Tuesday, April 26, 2011
Ideologies And Jobs
But does our current administration really subscribe to the "best place to do business" mantra? One of the notable aspects about our current recovery cycle is that recovery is coming from the large companies, not the small. We desperately need the manufacturing boost to exports, also. And we need energy.
I find it odd that we are not exploiting CO's Green River shale oil deposit. Bizarre as it seems, an Estonian company has locked up almost all the privately owned oil shale reserves in the US. Whether it will ever be allowed to do anything with them is questionable; eventually it will probably let the sites to private companies when an outraged US public demands gas at something less than $5 a gallon, and after the second recession in about three years. Shell has been doing research at the site but hasn't gotten the go-ahead. The bright line for oil shale is $60-65 a barrel to make the upfront costs bearable. Eventually the oil can be sold at $45 - $50 a barrel. It does produce a LOT of jobs. There are pollution concerns, and these projects need to be monitored and regulated. But I doubt that the pollution will be as bad as that from some of the fracking projects, which also need to be more tightly controlled.
If we were to take a bit of the boot off, we also could be starting up a bunch of Alaskan oil projects. But I don't think the boot is going to come off very soon.
Ah, well, now that we have GHG regulations, our electricity supply is going to suffer and electricity will be more expensive by far. This makes the prospect of sinking 40K into an electric car far more problematic, IMO. Congress has taken up the question; Democrats in the Senate have voted no. In 2012, a bunch of those senators are up for reelection. The first thing we need for lasting economic recovery is to get the EPA out of CO2 regulation. Either the Democratic senators will have to believe that they will lose an election for failure to act, or they will have to lose the election for failure to act. The Senate needs 60 votes, and can currently only get 50.
It seems likely that only a lot more production activity will boost the figures found in this AGC roundup.
And then there is the knotty question of ideology and unions. Boeing built a plant in SC for its 787 Dreamliner. An NRLB complaint is trying to force Boeing to shut it down, on the grounds that the plant is being built to retaliate for the relatively constant strike pattern in Washington State. NY Times article. Salon article, which willfully ignores the reality that people are being hired for both plants. Boeing needs to scale up production, so no workers are being laid off in Seattle - in fact more workers are being hired.
It is far cheaper to build and operate a plant in SC. Of course, over time it is probable that the ability of the union in Seattle to hold Boeing hostage will diminish. I think that Boeing will eventually win on this one, but it is going to be costly.
If Boeing doesn't win, it will obviously build plants outside the country to do the same thing. Needless to say, SC is quite perturbed about the NRLB complaint. SC put in quite a bit of money to get the plant and to get these jobs. I am perturbed because if this goes through, it would be a reckless and foolish management that ever built a manufacturing plant in this country in any state that isn't right-to-work, and if the management of the company already has a plant which has struck, they would have problems building new plants to expand production.
Note that the NRLB was kind of packed in 2010 with two recess appointments of labor lawyers. HuffyPost's Dean covers the brilliance of the move. Mother Jones quoting NY Times:
The 15 appointees to boards and agencies include the contentious choice of union lawyer Craig Becker to the National Labor Relations Board. Republicans had blocked his nomination on grounds he would bring a radical pro-union agenda to the job, and they called on Obama not to appoint Becker over the recess.
Obama went ahead anyway, while also choosing a second member for the labor board so that four of its five slots will be filled. The board, which referees labor-management disputes, has had a majority of its seats vacant for more than two years, slowing its work and raising questions about the legality of its rulings.
"Radical" is something of an understatement. Becker was the SEIU general counsel. In theory the NRLB is supposed to supervise union misdeeds as well as management misdeeds; in practice Becker doesn't even favor fair voting for unions. CBS News.
The bottom line is that our trade imbalance is driving our economic woes:
This is trade imbalance (blue long line), Jolts Hires (low green line) and total employment in nonfarm private goods-producing ADP.
Graph from St. Louis Fed Fred.
Now Krugman's partly crazy. He's transposing cause and effect. There is no need for the rest of us to drink whatever he is drinking.
If we want to improve our standards of living, we have got to attack the trade deficit. The one benefit of the Fed's recent actions is that it makes us more competitive in manufacturing. If we do not redress some of the structural causes of an unwillingness or inability to invest in manufacturing in the US, we will get the worst of both worlds - declining standards of living AND poor employment/lower wages. I cannot vote for this paradise.
If we could get some old-fashioned Democrats into national politics, I would probably prefer to vote Democratic for a while. But as it is, what I have seen coming from the Democratic party in recent years is a prescription for national economic suicide. A welfare state funded by financial bubblizing rapidly turns into a declining welfare state, which is what we have. I don't want it.
