"The only thing we have to fear is fear itself." Roosevelt

 Popular Economics

FREDpayrolljobs

The job market is shrinking, to no one’s surprise. But July’s catastrophic unemployment report tells us the loss of -23,000 payroll was particularly horrific. Yet +214,000 jobs were created in March, and the economy was perhaps on its way to decent growth this year.

It’s been downhill ever since. More workers are leaving the workforce than are being hired—and 234,000 left the workforce in July—because companies are leery of Trump’s anti-growth policies.

In fact, the sharp drop in payroll hiring began with Trump’s start of the Iran War, as can be seen in the FRED chart. There may have been other factors, such as higher tariffs and threats to invade other countries as well.

But economies don’t like wars begun with no advance notice or preparation, nor does congress, or employers, or most Americans. Tolerating such an ongoing war tells us that many Americans are now living in a country ruled by almost constant fear, under a president who is a convicted felon acting like a mob boss who is ignoring laws and the congress while making decisions through threats and intimidation.

Why did this happen? President Roosevelt faced much larger fears that he addressed in his famous 1933 inauguration speech when 25 percent of Americans were unemployed. And because of such conditions, created the modern social safety net—including social security, union protections, and unemployment insurance—to recover from the Great Depression.

But many of those guarantees have been watered down or eliminated for many Americans since then. We are the only developed country without universal health care, tuition free public college, mandated paid vacations and paid child leave, among other benefits, all major indicators of social well-being.

And Americans suffer from the greatest income inequality in the developed world, engineered by successive conservative governments who have made a concerted effort to roll back President Roosevelt’s New Deal.

They have been so effective, particularly since 1980 and Ronald Reagan’s trickle-down economic policies, that many Americans no longer feel safe, have lost faith in democratic government, and have elected to live in an autocracy—particularly in red states ruled by Republicans—in desperate fear of not only losing their vocations, but their health care and retirement pensions, including social security.

Fear is contagious, but as President Roosevelt knew, was faced down when our government reclaimed its role as a public service that protected all Americans, not just the privileged few.

Harlan Green © 2026

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Make America Weak?

 

Financial FAQs

“This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Franklin Delano Rooselvelt

theguardian.com

The Democrat’s election sweep on November 2 is proving that American voters  heeded President Roosevelt’s famous warning at his first inaugural address, that the Democrats' paralysis after the loss to Trump II is over and fear, the greatest enemy of Democracy, can be conquered.

The November 2 elections showed just how illusory were those fears that Donald Trump and Republicans wanted Americans to believe, that the largest, most prosperous country in the world had grown weak. Americans were now in danger and only he and his oligarchs could save US.

In fact, Donald Trump and the Republican Party have been attempting to weaken everything that makes America the oldest constitutional democracy since his first day in office.

He began by slashing of essential government services via Elon Musk’s DOGE computer hackers (such as social security, Medicare, Medicare) that benefit all Americans, the attempt to eliminate the the Department of Education that supports our basic universal K-12 and early childhood educational systems, while picking the most unqualified to run the FBI, Department of Homeland Services, and Health and Human Services so that they are no longer fully functional. 

The brutal roundup of undocumented immigrants, whether they have a criminal record, are decimating the ranks of workers that fill agricultural, manufacturing, and service sector jobs needed to maintain economic growth.

The biggest financial threat to ordinary Americans are the rising prices on basic necessities that most Americans depend on due to tariff rates now at Great Depression levels, impoverishing the majority of Americans that live from paycheck-to-paycheck.

It’s become obvious that the Trump administration’s intent has been to instill as much fear as possible in the most vulnerable Americans that the federal government won’t work for them and only Trump and his oligarchs can same them.

But the recent election and huge protests at the last No Kings rallies are a sign that millions of Americans haven’t been cowed or paralyzed.

In fact, they have said, as did Howard Beale, the News Anchor in the movie Network, “I’m as mad as hell and not going to take this anymore!”

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Happened to Animal Spirits?

 Financial FAQs

"We're seeing a strong divergence between animal spirits of the stock market and what we're actually seeing unfold from businesses and business leaders," a White House official told reporters Monday, CNBC reported, adding, "The latter is obviously more meaningful than the former on what's in store for the economy in the medium to long term."

FREDconsumersentiment

The White House admission that the rise in “animal spirits” over Trump’s reelection had waned and that business leaders with were guiding the financial markets lower “in the medium to long term” because of Trump’s on again, off again tariff announcements, thereby doubting the possibility that the Republican campaign promises of lower taxes and fewer regulations will be of much benefit.

Such market enthusiasm couldn’t last when it became obvious that Trump’s contradictory messaging and his lack of knowledge about foreign trade could lead to tariff wars, which in the words of a growing number of business leaders, showed “he doesn't know what he is doing”.

Consumers are beginning to catch on as well, which is resulting in the decline of their own animal spirits. The above chart of declining consumer confidence as measured by the University of Michigan last peaked in January 2024 with Donald Trump’s re-election, when consumers believed in Trump’s promises to bring down inflation on “Day 1” of his second term.

But that hasn’t yet happened, and consumers are not happy about it. In the words of the U. of Michigan’s survey director Joanne Hsu:

“Consumer sentiment fell for the second straight month, dropping about 5% to reach its lowest reading since July 2024. This decrease was pervasive, with Republicans, Independents, and Democrats all posting sentiment declines from January, along with consumers across age and wealth groups.”

The term, “Animal Spirits”, was first coined during the Great Depression to explain why consumer behaved the way they did. Roosevelt’s New Deal that gave workers more benefits, such as the 8-hour work day, workers compensation, and social security, was created to boost their spirits and led to the recovery from the Great Depression.

Nobel Laureates George Akerlof and Robert Shiller even wrote a book about it that was entitled, Animal Spirits; How Human Psychology Drives the Economy and Why It Matters for Global Capitalism.

It was an important book because it refuted the long-held theory that so-called free market, or Laissez Faire, economic theories create more sustained growth with fewer regulations.

But Republicans’ touting of the benefits of sless regulated markets was a giant lie that led to President Reagan’s trickle-down economic theories, because with little or no oversight or regulations of their trades, the wealthiest always prospered the most because they had the time and money to research the markets.

Therefore conservatives that favored less regulation had to create a myth that some of that wealth was bound to “trickle down” to Main Street and benefit ordinary wage-earners to placate voters.

Professors Akerlof and Shiller showed it was a lie. Most consumers in fact do not have the resources or knowledge to adequately research what they buy or invest in. They discovered in their research that most consumers act on hearsay, or word of mouth, in making purchase decisions, including when to buy real estate.

And because consumers didn’t or wouldn’t do the necessary historical research in early 2000 when buying homes, but believed that housing prices could never decline, they pushed up housing prices so much that builders built too many homes, which was a major reason for the busted housing bubble and resultant Great Recession.

History has shown that the tax cuts and market regulations the Trump campaign promised will make the wealthy even wealthier, and 80 percent of Americans that are wage earners, less wealthy.

