You know it's bad if the notorious deregulator, bad trade deal promoter, DLC Economist Larry Summers is calling the economy sick and halfway through a lost decade:
US is now halfway to a lost economic decade. In the past five years, our economy’s growth rate averaged less than one per cent a year, similar to Japan when its bubble burst. At the same time, the fraction of the population working has fallen from 63.1 per cent to 58.4 per cent, reducing the number of those in jobs by more than 10m.
Summers is right, if one takes the average GDP growth from 2006 to 2010, we have a whopping 0.96% GDP growth. We've also shown, in the unemployment report the employment participation rate is down the 1980's levels. Below are the number of payroll jobs since January 2001. That's over 11 years and we are down -1426 jobs.
A sick economy constrained by demand works very differently from a normal one. Measures that usually promote growth and job creation can have little effect, or backfire. When demand is constraining an economy, there is little to be gained from increasing potential supply. In a recession, if more people seek to borrow less or save more there is reduced demand, hence fewer jobs. Training programmes or measures to increase work incentives for those with high and low incomes may affect who gets the jobs, but in a demand-constrained economy will not affect the total number of jobs. Measures that increase productivity and efficiency, if they do not also translate into increased demand, may actually reduce the number of people working as the level of total output remains demand-constrained.
Summers is referring to Japan, who had their own real estate speculative bubble and unfortunately responded similarly to how the U.S. did. Therefore it's no surprise our economy is suffering, like Japan's has. Yet, we've already suffered before this. The last 11 years have been the lost decade for jobs.
At last, Summers is right on calling the economy the lost decade and is calling for infrastructure projects, which is investment spending as well as a jobs program. Summers is also calling for a payroll tax and to stop this never ending nonsense on debt, deficits and inflation in order to focus on growing the economy.
That said, the obvious, bad trade deals, offshore outsourcing and a group of multinationals who literally are writing jobs policy is no way to recover the economy. Either is resurrecting a dead Hoover, demanding balancing the budget somehow will solve our problems. It will not, not with this weak of an economy and a job crisis.
Summers seems to almost be warning the White House, never mind Republicans, that tackling the deficit is the wrong policy at the wrong time. So is Ben Bernanke.
These absurd debt ceiling and deficit reduction games of chicken must be getting serious. The CBO also came out gunning about the threats to not raise the debt ceiling, calling it a dangerous gamble that will add to the deficit. The CBO is also warning America is in for a world of hurt, a warning on their revised economic growth projections.
Of course tax increases never come up in these never ending cut spending arguments, while people are screaming from the rooftops, now even Larry Summers, the real crisis is a jobs one. All roads lead to jobs and without them, nothing else will happen. Take heart all HR layoff slashers and COO bean counters, jobs matter and literally can pull down a national economy.
So, is anyone out there willing to step up to the plate and pass policy that will actually help?
The Nation did some digging and routing and found 5 smart bills in Congress, that you've never heard of. These pieces of legislation will no doubt will never see the light of day because they make sense and would greatly help the economy and the middle class:
- The 21st Century Civilian Conservation Corps Act [H.R.494]
- The Shortening Hours and Retaining Employees (SHARE) Credit Act [H.R.4179]
- The Federal Reserve Transparency Act [H.R.459]
- The Foundations for Success Act [S.294]
- The Fairness in Taxation Act [H.R.1124]
We can add to the Nation's list, a transaction tax on stock market trades, focusing on flash trading and derivatives, ban all Federal and State jobs offshore outsourced, bring them back and immediate across the board tariffs against China imports in response to their currency manipulation.
There are a lot of great ideas, polices that really could turn the U.S. economy around. The problem is they are drown out, lost in nonsense noise by people who have an agenda, but economically, don't know what they are talking about.
When even Larry Summers is writing op-eds, calling for action, perhaps it's time to raise your own voice and deficit reduction ain't it.