The axe is about to fall:
It won't fall as hard or quite as fast as it did in 2008, because of the time effects and the fact that in 2008, the energy recession combined with a credit recession. Chirpy Fed talk about transitory inflation has one unnoted side effect, and that is a recession. You cannot cut real wages for so many without it traveling through an economy that is still hugely biased toward consumer spending. The only time when you don't get a recession from declining real wages is when people can draw on credit to supplement wages, or when people are getting big income subsidies from the government. Most people cannot afford to run up their private credit again, and as a nation, every time we borrow another dollar now, we are really taking $1.20 away from a future retiree.
Gasoline is due to go up further, because oil prices have risen very quickly. If the Fed doesn't launch QE3 in July, oil prices may slack a little, but not that much:
For the first six months of the current fiscal year, the US ran a bleeping deficit of .829 trillion dollars. April's tax receipts will slow the apparent rate of growth, but not by that bleeping much. The deficit so far in 2011 is MORE than the deficit to date in 2010:
MARCH (Total deficit 716,990 or .717 trillion) 65,387
OCTOBER 140,432Revenues to date in 2010 were 953,892. Revenues to date in 2011 are 1,019,896. So yes, spending is the reason.
MARCH (Total deficit 829,410 or .829 trillion) 188,153
We are following an inflationary policy in every way, and worse, it is an inflationary policy that shifts revenue to higher income earners while taking it away from lower income earners. That is insane.
Both the Republicans and the Democrats are deeply complicit. It would be wonderful to vote 80% of them out. To do that we need a new party. Right now our national policies are a compendium of the most destructive tendencies of each party. The Republicans want huge tax breaks for people who are doing very well, and the Democrats want to constantly increase spending and prevent any sort of capital/production investment. And, in a bipartisan deal brokered by a president who is supposed to be progressive, in December they agreed to give us this, this, this... disgusting recipe for self-immolation.
To understand why these deficits are such a big deal, the Social Security Trust Fund has about 2.7 trillion in it. But we're spending that in advance, so the reason why we are talking about cutting Social Security checks in the future is because of present irresponsibility.
To quote Mark:
I was once teased at my last company for saving so much.
Coworker: "Why save so much? You'll be too old to enjoy it anyway."
Me: "If I am too old to enjoy money when I am older, then I will definitely be too old to enjoy working.
At the time, lefties had a wonderful time hooting and hollering about the apparent paradox in that statement. But if you read it as a plea not to expand government-funded health care, for fear of breaking what we already had, it's quite rational. The Tea Party is, or at least was, mostly about preventing further growth of spending, so as not to lose the old-age benefits that early-wave Boomers are counting on.
They were too late. They failed.
So now what will the Tea Parties do, since there's little left to lose?
At some point, Boomers will start to realize how this affects them personally. I haven't managed to convince the boyfriend that Obamacare means they would rather see him live out his life in a wheelchair than pay for another hip replacement surgery. When those things start to happen, they'd better figure out a way to disenfranchise the Boomers as well.
Persons have always been told that their FICA taxes paid throughout their working lives go into a "trust" and that when they build up enough in their "account" they are then entitled to benefits. And SS even helpfully sends you a statement.
So it's as if the Federal government passed a law saying that they were going to pay for eye benefits for poor people by reducing everyone's tax refund by $250. People look at it as "their money".
Judging by what I see on DU, the fight has only just begun.
That is why the CBO keeps saying that the Medicare "savings" enacted in ObamaCare won't materialize. When it actually comes to implement the cuts, it won't happen. Just as it didn't last year.
More than the boomers. SS and Medicare are a huge benefit to the children of the parents.
--ever-more-ambitious regulations (viz industrial boiler rules)
--increasing energy costs (possibly held at bay by cheap nat gas, but there are efforts underway to screw this up)
--tax code which discriminates against tangible-asset intensive businesses
--cultural prejudice against manufacturing
What kills me about this is that we have the basics. I can practically feel the floor forming up under us.
But we just never let go of our bad ideas.
It is not true at all that the US has to steadily lose manufacturing jobs. We won't ever get back the retire-at-55-w/full-lifetime-family-benefits, because that was always unsustainable.
But manufacturing generates masses of jobs, even if they aren't directly on lines.
WE CAN DO IT. But our ideology is lethal. Not only can we do it, but we can do it without losing most of our environmental gains.
Jobs are slip sliding away.
I've updated the earlier 36.2 million missing jobs chart with this new and improved 37.9 million missing jobs chart. It has been 8 months after all.
"You go nationally bankrupt with the politicians you have, not the politicians you'd prefer to have."
Best quote ever!
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