It’s the real reason Trump has unleashed “Chainsaw Musk”—to terrorize government workers into quitting their jobs and destroy as much as possible of Roosevelt’s New Deal, and the laws and regulations that have benefited most Americans since then.

Harlan Green © 2025

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Record Inequality = Record Debt

 Answering Kennedy’s Call

“Never spend money before you have earned it.” Thomas Jefferson

Thomas Jefferson may not be the best person to quote on the dangers of debt—His slaves weren’t freed upon his death because his estate owed too many debts. And my Italian economics history professor lectured on the cause of the fall of the Roman Empire. Its empire collapsed when it was bankrupted because its armies had run out of territories to invade and loot.

Might our American empire might end up in a similar situation? We have transferred as much of our national wealth as possible to the top 10 percent of American households by lowering their taxes. The other 90 percent of American households are tapped out, having accumulated massive debts as household incomes have stagnated since the 1970s.

FREDdebt/gdp

The FRED graph dating from 1980 shows when our debt-to-gdp ratio began to bulge—in 1980 from 31% to 51% of GDP creating the first $400 billion national debt total.

Our national debt has now ballooned to 121 percent of GDP since because we can’t agree on how to pay for it. We may soon lose our last Aaa rating from Moody’s Investors Services who has already warned it is in danger because “Continued political polarization within U.S. Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability,” as quoted by Barron’s Randall Forsyth.

Graph: Last Tech Age

But the real debt culprit is what the political polarization has led to—our record income inequality, worst in the developed world and many of the developing countries. It is mainly because majority Republican congresses have managed to push through successive tax cuts without the means to pay for them.

The U.S. was in 106th place of the 149 countries in income inequality as ranked by the CIA’s World Factbook with a Gini inequality index of developing countries like Peru and Cameroon when I first wrote about it. Whereas Finland and the Scandinavian countries are at the top of equality rankings, Germany and France are 12th and 20th, respectively. The higher the index, the greater the gap between wealthy and poorer citizens of a country’s population.

Is our bankruptcy immanent? It is becoming increasingly difficult to pay our bills with increasing deficits, since much of the deficit is funded by other countries investing in U.S. Treasuries because the US Dollar is a world currency. But it will become increasingly expensive as foreign investors in US Treasuries will demand higher bond yields for the increased risk of default, as Moody’s Investor Services has warned.

Defaults happened in 1932, when national markets collapsed causing the Great Depression. Americans had borrowed too much and in the words of Roosevelt’s Federal Reserve Chairman Marriner Eccles, “The United States economy is like a poker game where the chips have become concentrated in fewer and fewer hands, and where the other fellows can stay in the game only by borrowing. When their credit runs out the game will stop.”

Part of the solution would be to restore the tax rates for the highest income earners that prevailed before President Reagan cut them to downsize government and enrich his Big Business supporters. The first tax cut (Economic Recovery Tax Act of 1981), cut the highest personal income tax rate from 70% to 50% and in the second tax cut (Tax Reform Act of 1986) to 38.5% among other things, per Wikipedia.

But most of the taxes would have to be paid by those he enriched, maybe even a tax on the wealth they had accumulated, i.e., the wealthiest 10 percent that benefited from all those tax cuts since 1980. Is that possible when the incoming administration wants even more tax cuts?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Another Gilded Age?

 Financial FAQs

"I remember '29 very well ... the drugged and happy faces of people who built paper fortunes on stocks they couldn't possibly have paid for. ... In our little town bank presidents and track workers rushed to pay phones to call brokers. Everyone was a broker, more or less. At lunch hour, store clerks and stenographers munched sandwiches while they watched stock boards and calculated their pyramiding fortunes. Their eyes had the look you see around a roulette wheel ...but despondency, not prosperity was just around the corner.”—John Steinbeck

Graph: Last Tech Age

This is what happened in the 1920s that led to the Great Depression and Roosevelt’s New Deal.

Marriner Eccles, Rooselvelt’s New Deal Federal Reserve Chairman was one of the first to characterize the cause of the Great Depression, when he said in testimony before congress that it was the record income inequality of that time:

“The United States economy is like a poker game where the chips have become concentrated in fewer and fewer hands, and where the other fellows can stay in the game only by borrowing. When their credit runs out the game will stop—Mariner Eccles, Federal Reserve Chairman during the Great Depression.”

The current Gilded Age began in earnest with the election of President Ronald Reagan and his credo that “government is the problem.” It has resulted in the huge transfer of wealth from workers to the owners of capital—as much as $1trillion, according to some economists—by cutting their taxes and deregulation of whole industries.

Laws were also enacted to weaken labor unions and monoply laws were not enforced so that corporations could transfer their factories overseas where labor was cheaper, basically gutting America’s middle class industrial base that has been the cause of so much anger and despair of America’s workers.

The U.S. is in 106th place of the 149 countries in income inequality as ranked by the CIA’s World Factbook; with a Gini inequality index of developing countries like Peru and Cameroon. Whereas Finland and the Scandinavian countries are at the top of equality rankings, Germany and France are 12th and 20th, respectively, as I’ve highlighted in past columns. The higher the index, the greater the gap between wealthy and poorer citizens of a country’s population.

It’s had to believe that we have reached that point once again, a time when today’s wealthiest exceed the wealth of the Vanderbilt’s, Rockefeller’s and Morgan’s tenfold that built those massive 5^th Avenue mansions at the turn of the 20^th Century to show off their wealth, before there was an income tax or Federal Reserve.

It was spawned by an economy fueled by oil, railroads, and a banking system that enabled so many consumers to go into debt, until the stock market crashed on Black Friday of 1929.

History is repeating itself with $Trillioners instead of the $Billionaires (and $Millionaires) of that era because of Sillicon Valley and the Internet that have made an Elon Musk, now the richest person in the world.

But it is at the cost of a greater concentration of wealth than ever. Today’s moguls duplicate the 20^th Century robber barons in wanting to share as little of their wealth as possible—instead, they use their wealth to elect conservative policies that lower tax rates and cut government benefits that protect the other 99 percent of Americans.

Is President Biden’s Bidenomics’s spending of $trillions to modernize America’s industrial base, infrastructure, and mitigate disasters caused by a changing climate the last gasp of Roosevelt’s New Deal programs that protect ordinary Americans?

The incoming Trump administration has tasked the richest man in the world to set up a “Department of Government Efficiency”, they say, to downsize or eliminate some of those programs to eliminate waste, but really to shrink or eliminate the health and safety programs; such as the US Environmental Protection Agency, Health and Education department, and even shrink the IRS once again to enable the $Trillionaires to better evade taxes.

Trump is clear about his intentions. He intends to pick a cabinet based on their loyalty to him as he did in his first term. Many have no qualifications; most were lobbyists with blatant conflicts of interest which resulted in many having to resign when their corruption was uncovered.

Such dysfunctional behavoir was a reason President Trump lost the House of Represetatives to Nancy Pelosi and the Democrats in 2018, and Trump lost to President Biden in 2020.

