWO consecutive Quarters of Negative Growth"

END of a Recession: "TWO consecutive Quarters of POSITIVE Growth"

Despite all the spin from the White House, we have NOT ended the Recession. We had ONE Quarter of growth...and a large part of that was a result of pulling car sales from THIS Quarter into LAST Quarter!

Smoke meet mirrors!

The thing that would do mor... (Below threshold)

The thing that would do more to stimulate the economy, along with the cut in all taxes and regulations, is to abolish the Federal Reserve. Close its doors, and make the Treasury Department do its Constitutionally mandated job and put the United States back on the gold standard.

Obama, like Pelosi, lives i... (Below threshold)

Obama, like Pelosi, lives in a fantasy land. Don't expect things to get better. Barry has a lot on his plate trying to deal with Fox News. And those other things.

"Here in central MN, or pur... (Below threshold)

"Here in central MN, or purple Amerikkka, Dear Leader's swing voters are beginning to accept, with resignation, that he won't ride in to save the day."

"purple Amerikka", ha ha.

I lived in central Mn for 20 years and it was always royal blue.. I guess if its gone from blue to purple the logical conclusion one can surmise is, next up is socialist red.

What a perfect understandin... (Below threshold)
Freedom Fan:

What a perfect understanding you have of our dire situation, M. Drummond. You are very wise and eloquent indeed.

Obama's a liar, people were... (Below threshold)

Obama's a liar, people weren't hired. ww

The Chicago machine is not ... (Below threshold)

The Chicago machine is not a political cartoon series. The word "buddies" requires a deeper functional definition vis-a-vis the reality of broader historical context. Here "buddies" comes to mean cronies, fellow kleptocrats (if you've become the cat's paw of your Goldman-Sachs contributors, et. al.) .
It also means the influence of a semi-legiti-mate capital formation process that's been at the heart of Illinois politics since at least the 1930's. And so: Qui bono? Who benefits?
Cewrtain not "we the people," nor (edging into the oxymoronic) even the legitimate banking interests, which with no real supervision are still dysfunctional.

Politicians who bcome real leaders are dream-makers, not the echoes those they follow. We are still being led backward into the past of the 20th century instead of into the future.

It occurs to me that the ma... (Below threshold)

It occurs to me that the main thrust of Obama and the Congress is to throw enormous piles of freshly printed money at every problem, not to solve them, but to reduce the symptoms so things don't look so bad.

The problem, of course, is that none of these problems have been solved. The administration is whitewashing bad news, finally admitting to 10.2% unemployment -- as soon as the recent elections were over -- on a Friday, as usual. If job losses are a tenth of a point better than predicted, happy days are here again. Even though another 517,000 people have lost their jobs since the previous report, that's somehow great news.

Every other problem we have gets money thrown at it to make it appear to go away. Extending unemployment bonuses yet again, cash for clunkers, cash for houses, cash for seniors, cash for everybody -- until the butcher's bill comes due. None of these programs actually solve one damned thing. They just make them look smaller for the short term, while making things more and more painful in the long run.

Face it, folks. We're being lied to on a daily basis. By Obama, by Congress, by the media.

They think we're too stupid to figure it out.

The question is, are they right?

"Obama's a liar, people wer... (Below threshold)

"Obama's a liar, people weren't hired. ww"

That was a tele typo. It was supposed to be read as "people were fired".

Obviously, since Obama is n... (Below threshold)
Jim Addison:

Obviously, since Obama is not exactly a free market capitalist by nature, he would never consider tax cuts and deregulation to stimulate the economy. To him, as a confirmed statist (to be polite), "the economy" is indistinguishable from "the government." He believes we need more government in a weak economy, and he believes we need more government if the economy is neutral or strong as well.

We are seeing what I consider a "bear market rally." The stock market is generally a good predictor of the economy six months or so ahead. Rising productivity and the surprising ability of many companies to turn profits in the current morass do indeed foreshadow decent growth through the spring of 2010. After that, though, different dynamics will apply.

Much of the available "stimulus" money will have been spent by then, but the bills will also begin to come due. More pressure on the dollar will result from the inordinately large debt auctions we will be forced to offer. As we saw in the W years, strong productivity gains are good for business but do not immediately translate into job growth. Since the Bush tax cuts' expiration will amount to a huge tax increase on the very people we would expect to fund investment and savings in a recovery, it will be like swimming the Channel with an anchor attached.

It's not a bad time to be in the market for investors with strong nerves and keen instincts, but by April being short the market will begin to be an attractive position.

Tens of thousands of good C... (Below threshold)

Tens of thousands of good Chrysler customers were not refinanced by Chrysler at lease end during the credit crunch. Chrysler forced them to turn in leased vehicles they wanted to buy. These-often very good repeat customers-were hit with turn-in fees (over mileage, damages, etc). Chrysler is now filing tens of thousands of LAWSUITS against these former loyal customers to collect this money! I bought 4 Chryslers since 2001. Made all payments on time. Now Chrysler is suing me-and not paying back their government loans. Sound right to you? Think I'll buy another Chrysler?

Thanks for the post and for... (Below threshold)

Thanks for the post and for sharing the very resourceful information here.






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