by Damozel | From The New York Times:
Another 651,000 jobs disappeared from the American economy in February, the government reported Friday, as the unemployment rate soared to 8.1 percent — its highest level since 1983.
Most economists now assume that the American fortunes will not improve before near the end of the year, as the Obama administration’s $787 billion emergency spending program begins to wash through the economy.
The acceleration has convinced some economists that, far from an ordinary downturn after which jobs will return, the contraction under way reflects a fundamental restructuring of the American economy. In crucial industries — particularly manufacturing, financial services and retail — many companies have opted to abandon whole areas of business.
So....the things the government has done in the past to cope with bad times aren't going to work this go-round. Handing out unemployment checks, as the article points out, isn't going to help. The only way forward is to change our whole way of thinking. People who did jobs that aren't going to come back again are going to have to be trained to do something else.
The United States has been neglecting job training programs for decades, argues Andrew Stettner, deputy director of the National Employment Law Project in New York. In current dollars, the nation devoted the equivalent of $20 billion a year on job training in 1979, while spending only $6 billion last year.
The stimulus spending bill includes $4.5 billion in additional monies for job training. But under current programs, many of those eligible for training are given vouchers that cover only a semester or two at community colleges, while careers in growth industries like biotechnology and health care typically require two-year degree programs.
Meanwhile, employers are shedding jobs as fast as they can.
The White House says there's no way to "put a positive spin" on what's happening.
Getting Republicans to address this crisis is proving to be uphill work. While they don't seem to have any ideas other than "cut taxes," they have united to oppose any plan that requires anything else.
Some Republicans can read the 50 miles high handwriting on the Wall Street. Scarecrow
at FDL points out that Republican economist Martin Feldstein, "the guy
the Republicans quoted during the stimulus bill debate," seems to think
that our only hope lies in another stimulus bill.
"Meanwhile, determined to be seen as both irrelevant and irresponsible, Senate Republicans held up the Ominibus Budget Bill yesterday because . . . it had too much spending for near-term projects," Scarecrow concludes. (FDL) At present, the Republican's input into solving the current crisis seems limited to blaming Obama (in office since for about two months -- for the crashing and burning of the Dow. The Dow is just scared to death that Obama might be a socialist! It's that simple.
One wonders what great ideas they're keeping back for just the right moment.
As to their guy Feldstein, he seems to think that what's needed is more and better stimulus. Having lost $12 trillion in household wealth, the economy now faces a $750 billion shortfall in demand, Feldstein says. And the current stimulus package isn't sufficient to solve the problem.
Moreover, a substantial part of the spending will be spread over the following decade. And some of the government spending in the stimulus package will replace other outlays that would have occurred anyway. An optimistic estimate of the direct increase in annual demand from the stimulus package is about US$300 billion in each of the next two years.
The stimulus package would thus fill less than half of the hole in GDP caused by the decline in household wealth and housing construction, with the remaining demand shortfall of US$450 billion in each of the next two years causing serious second-round effects. As demand falls, businesses will reduce production, leading to lower employment and incomes, which in turn will lead to further cuts in consumer spending.
To be sure, an improvement in the currently dysfunctional financial system will allow banks and other financial institutions to start lending to borrowers who want to spend but cannot get credit today. This will help, but it is unlikely to be enough to achieve positive GDP growth.
A second fiscal stimulus package is therefore likely. However, it will need to be much better targeted at increasing demand in order to avoid adding more to the national debt than the rise in domestic spending. Similarly, the tax changes in such a stimulus package should provide incentives to increase spending by households and businesses. (Taipei Times; emphasis added)
The Republicans don't get it. Does the Obama administrations? Krugman suggests that -- with respect to the banking crisis -- the White House is likewise
refusing to face the facts. For one thing: Geithner.
Thus, in a recent interview Tim Geithner, the Treasury secretary, tried to make a distinction between the “basic inherent economic value” of troubled assets and the “artificially depressed value” that those assets command right now. In recent transactions, even AAA-rated mortgage-backed securities have sold for less than 40 cents on the dollar, but Mr. Geithner seems to think they’re worth much, much more.
And the government’s job, he declared, is to “provide the financing to help get those markets working,” pushing the price of toxic waste up to where it ought to be...What’s more, officials seem to believe that getting toxic waste properly priced would cure the ills of all our major financial institutions. Earlier this week, Ben Bernanke, the Federal Reserve chairman, was asked about the problem of “zombies” — financial institutions that are effectively bankrupt but are being kept alive by government aid. “I don’t know of any large zombie institutions in the U.S. financial system,” he declared, and went on to specifically deny that A.I.G. — A.I.G.! — is a zombie...
The truth is that the Bernanke-Geithner plan — the plan the administration keeps floating, in slightly different versions — isn’t going to fly.
"What's going on, what's being done?" Taylor Marsh asks in frustration. "[D]o something." Such as ditching Geithner and Bernanke for a start...
More at Memeorandum....
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