Sadly, the incoming all-Republican congress will probably give him the tax cuts, inflationary tariffs and the mass deportation of undocumented immigrants that will also be a repeat of Trump’s first term.

And many in the working class who voted for him will suffer again, and as they have throughout Trump’s working life; thanks in large part to the Elon Musk’s of the world that don’t believe in sharing their wealth.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

How Do We Fix Inflation?

 Financial FAQs

I said last week that: “Many of us remember when a gallon of gas was less the $2, or a quart of milk less than $1, or housing was last affordable in the 1970s. I remember the inflation surges in housing. What happened?”

So, Shouldn’t we as voters be able understand how to fix inflation such as we just experienced with the COVID-19 pandemic? That didn’t happened on November 5. Trump was able to convince most of his voters to blame someone rather than learn what needed to be done, and had already been done, to cure the problem.

It is now doubly important because if Trump raises tariffs and begins to deport undocumented workers on ‘Day One’ of his presidency as promised, inflation will soar again and the U.S. economy will quickly go into a tail spin.

Why couldn’t Trump voters see this? Their anger was fostered by an out of control social media catering to their own interest groups by elevating conspiracy theories and denigating scientific facts to keep their audience rather than what is good for most Americans and the American economy.

It has always been difficult to pierce the fog of propaganda and obfuscation that has dogged anything related to our economy because the U.S. economy is the most complex in the world with its competing mix of private and public enterprise needed to to make it work.

FREDcpi

The retail Consumer Price Index (CPI) in the FRED graph above dating from 1980 is the eaiest way to understand why we had high inflation spikes and how long it took for it to return to normal.

Simply put, the spikes that hurt most Americans were due to supply shortages mostly out of our control. The 1980 spike was mainly because of an oil shortage that took a decade to reverse. In 2022 the other high spike was the COVID-19 pandemic that shut down supply chains and took approximately three years to recover.

It didn’t matter which political party was in charge—Republicans in 1980 and Democrats in 2022. Both parties had the tools to mitigate the inflation surges that took some time, as I said.

How were they solved? Both political parties used their financial institutions, mainly the Federal Reserve and Treasury Department, and did not disparage them as Trump’s MAGA supporters do as a matter of policy. Because they control the flow of money—regulating whether there is too much (inflationary) or too little (deflationary) money is in circulation to counter the supply disruptions.

But playing the blame game that has enraged so many working class voters doesn’t solve the inflation problem, though it did win enough workers to the Republican side. They now must prove they actually know something about its causes.

What will hinder any good faith effort to tame inflation is the maldistribution of the money supply. Too much of it is in too few hands, a hallmark of what has been called the second Gilded Age that has favored the wealthiest since the 1970s, and not ordinary workers damaged most by higher inflation whose household incomes have stagnated since then.

We have working solutions to the inflation that has plagued the American economy for decades. But deporting undocumented workers and raising tariffs will raise inflation, since tariffs are a tax on imports, and fewer immigrants form the backbone of the supply sector (restaurants, transportation, retail, construction) that has been the mainstay of this recovery. It will cause a labor shortage, which means fewer goods and services will be produced, thus raising the price of things, as well.

This is the most basic of Econ 101 priinciples, but Trump was able to fool his voters because there is a general ignorance of economic principles.

And our capitalist system hasn’t been helping the working class since the 1970s, as I’ve said in past columns. The increasing income inequality created an almost unstoppable anger that grew after decades of income loss for working class voters as more and more wealth was shunted upward creating ever larger budget deficits.

If we are able to reverse the income inequality with more progressive taxation policies that pay for better social benefits, for instance, we might convince more voters to realize government isn’t the problem and inflation is really governed by the common sense rule of supply and demand.

They might then not choose someone who only knows how to blame but rather vote for real economic solutions to mitigate inflation.

Once Roosevelt created the New Deal in response to the Great Depression, governments began to work for ordinary Americans—from social security to a federal minimum wage, to workers rights. Only such a private-public partnership will help to cure our inflation problem.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Bidenomics Is Working!

 Financial FAQs

Brad Delong

Why are Republicans denigrating Biodenomics, the economic policies passed by a bipartisan congress since 2021 that is causing 3 percent GDP growth and 4.0 percent unemployment, with 8 million job vacancies looking for workers, and inflation back to COVID-19 pre-pandemic levels?

Republicans are playing politics in this election year, of course, but Senator McConnell has touted President Biden for rebuilding some major bridges in Kentucky with the Infrastructure Act.

In fact, the U.S. has far outdistanced other developed countries in recovering from the COVID-19. Why? Because President Biden has pulled off a great renaissance of public-private investments with said bipartisan congress, the largest investments in renewing the U.S. economy since Roosevelt pulled off the New Deal during the Great Depression..

Time Magazine described what it is meant to do: “Bidenomics argues that a large and thriving middle class is the primary cause of economic growth. “When the middle class does well, everybody does well,” the President has repeatedly explained. This is the core proposition of Bidenomics: that prosperity grows from the bottom up and the middle out.”

Vice President Harris has echoed that slogan in her campaign, because very few Americans seem to understand Bidenomics at all. A major reason is that four decades of its predecessor; Reaganomics, or Trickle-down economic policies; have badly damaged the middle class, followed by the double-whammy of COVID-19,

A Monmouth University Poll finds that just under half the public gives President Joe Biden credit for this upturn, for instance, but few say his policies are helping the middle class, especially compared to his predecessor.

“The president has been touting ‘Bidenomics,’ but the needle of public opinion has not really moved. Americans are just not giving him a lot of credit when it comes to the economy,” said Patrick Murray, director of the independent Monmouth University Polling Institute.

The poll also finds that disapproval of Congress has hit a nominal record for the past decade.

Time Magazine cites a major reason for the pessimism in a new working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation—the record inequality of the past four decades:

“…had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. “

The authors assert that since the 1970s, some $50 trillion in wealth has been transferred from workers to owners of capital with the massive deregulation of whole industries, including banking, the passing of anti-labor legislation that weakened union collective bargaining, and massive tax cuts for the wealthiest that practically halved the maximum income tax rate from 50 percent in 1980 to 28 percent today.

So, it is no wonder that workers in the Rust Belt Midwest want to return to the ‘good old days’ of post WWII, when income distribution was more equal (but with fewer Black and women’s rights)?

The problem is that has never been Republicans’ agenda, especially MAGA Republicans, still the party of the wealthy attempting to sell their credo that lower taxes and fewer government benefits will benefit all Americans.

Europeans love Bidenomics, however. “With a fast-growing economy, a strong labour market and falling inflation, the US has outpaced its counterparts in Europe and elsewhere, says a recent BBC article. That put the US at 2.5% over the course of the year, outpacing all other advanced economies and on track to do so again in 2024.”

What will it take for Americans to know and value what we have?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Government Was Never the Problem

Popular Economics Weekly

MarketWatch.com

President Reagan’s all-encompassing campaign slogan that “government is the problem” was never the problem. But competent governance has been a problem; in as much as incompetent leaders have been the problem dogging the overall prosperity and sustainable economic growth in our free enterprise capitalist system.

Herbert Hoover was an incompetent leader who was very image conscious (as is our current President). He helped to precipitate the Great Depression by ignoring the changing times—and a stock market crash due to record income inequality of that time. The “roaring twenties” unleashed so much irrational exuberance that the public came to believe anyone could become a Great Gatsby that lived beyond their means if they played the financial markets right.

It took one of our greatest presidents to look behind the mirrors to lift our spirits and win World War II. But then President Roosevelt had already a lifetime of experience running government as an Assistant Navy Secretary in the 1920s, then as the Governor of New York.

Hoover was a mining engineer before entering politics. President Reagan, the ‘Great Communicator’, was also image conscious as a former actor. His rise to power came from being the great communicator for Big Business that wanted to gain more power and globalize its work force; therefore Reagan reduced the power of labor unions to bargain for their rights and instituted trickle-down economics.

We know how that ended. Whole industries were deregulated in the name of free enterprise and allowed to form monopolies. Very little of our national wealth has consequently trickled down to the rest of us; except maybe for the top 10 percent income earners since the end of the Great Recession.

Corporate CEOs now earn more than 300 times the average salary of their employees. AT&T’s CEO is apparently scheduled to retire with a lifetime $274,000 per month pension.

President Reagan became a great leader for the wealth-holders in extracting more wealth for themselves, in other words, but not for those workers that actually produced it. And now we need competent governance more than ever to extract us from this oncoming Great Recession, or Depression, depending on how quickly Americans can return safely to work from the damage done by COVID-19.

Even Treasury Secretary Mnuchin predicts we could reach a Great Depression level unemployment of 25 percent, if we don’t return to work sooner. But studies show that the recession will be prolonged if we return to normal before implementing all the CDC-administrations guidelines of social isolation, testing, and contact tracing until an effective vaccine is created.

“We need to find ways of getting the people who are healthy, who are at lower risk, back to work and then providing the assistance to those who are most at risk, who are going to need to be quarantined or isolated for the foreseeable future,” Minnesota Federal Reserve Governor Kashkari said in a recent CBS Sunday interview.

But such a plan depends on leaders that can lead all Americans, the poor as well as wealthy. Whereas, Jennifer Senior New York Times Op-ed contributor has perhaps described the current administration best: “Vice President Pence may talk about a “whole-of-government approach” to the pandemic, but what we really have is a government of holes,” she said recently.

We will have to slog a long, hard road until we get to either an effective therapy or a vaccine, even with good leadership. It’s hard for me to see a quick, V-shaped recovery because of what we are facing, and now we have so much mixed-messaging coming from Washington that creates even greater uncertainty.

The only competent leadership is in states like New York, California, and Michigan—mostly blue states with Democratic governors. So I ask, why must the response to a pandemic that doesn’t recognize borders be so partisan?

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

When Will the Consumer Recover?

Popular Economics Weekly

BEA.gov

The key to a robust recovery will depend on how American consumers react to the novel coronavirus pandemic and business shutdown.

We were slipping into a recession, anyway. COVID-19 just sped up the inevitable result of economic mismanagement since the 1990s of U.S. growth, in what is the longest economic expansion since World War II.

Why? Can you imagine what could have been accomplished with $2 trillion if it had been put into upgrading our infrastructure, instead of tax cuts for the wealthiest that corporations used to boost their stock prices? We might have avoided what may become another severe, maybe Great Recession that put some 8 million Americans out of work for years.

Economists had been conjecturing what might have been a mild recession beginning in March, anyway, as corporations (-$13T) and the federal government (-$22T) became so heavily indebted that default rates were already climbing—whether with students and consumers, or corporations falling behind on their debt payments amid declining profits this year.

Sustainable economic growth was no longer possible, in other words. COVID-19 was the nail in the coffin oof this recovery from the Great Recession, when the most basic investments that would prolong future growth had been drastically curtailed by a deadlocked congress through much of the Obama administration—in infrastructure, education, R&D, except healthcare.

First Quarter Real gross domestic product (GDP) decreased at an annual rate of 4.8 percent in the first quarter of 2020, according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2019, real GDP increased 2.1 percent, said the Commerce Department today.

“The decline in first quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued "stay-at-home" orders in March, said the BEA. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified.”

It is a stark reminder of what has happened to economic growth since the nationwide shutdown. The question haunting economist will be the shape of the contraction—whether it is V, U, or L shaped—i.e., whether it will be a sharp and short contraction, or something more prolonged.

Any decent economic recovery will depend on whether consumers can weather the COVID-19 pandemic and maintain their jobs, of course. And that will depend on how quickly the pandemic curve flattens and so-called coronavirus ‘clusters’ are identified and isolated.

There is also a curve that measures consumers’ behavior. The moment consumer confidence begins to rise again from the dumps will be the earliest indicator of a revival—when American consumers feel secure enough to buy again, which is 70 percent of economic activity.

The Confidence Board is a survey that measures consumer confidence, and it has been sinking due to the shutdown.  It weakened significantly in April, driven by a severe deterioration in current conditions, said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

“The 90-point drop in the Present Situation Index, the largest on record, reflects the sharp contraction in economic activity and surge in unemployment claims brought about by the COVID-19 crisis.(But) “Consumers’ short-term expectations for the economy and labor market improved, likely prompted by the possibility that stay-at-home restrictions will loosen soon, along with a re-opening of the economy. However, consumers were less optimistic about their financial prospects and this could have repercussions for spending as the recovery takes hold.”

President Roosevelt most famously said, “The only thing we have to fear is fear itself,” in his first inaugural address at the beginning of the Great Depression.

We could be entering another such depression, though this downturn will probably be much shorter because so sudden. The unexpected 8.7 percent plunge in March retail sales was another sign of its depressing effect on consumer behavior.

I have seen even more pessimistic scenarios. For instance, if the pandemic lasts into 2021, it could reduce the level of global GDP by 8 percent compared with the baseline, says Gita Gopinath, the IMF’s top economist.

New York Governor Cuomo is now echoing President Roosevelt’s call to unite to fight this pandemic with his words, “It’s not about me, it’s about we.” And that means consumers have gain confidence and can unite behind and believe in the science that will ultimately defeat the virus.

 It would be nice if we had more confidence in our federal government, but that's not possible for the moment.  Yet we can support each other, and that’s what 'we' must do to conquer this pandemic.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

'It’s Not About Me…"

Popular Economics Weekly

FRED

New York Governor Andrew Cuomo is sounding like President Roosevelt when he intones, “It’s not about me, it’s about we.” in his morning COVID-19 press conferences.

President Roosevelt, who was also a New York Governor before becoming president, most famously said, “The only thing we have to fear is fear itself.” in his first inaugural address at the beginning of the Great Depression. Roosevelt was telling us we could conquer a Great Depression if we conquered our fears and came together to fight economic collapse.

We could be entering another such depression, though this downturn will probably be much shorter. The March 8.7 percent plunge in U.S. retail sales is the first major indication of the effects of the business shutdown and shelter-in-place mandates.

The severest part of the oncoming recession could  last only a matter of months if we listen to the health care experts and do the testing and contact tracing required to prevent a further spread of the novel coronavirus in all 50 states.

But the abrupt shutdown of businesses with consumers unable to shop outside of buying necessities will cause a horrific decline in economic growth—on the order of 3 to 6 percent, according to the IMF, depending on how closely Americans follow the stay-at-home recommendations.

And there are more pessimistic scenarios. For instance, if the pandemic lasts into 2021, it could reduce the level of global GDP by 8 percent compared with the baseline, said Gita Gopinath, the IMF’s top economist.

March retail sales sank a breath taking 27 percent at auto dealers and 17 percent at gas stations, two of biggest segments of the retail industry, according to the U.S. Census Bureau. Fewer people are buying cars with millions of Americans losing their jobs and millions more worrying about their next paycheck.

“Americans also drove less as an economic shutdown spread across the country, exacerbating already steep price declines caused by a global price war that has cut the cost of crude oil by two-thirds in just a few months,” said MarketWatch’s Greg Robb, commenting on the retail sales figures.

It may console us a bit that the 1930s were a much different time. The Great Depression only became ‘Great’ because it lasted 10 years over two successive recessions, until the beginning of World War II.  This COVID-19 pandemic doesn’t have to be a repeat if we keep the necessary safeguards in place long enough to prevent successive recurrences of the pandemic.

Governor Cuomo’s words could end up to be as historically significant in helping to inspire Americans, for they signal what Americans must also conquer—the narcissism exemplified by our Narcissist-in-Chief and his political party—in order to work together and ignore political affiliations and ethnic divisions.

It takes a certain kind of selflessness when many are banding together to supplement the shortage of PPE masks and clothing, while states work together to supply each other with medical equipment, like ventilators.

This is while we see President Trump’s fumbling responses to the pandemic that so exemplifies the personality disorder we seem to have been living through as a country. Maybe this worldwide pandemic will bring us out of the Age of Narcissism itself, the ‘me first’ attitude that has been the byword for the fragmentation of the U.S. into blue states and red states, white vs. brown skins, and native-born vs. immigrant divisions that our Narcissist-in-Chief has fomented to enhance his own political power.

President Roosevelt in his 1932 speech also said, “…we now realize as we have never realized before our interdependence on each other; that we can not merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective.”

Simply put, we can no longer think of just ‘me’, if we want to survive this pandemic and prevent another Great Depression.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Coronavirus, A New World War

Popular Economics Weekly

Conference Board

Nobel laureate Paul Krugman has said it might take an alien invasion to bring Americans together again to counter the threat of another economic downturn possibly as great as the Great Depression.

Well, the new threat has arrived—COVID-19, the ‘new’ coronavirus. The only way it will be defeated is if Americans can come together as we once did with the creation of the New Deal under President Roosevelt.

Today, unfortunately, we have a president who would like us to gather together in churches on April 12, Easter Sunday, to celebrate our deliverance from a pandemic that will not end for months, if not years.

He has named himself a “wartime” president yet wants to declare an armistice before the enemy has been vanquished. Why? He said, “We cannot let the cure be worse than the problem.”

But the cure will be worse because the social isolation and business shutdown required to keep the coronavirus pandemic even in check can take months; enough time to bring on a recession or depression.  And in fact it will take another New Deal, or Green New Deal to defeat the economic damage caused by new coronavirus.

Economists such as Nouriel Rubini predict we could be entering a “greater” Great Depression, even with the just-passed $2 trillion aid package that gives extended benefits to all business sectors and the unemployed.

“With the COVID-19 pandemic still spiraling out of control, the best economic outcome that anyone can hope for is a recession deeper than that following the 2008 financial crisis. But given the flailing policy response so far, the chances of a far worse outcome are increasing by the day,” he said in Project-Syndicate.

The Conference Board has predicted in three scenarios just what could be the effects of this worldwide pandemic on the U.S. economy.

1. May reboot (quick recovery): Assuming a peak in new COVID-19 cases for the US as a whole by mid-April (with some possible variation by region), economic activity may gradually resume beginning in May.
2. Summertime V-shape (deeper contraction, bigger recovery): The peak in new COVID-19 cases will be higher and delayed until May, creating a larger economic contraction in Q2 but a stronger recovery in Q3 than in the scenario above.
3. Fall recovery (extended contraction): Managed control of the outbreak helps to flatten the curve of new COVID-19 cases and stretches the economic impact across Q2 and Q3, with growth resuming by September.

The April scenario is President Trump’s wish, but he would have had to act as fast and methodically as China’s Premier Xi Jinping. That can’t happen when Trump has labeled himself as a “wartime” president but has been reluctant to use the War Powers Act that would order private industry to produce what health care workers lack now to protect themselves while treating the mushrooming population of COVID-19 victims.

The other two scenarios are called ‘V’ and ‘U’-shaped recoveries by economists, meaning the recoveries would take longer. The V-shape means a quicker recovery with a more severe downturn, as can be seen in the Conference Board graph. The ‘U’ shape means the downturn and return to growth is more gradual and over a longer term.

All of the Conference Board’s predictions posit a return to GDP growth in the fourth quarter of 2020.

But not so fast, says Dr. Rubini: “While most self-serving commentators have been anticipating a V-shaped downturn – with output falling sharply for one quarter and then rapidly recovering the next – it should now be clear that the COVID-19 crisis is something else entirely. The contraction that is now underway looks to be neither V- nor U- nor L-shaped (a sharp downturn followed by stagnation). Rather, it looks like an I: a vertical line representing financial markets and the real economy plummeting.”

Which scenario will it be? It’s obvious that the just-passed $2 trillion recovery package will keep this economy alive for a few months only. Additional aid will be required, when the initial jobless claims for just this week reported 3.28 million new unemployment claims.

The Great Depression lasted 10 years, and the layoffs have just begun for this downturn. Our best hope is that a new vaccine and treatment regimen is discovered sooner rather than later. But also that Americans are able to band together to create a ‘new’ econo,ic New Deal that protects all Americans.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Do We Need a (new) New Deal?

Financial FAQs 

Amazon

COVID-19 has finally done it. The new bi-partisan legislation working through congress that apportions money to the people and businesses that really need it—working (salaried) folk and small businesses with less access to credit—tell us why we are finally returning to an era when government was the solution (not the problem) to a more level playing field that distributed the products of work more equitably.

This is urgent not just because of the coronavirus pandemic. There will be little work as we have known it in coming decades for ordinary Americans, because of the onrushing ‘gig’ economy that will ultimately replace people in large segments of the economy with machines and more intelligent software.

Is this legislation a harbinger of a (new) New Deal?

It is taking more than a Great Recession that caused temporary pain to the one percent to return to bipartisan deal-making. Their profits came roaring back after it ended, thanks to the $700 TARP bank-Wall Street bailout and no prosecutions of the miscreants that caused it.

Such deal-making during the Great Depression was possible because we had a president and administration that understood when government should step in to soften adversity.

Government only works when there is a national consensus, in other words, such as when the unemployment rate reached 25 percent during the 1930s, there was no work to be had, and policymakers saw no other alternative.

What has triggered the sudden political consensus that has even Republican Senator Leader Mitch McConnell becoming a patriot, and now says, “this is the time for us to work together,” is the fact that the bottom seems to have fallen out of the economy. Treasury Secretary Steve Mnuchin is predicting as much as a 20 percent unemployment rate if congress doesn’t act quickly on the proposed legislation.

There are a lot of reasons for the Great Depression that plenty of economists have taken the time to explain, but not here. Just accept the fact that the private sector no longer wanted to spend, because consumers and private businesses had run out of money to buy and there was none to borrow—except from our government that creates the money, of course.

The Roosevelt administration went heavily in debt by lending to everyone that needed it—up to 120 percent of GDP, of what we produced—so that workers were hired directly by government to build our modern infrastructure, develop the Internet, build schools, and modern technologies that sent us to the moon.

Private industry couldn’t or wouldn’t do it then, as they aren’t doing it now. Treasury Secretary Mnuchin is negotiating with House Speaker Pelosi to inject as much as $1.5 Trillion into sectors that have suffered the most during the most recent recovery from the Great Recession.

What is needed? Mnuchin and Pelosi are proposing to give “most adults” $1,000 (earning less than $150,000 for a couple, maybe?) and every child $500. Aside from the money sent to families, the White House is asking for hundreds of billions of dollars to bail out the airline and other industries that have mostly been shut down as the nation to slow down the spread of COVID-19, extend unemployment insurance and boost Medicare spending due to the illnesses resulting from the new coronavirus.

MarketWatch’s Jeffery Bartash says “The short-term outlook is grim, though. A JP Morgan analyst estimated the economy could shrink by as much as 14 percent on an annualized basis in the second quarter. Such a decline — the most alarming on Wall Street — would be the biggest in modern times, even surpassing the worst of the 2007-2009 Great Recession.

It could take us back to the 1930s and Great Depression, in other words. The economy did come roaring back then; thanks in part to World War Two, unfortunately. Today there is even a better reason to put government back into the growth equation, to build in more of the safeguards that protect people and banks from the worst excesses like Dot-com or housing bubbles.

What will happen to all those less-skilled workers replaced by robots in the gigabite economy?

Books, such as Professor James Livingston’s No More Work, Why Fill Employment Is a Bad Idea, are telling us we have to think of work in new ways, as we research how to build a better economy and social safety net for those freed from the need to work to produce the things and services in the new gig economy.

Rather than having to produce the necessities anymore via work as we have known it—robots and Artificial Intelligence will be doing those jobs—people will then be able to find more creative ways to fulfill their need to have a meaningful life.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

How Do We Defeat COVID-19?

Popular Economics Weekly 

St.LouisFRED

Economists are beginning to predict the worst due to the COVID-19 outbreak that has become a worldwide pandemic.  Former Fed Vice-Chairman Alan Blinder said recently on CNBC that a recession may have already begun this March; and Jason Furman, the chief economist of Obama's Council of Economic Advisors, told Lawrence McDonnell on MSNBC that the recent record-breaking sttock and bond market volatility feels more like 1929, and the onset of the Great Depression.

The U.S. Treasury Bond market even seemed to seize up over the past several days; so the New York Fed just announced that it may buy up to $1 trillion in U.S. Treasury bonds to inject liquidity into the bond markets, which enabled the bond market to continue to function as well as injecting more money into the general economy.

Another sign just out of a looming recession is sharply falling commodity prices.  The PPI Index of Final Demand for Commodity prices has risen just 1.28 percent YOY in February, per the St. Louis Fed graph, signaling a huge drop in the demand for such products amid declining world trade; while the coronavirus has as yet no timeline for recovery.

History books say the starting point of the Great Depression is usually listed as October 29, 1929, commonly called Black Tuesday. This was the date when the stock market fell dramatically 12.8 percent. It was after two previous stock market crashes on Black Tuesday (October 24), and Black Monday (October 28).

Sound familiar?  The current market gyrations saw the stock indexes plunge 10 percent just yesterday, after several severe plunges last week. 

If such predictions prove true, then policymakers should really be looking at the need to implement  that which brought us out of said Great Depression.

It was called the New Deal that gave us good government policies and kept Americans out of serious downturns since then—until the Great Recession. The obstacle to implementing similar New Deal policies that provided federal jobs to the jobless in infrastructure building, education, and research; while protecting more than one million homeowners in danger of losing their homes; has been conservative Republican administrations since the 1980s that have worked to dilute those safeguards limiting the power of Big Business, and protecting the rights of workers.

There was also another important ingredient that created the New Deal. It was the leadership of Franklin Delano Roosevelt, one of our greatest presidents, because he inspired Americans to work together with his words.

He said, “The only thing we have to fear, is fear itself...This is preeminently the time to speak the truth, the whole truth, frankly and bold. Nor need we shrink from honestly facing conditions in our country today,” in his first Inaugural Address.

Right now, the coronavirus is an unknown fear that is devastating whole economies as businesses and individuals go into quarantine.

Yet there is no coherent national leadership today to address its spread, “to speak the truth,” just attempts to deceive and deflect from the reality of COVID-19's contagious affects.

We will need a new leader and leaders that have this capability to speak the truth to its sufferers as the coronavirus spreads to all states, and possibly one million victims.

Let us hope that the upcoming Presidential election brings us such a leader.

Harlan Green © 2020

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Is American Socialism?

Financial FAQs

What is American Socialism that candidate Bernie Sanders has talked about ever since he has been running for President? In fact, our one and only example of something that represents any definition of Socialism and concerted government planning benefiting all Americans was President Roosevelt’s New Deal.

But there has never been any actual American government ownership of businesses and its profits that is Socialism spelled with a capital ‘S’. Rather, tax revenues of private businesses and individual incomes have always financed government programs and investments.

New Deal-type programs were needed because we were living through the Great Depression with 25 percent of Americans unemployed that required government planning and investments to bring the U.S. economy back to life; and which also enabled the U.S. to win World War II.

There has never been American Socialism or socialist programs as defined by Marx-Engels’ classical definition that communist countries have espoused; that have only worked for a time in dictatorships by a wealthy elite such as rule China, North Korea and Russia.

Why did the New Deal work so well? By directing public investment in both infrastructure and the American people while building up an industrial base that could quickly convert to a war footing by converting automobile and aircraft factories to tank and military aircraft factories in 1941.

The investment in people was firstly creating social security, labor union legislation, Workman’s Compensation and other labor protections to support American workers, while paying Americans to keep working in such as planting trees, building dams, power grids, post offices, and all the public infrastructure we needed to boost the productivity of our economy.

The Roosevelt administration even created the Home Owners Loan Corporation (HOLC) to purchase and refinance more than one million delinquent home mortgages to keep homeowners who had lost jobs in their homes until the Depression was over.

Have we seen any such programs created today that helped US out of the Great Recession and the busted housing bubble? There were one-time spending boosts to public spending and the TARP bank bailout in 2007-08, but no new HOLC program to purchase and refinance delinquent loans and keep homeowners in their homes, which would have mitigated effects of the Great Recession and the tremendous losses for homeowners.

Yet even today, die-hard Republicans (and President Trump) call Bernie’s socialism no different than China’s or North Korea’s, or even Russia’s; where Russia is ‘owned’ by a very wealthy elite controlled by Putin and his oligarchs.

The New Deal was working so well by 1937 that Republicans gained a majority in congress, and convinced Roosevelt to begin to pay back the public debt that had boosted growth. But he had to reverse course in 1938 when the U.S. plunged back into the depression that lasted a total of 10 years, hence came to be called the Great Depression for its repeat performance.

The only reason the Great Recession didn’t become another Great Depression was a proactive Federal Reserve that printed $billions to create more liquidity when it realized government aid and action was necessary to fill the gap vacated by private business.

Why is a new New Deal necessary today? We are ignoring very real crises that could precipitate another Great Depression—maybe not this year or next. One such is looming Climate Change, or Global Warming, that could even create another World War says the U.S. Pentagon in several congressionally-mandated reports, as increasing droughts and rising oceans begin to drown coastal cities and even countries.

Professor James Livingston, a Rutgers University historian, has highlighted the excesses in capitalism responsible for the many post- World War II recessions we have endured (five just since 1980) in a NYTimes Op-ed.

It’s the decline of private sector investment over the past century in anything that continues to grow the American economy for all Americans. Corporations instead began to pay themselves a larger share of their profits in stock buybacks and higher CEO and executive salaries.

“So corporate profits do not drive economic growth — they’re just restless sums of surplus capital, ready to flood speculative markets at home and abroad. In the 1920s, they inflated the stock market bubble, and then caused the Great Crash. Since the Reagan revolution, these superfluous profits have fed corporate mergers and takeovers, driven the dot-com craze, financed the “shadow banking” system of hedge funds and securitized investment vehicles, fueled monetary meltdowns in every hemisphere and inflated the housing bubble.”

In the words of columnists Nicholas Kristoff and wife Sheryl Wudunn via a NYTimes’ Op-ed describing their new book, Tightrope, a chilling portrait of the decline of Kristoff’s tiny rural Oregon home town since the Great Recession, “First, well-paying jobs disappeared, partly because of technology and globalization but also because of political pressure on unions and a general redistribution of power toward the wealthy and corporations.”

Bernie Sanders doesn’t have to call his election platform Socialism, since the New Deal was not really a lesson in socialism, but how governments should work for all Americans in a capitalist, private-ownership economy.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Where Are the Leaders?

Answering the Kennedys’ Call

surveymonkey.com

The congressional impeachment hearings illustrate one overwhelming fact; America has a leadership problem. President Trump is a very weak leader. He asked the newly-elected Ukrainian President Volodymyr Zelensky (extortion or bribery are the legal terms) to publicly announce that the Ukraine would investigate Joe and son Hunter Biden for potential conflicts of interest; in order to aid his reelection campaign.

Multiple sources reported he did so reportedly at the suggestion of former Campaign Manager and convicted felon Paul Manafort’s former business partner, Konstantin Kilimnik, a Russian operative.

Where is an American leader that will stand up to Russian oligarchs and Putin, instead of Trump’s open support of Putin’s foreign policy objectives; such as Trump’s reluctance to enforce sanctions first imposed under President Obama for Putin’s invasion of the Ukraine, or the weakening of our foreign alliances, including NATO that protect the peace?

This has further endangered a young democracy invaded by a Russian-backed army that has cost some 13,000 Ukrainian lives to date, and weakened their position in any negotiated peace settlement.

It is a perhaps disconcerting fact that America’s greatest leaders only came forward at the time of our greatest perils; whether it was George Washington winning the Revolutionary War, or Abraham Lincoln leading us through the Civil War, or Franklin D Roosevelt who led us through the Great Depression and World War II.

It is an even sadder thought to imagine what would have happened to the United States of America without these and other leaders that have grown American democracy? Our best leaders have always attempted to keep us united and the world at peace.

In a recent essay, Thomas Caruthers, Sr. Vice President for Studies at the Carnegie Endowment for International Peace write how the U.S. has kept the peace:

“In the late Cold War and early post–Cold War years, the United States took the lead in projecting a vision of global democracy and making it a core foreign policy priority. Successive U.S. administrations devoted significant diplomatic capital to supporting the spread of democracy, often building coalitions among governments and within multilateral organizations to help mobilize support for democratizing governments or pressure backsliding ones.

This is while our weakest leaders—from Lincoln’s successor Vice President Andrew Johnson to Donald Trump—have intentionally or inadvertently increased our divisions. Johnson was impeached by allowing cronyism and the corruption of his officials that prevented implementation of the post-civil war Reconstruction effort, or Trump’s outright appeal to the worst of our natures that has divided Americans.

It is therefore no coincidence that Johnson was impeached, and Trump is about to be impeached for the abuse of their Presidential powers. Whether Trump will be removed from office depends on a very partisan, Republican Senate that doesn’t see such weak leadership right in front of them that will weaken the Republican Party as well.

There is also a growing danger that democracy is in decline in many other parts of the world. Chess Grand Master Gary Kasparov and Thor Halvorssen of the Human Rights Foundation detailed the current sad state of participatory democracies in a recent Washington Post article:

“At present, the authoritarianism business is booming. According to the Human Rights Foundation’s research, the citizens of 94 countries suffer under non-democratic regimes, meaning that 3.97 billion people are currently controlled by tyrants, absolute monarchs, military juntas or competitive authoritarians. That’s 53 percent of the world’s population. Statistically, then, authoritarianism is one of the largest — if not the largest — challenges facing humanity.”

Are we now approaching another period of greater peril for America and participatory democracy in general? It has called forth great leaders in the past. What about today? We know the requirements of great leadership from our history—the requirement above all that to survive as a democracy and not become an autocracy ruled by the few, we are all in this together.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

October Employment No Big Deal

Popular Economics Weekly

MarketWatch.com

Total nonfarm payroll employment rose by 128,000 in October, and the unemployment rate was little changed at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in food services and drinking places, social assistance, and financial activities.

But most were not the good-paying jobs that will support a household, or buy a home. Restaurants and bars led the way in hiring by adding 48,000 jobs. Professional jobs rose by 22,000, social-assistance providers added 20,000 jobs, and financial companies increased employment by 16,000.

Payrolls fell by 36,000 in manufacturing that mostly reflected the GM strike, and government employment slipped by 3,000.

Just the 22,000 Professional jobs are considered middle-class, white collar jobs. In fact, most consumers and jobs are stuck with low-paying service sector jobs in retail, warehousing, and even healthcare.

This is a major reason U.S. economic growth is gradually slowing, as many economists reported last week. Hence the uncertainty about an upcoming recession, since consumers are still optimistic about job prospects and flush with earnings from the very low unemployment rate.

But ‘very low’ unemployment has been masking the real problem with this recovery. Wages and salaries have not been rising fast enough, in jobs that support an adequate standard of living, to bring back anything close to boom times again for most Americans.
Why not? We have to look at the history of economic recoveries.

The Obama administration’s one-time American Recovery and Reconstruction Act of 2009 (ARRA) put some $850 billion back into governments to end the Great Recession, which boosted a flurry of infrastructure improvements, and helped to balance some state budgets, but it didn’t even begin to catch up to the $2 trillion plus shortfall in outmoded infrastructure that included not only roads and bridges, but airports, the energy grid, water and sanitation facilities (e.g., Flint, Michigan and Newark, NJ), and a K-12 elementary education system ranked at the bottom in the developed world.

This is what any responsible governance policies should continue to do. The current economic recovery has benefited just the top 10 percent in income-earners, which is the reason for so much discontent among blue collar, working folk.

It was called the New Deal when we had a leader capable of answering the call, as did a President named Roosevelt, who said just prior to his reelection in 1936: "the old enemies of peace: business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism…are unanimous in their hate for me — and I welcome their hatred." 

Livingnewdeal.org

In fact, President Roosevelt did falter in 1937, when Republican’s won a congressional majority and he agreed to attempt to rebalance the federal budget while the Federal Reserve reduced the money supply as it had in 1930; which helped to precipitate the original downturn. The U.S. economy then dropped back into a second recession, which is why it was called the Great Depression; before Roosevelt reinstituted New Deal spending programs that brought growth back to pre-Great Depression levels.

“The New Deal ushered in a Golden Age for public works, as Washington at last took a leading role in funding infrastructure,” said one study of the New Deal. “The federal government, working hand-in-hand with state and local agencies, financed (and provided relief labor for) a huge array of projects. These emphasized the newest forms of technology and infrastructure, including highways, airports, dams, and electric grids, as well as more traditional public works, such as libraries, schools and parks.”

Those same policies need to be enacted today to bring back this recovery from the Great Recession, and keep it from becoming another Great Depression.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Saving Capitalism--Part II

Popular Economics Weekly

Nobel laureate Joseph Stiglitz’s plea to save capitalism is important for a number of reasons; foremost is the survival of liberal democracy itself. Modern liberal democracies that we have known since WWII cannot survive if we cannot ‘fix’ modern capitalism to serve the majority rather than minority of its citizens.

“There are many reasons for our plight, including corporate power and greed centered on immediate profits and little regard for the impacts business decisions have on low-income Americans and the environment,” said Stiglitz. “Corporations have translated their economic power into political power, lobbying for policies that give them free rein to despoil the environment; and the swamp President Donald Trump promised to drain has been overflowing.”

It cannot survive without greater government programs to improve lives, and better control of financial markets, advantages that countries like China, the world’s second largest economy, have in competing in world markets for resources, and winning trade competitions.

One answer is what is called Modern Monetary Theory, or MMT, that both progressives and conservatives are talking about. It’s really a reincarnation of the New Deal that enabled America to pay for the Great Depression and WWII with a large amount of government debt, without raising taxes at the time that would have impeded economic growth.

Conservatives have railed against versions of MMT since Roosevelt and his Labor Secretary Francis Perkins created the New Deal—giving millions of jobs to jobless Americans, creating the social safety net and much of the early infrastructure (dams bridges, energy grids) that need updating today.
But it’s now become obvious from their 2017 tax cuts that Republicans love debt as much as anybody when it suits their purpose.

Barrons.com

Conservative publication Barron’s Magazine portrays in this graph from 1985 to 2016 the actual U.S. net savings as a percentage of GDP. It highlights the wide fluctuations in the line graph—when there were 4 years of federal budget surpluses 1996-2000 (midgraph), to the low point in net savings during the Great Recession with the massive federal deficit. Foreign net savings are in red, domestic household and business net saving in blue and gray.

MMT is being touted as a possible way to pay for AOC’s Green New Deal, universal health care and other Democratic initiatives that will create jobs for all.

But debt has to be paid back in one form or another. In post-WWII economies, 1) it does get paid back if used in advancing growth that increases revenues, and 2) debt is extremely cheap today with the world awash in excess savings that investors are begging to place where it will give a decent return. Financing U.S. budgets with ‘other people’s money’ is not so risky when there’s no safer place to put it than in U.S. dollar investments.

WWII’s 120 percent of GDP debt was paid down to less than 40 percent in the post-war years with massive growth and productivity-enhancing investments like public highways, the Internet, modern healthcare improvements and government basic research.

We are in a much better position today with a fully-employed economy. But it does subject investors to the vagaries and vacillations of the Treasury bond market, which is the safest haven for investors afraid of an economic downturn that could crater stock prices.

Democracies are also in danger with authoritarian governments springing up in Eastern Europe using Russia and China’s authoritarian examples that control the courts and public media to maintain their power.

However modern capitalism with its checks and balances has enabled the growth of prosperous middle classes at the heart of liberal democracies. No other economic system is able to produce the quantity of goods and services required for a healthy liberal democracy.

Radosław Sikorski, Polish Minister of Foreign Affairs, speaking of recent anti-democratic trends in Eastern Europe at the Wrocław Global Forum, an annual summit organized by the Atlantic Council, the city of Wrocław, Poland, and other partners, noted a startling fact--there is a common assumption that dictatorships may be better at some economic tasks because they do not have to pay attention to public opinion. Yet communist governments in Central and Eastern Europe failed to live up to that supposed economic advantage.

Sikorski explained, “My thesis is this: contrary to received wisdom, dictatorships also have public opinion and dictatorships are usually more cowardly than democrats. That is why fundamental economic reform under dictatorships – in Chile for example – is the exception, not the rule. It is usually the democrats who have to tidy up the mess, including economic mess, left by dictatorships.”

The club of rich democracies is not easy to join, per a recent piece in the Economist, but those who get in tend to stay there. Since the dawn of industrialisation, no advanced capitalist democracy has fallen out of the ranks of high-income countries or regressed permanently into authoritarianism.

This is not a coincidence, say Torben Iversen of Harvard University and David Soskice of the London School of Economics, in their recent book, “Democracy and Prosperity”. Rather, they write, in advanced economies democracy and capitalism tend to reinforce each other, as I’ve been saying. It is a reassuring message, but one that will face severe tests in years to come.

What are those tests? The largest may be how to grow an economy that benefits more of the middle and lower-income classes with greater government-funded programs, such as happened with the New Deal. That obviously hasn’t been the case since 2009 and the recovery from the Great Recession. It is already being tried successfully in many Northern European countries that reward its citizens with a larger social safety net, shorter working hours, and more leisure time.

Professor Stiglitz, Torben Iversen, David Soskice and a growing number of economists show just how liberal democracies have survived multiple wars and global recessions; by modernizing capitalism to fit modern needs. Perhaps “capitalism is the worst economic system, except for all the others,” to paraphrase Winston Churchill’s famous aphorism.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen