Obama’s Absurd Sequester Scheme

Making a Terrible Situation Worse
by DEAN BAKER


The big talk in Washington this month is the sequester cuts. These cuts are roughly 8 percent of most areas of discretionary spending, both military and domestic. While the cuts became effective at the start of March, many will first begin to pinch this month since government contracts generally require 30 day advance notice for leaves or furloughs. This means that cuts in areas such as airport security, food inspectors, and air traffic controllers are just now taking effect.

The Democrats have been yelling loudly about the damage that these cuts will inflict on specific programs and the economy as a whole. They do have a case. The cuts will whittle back spending in a wide variety of areas. Some of these, like the cuts to airport security and food inspections will have an immediate impact. We will see longer lines at airports and are more likely to find ourselves eating contaminated meat.

The impact of other cuts, like reductions in spending on infrastructure maintenance and medical research, will only be seen over the long-term. We will see a gradual worsening in the quality of the infrastructure and less medical progress.

In addition, the reduction in spending at a time when the economy is already weak will further slow growth and weaken job creation. The March jobs report helped to remind everyone of this problem. The economy created just 88,000 jobs in March, less the number needed just to keep pace with the growth of the labor force.
For some bizarre reason, prior to the release of the report many economists were making bold claims about how the economy had turned the corner and the recovery was picking up steam. It’s not clear what these folks had been smoking.

The economy was growing at just a 1.7 percent annual rate in the second half of last year. The most recent data on new orders for equipment showed that investment was just even with its year ago pace. And the rate of job creation over the prior five months was actually down by an average of 40,000 from the same months a year earlier.
None of this looked like a story of accelerating growth. Thankfully the March jobs report helped bring the discussion of the economy back to reality. The experts again recognized that we have a problem of a seriously depressed economy that is at best just growing rapidly enough to keep pace with its underlying potential, meaning that it is making up none of the lost ground from the downturn.

In this context, the hit from the sequester is clearly bad news. The Congressional Budget Office projects that it will reduce growth in 2013 by 0.5 percentage points costing as many as 700,000 jobs. With the sequester in place there is a high probability that the unemployment rate will be higher at the end of the year than it was at the beginning.

But there is a limit to how much President Obama and the Democrats can really complain about the sequester. The reason is that President Obama himself set a course for large cuts in discretionary spending. His budget for 2012, which was put out before the deal with the Republican Congress, called for discretionary spending to be 7 percent less in 2021 than it had been in 2010, in nominal dollars. This budget would have implied cuts in services of more than 40 percent since the economy was projected to be more than 60 percent larger in 2021 than in 2012. This means that most of the bad stories that we are hearing about from the sequester cuts likely would have been the result of the cuts that President Obama had laid out himself, even if they would have been phased in more slowly.

The furloughs and layoffs of public sector workers also have their roots with President Obama. After all, it was his idea to freeze the pay of federal employees back in 2011, implying that we have a problem with overpaid government workers. Is it a surprise that the Republicans want to push the attack one step further?

And President Obama basically accepted the Republicans’ framing of the story of the downturn which turned reality on its head with the line about out of control budget deficits. Fans of arithmetic know that the large budget deficits are the result of the economic collapse. In fact budget deficits were modest prior to the downturn and were projected to remain small even if the Bush tax cuts were no allowed to expire at the end of 2010 as originally scheduled.

In this context, it is a bit hard to get too excited about the sequester. Yes, it is very bad news, but we were looking at the prospect of large cuts to the budget even before the sequester. And yes, it will slow growth and increase unemployment, but we were already looking at a government that seemed content to allow the country to needlessly lumber through a prolonged period of high unemployment.

The sequester makes a terrible situation somewhat worse, but the idea that everything would be just fine if we just stopped the sequester is nuts. We should be talking about reversing the austerity agenda more generally. The Democrats’ hysterics about the sequester should be recognized as the theater it is.

Even worse the idea pushed by President Obama, that we should be prepared to accept large cuts to Social Security and Medicare to get back to the slow motion sequester is almost too absurd for words. If he raised this plan anywhere other than Washington he would have been laughed out of town. Certainly those of us who do not work for hacks and hedge funds should treat this scheme with the derision it deserves.

100 Million Poor People In America And 39 Other Facts About Poverty

July 25, 2012

Every single day more Americans fall into poverty. This should deeply alarm you no matter what political party you belong to and no matter what your personal economic philosophy is.

Right now, approximately 100 million Americans are either "poor" or "near poor".  For a lot of people "poverty" can be a nebulous concept, so let's define it.  The poverty level as defined by the federal government in 2010 was $11,139 for an individual and $22,314 for a family of four.  Could you take care of a family of four on less than $2000 a month?

Millions upon millions of families are experiencing a tremendous amount of pain in this economy, and no matter what "solutions" we think are correct, the reality is that we all should have compassion on them.  Sadly, things are about to get even worse.  The next major economic downturn is rapidly approaching, and when it hits the statistics posted below are going to look even more horrendous.

When it comes to poverty, most Americans immediately want to get into debates about tax rates and wealth redistribution and things like that.

But the truth is that they are missing the main point.

The way we slice up the pie is not going to solve our problems, because the pie is constantly getting smaller.

Our economic infrastructure is being absolutely gutted, the U.S. dollar is slowly losing its status as the reserve currency of the world and we are steadily getting poorer as a nation.

Don't be fooled by the government statistics that show a very small amount of "economic growth".  Those figures do not account for inflation.

After accounting for inflation, our economic growth has actually been negative all the way back into the middle of the last decade.

According to numbers compiled by John Williams of shadowstats.com, our "real GDP" has continually been negative since 2005.

So that means we are getting poorer as a nation.

Meanwhile, we have been piling up astounding amounts of debt.

40 years ago the total amount of debt in the United States (government, business and consumer) was less than 2 trillion dollars.

Today it is nearly 55 trillion dollars.

So we have a massive problem.

Our economic pie is shrinking and millions of Americans have been falling out of the middle class.  Meanwhile, we have been piling up staggering amounts of debt in order to maintain our vastly inflated standard of living.  As our economic problems get even worse, those trends are going to accelerate even more.

So don't look down on the poor.  You might be joining them a lot sooner than you might think.

The following are 40 facts about poverty in America that will blow your mind....

#1 In the United States today, somewhere around 100 million Americans are considered to be either "poor" or "near poor".

#2 It is being projected that when the final numbers come out later this year that the U.S. poverty rate will be the highest that it has been in almost 50 years.

#3 Approximately 57 percent of all children in the United States are living in homes that are either considered to be either "low income" or impoverished.

#4 Today, one out of every four workers in the United States brings home wages that are at or below the poverty level.

#5 According to the Wall Street Journal, 49.1 percent of all Americans live in a home where at least one person receives financial benefits from the government.  Back in 1983, that number was below 30 percent.

#6 It is projected that about half of all American adults will spend at least some time living below the poverty line before they turn 65.

#7 Today, there are approximately 20.2 million Americans that spend more than half of their incomes on housing.  That represents a 46 percent increase from 2001.

#8 During 2010, 2.6 million more Americans fell into poverty.  That was the largest increase that we have seen since the U.S. government began keeping statistics on this back in 1959.

#9 According to the U.S. Census Bureau, the percentage of "very poor" rose in 300 out of the 360 largest metropolitan areas during 2010.

#10 Since Barack Obama became president, the number of Americans living in poverty has risen by 6 million and the number of Americans on food stamps has risen by 14 million.

#11 Right now, one out of every seven Americans is on food stamps and one out of every four American children is on food stamps.

#12 It is projected that half of all American children will be on food stamps at least once before they turn 18 years of age.

#13 The poverty rate for children living in the United States is 22 percent, although when the new numbers are released in the fall that number is expected to go even higher.

#14 One university study estimates that child poverty costs the U.S. economy 500 billion dollars a year.

#15 Households that are led by a single mother have a 31.6% poverty rate.

#16 In 2010, 42 percent of all single mothers in the United States were on food stamps.

#17 According to the National Center for Children in Poverty, 36.4 percent of all children that live in Philadelphia are living in poverty, 40.1 percent of all children that live in Atlanta are living in poverty, 52.6 percent of all children that live in Cleveland are living in poverty and 53.6 percent of all children that live in Detroit are living in poverty.

#18 Since 2007, the number of children living in poverty in the state of California has increased by 30 percent.

#19 Child homelessness in the United States has risen by 33 percent since 2007.

#20 There are 314 counties in the United States where at least 30% of the children are facing food insecurity.

#21 More than 20 million U.S. children rely on school meal programs to keep from going hungry.

#22 A higher percentage of Americans is living in extreme poverty (6.7 percent) than has ever been measured before.

#23 If you can believe it, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.

#24 A lot of younger Americans have found that they cannot make it on their own in this economy.  Today, approximately 25 million American adults are living with their parents.

#25 Today, one out of every six elderly Americans lives below the federal poverty line.

#26 Amazingly, the wealthiest 1 percent of all Americans own more wealth than the bottom 95 percent combined.

#27 The six heirs of Wal-Mart founder Sam Walton have a net worth that is roughly equal to the bottom 30 percent of all Americans combined.

#28 At this point, the poorest 50% of all Americans now control just 2.5% of all of the wealth in this country.

#29 Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs.

#30 Right now, the United States actually has a higher percentage of workers doing low wage work than any other major industrialized nation does.

#31 Half of all American workers earn $505 or less per week.

#32  In 1970, 65 percent of all Americans lived in "middle class neighborhoods".  By 2007, only 44 percent of all Americans lived in "middle class neighborhoods".

#33 Federal housing assistance outlays increased by a whopping 42 percent between 2006 and 2010.

#34 Approximately 50 million Americans do not have any health insurance at all right now.

#35 Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, approximately one out of every 6 Americans is on Medicaid.

#36 It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.

#37 Back in 1990, the federal government accounted for 32 percent of all health care spending in America.  Today, that figure is up to 45 percent and it is projected to surpass 50 percent very shortly.

#38 Overall, the amount of money that the federal government gives directly to the American people has risen by 32 percent since Barack Obama entered the White House.

#39 It was recently reported that 1.5 million American families live on less than two dollars a day (before counting government benefits).

#40 The unemployment rate in the U.S. has been above 8 percent for 40 months in a row, and 42 percent of all unemployed Americans have been out of work for at least half a year. (Though that's the bogus govt rate, the real unemployment rate is about 22%--see the previous article to see how badly the govt. distorts employment numbers.--jef)

Recently, I wrote a long article about why there will never be enough jobs in the United States ever again.

That means that a whole lot of Americans are not going to be able to take care of themselves.
As our economy gets even worse, there is going to be a tremendous need for more love, compassion and generosity all over the country.

Don't be afraid to lend a helping hand, because someday you may need one yourself.

President Obama, the Jobs Crisis and Corporate America’s Game Plan

by Jack Rasmus
Tuesday, February 15, 2011 by In These Times

On February 4, the Labor Department released its latest jobs report for the month of January. It showed a deep decline in net jobs created—only 36,000 last month, according to the Bureau of Labor Statistics (BLS).

This was about a third of the average 90,000 jobs created in each of the two preceding months, November-December 2010. For the past three months, November through January, the average number of net jobs created per month has totaled about 70,000. (To put this in perspective, 150,000 jobs need to be created each month just to absorb new entrants into the workforce.)

This dismal job creation of the last three months followed last summer’s even worse jobs performance, during which job creation was negative for three consecutive months, from May through July 2010—a total of 391,000 jobs lost. Barely half of those jobs were ‘recovered’ from that summer slump. That ‘recovery,’ given last month’s mere 36,000 jobs, appears to be faltering even further once again.

The overall jobs picture for the past nine months has thus been one of renewed collapse in jobs, followed by stagnation in job creation. Together with the current double dip decline underway today in the housing market and the rapidly deepening fiscal crisis in state and local governments, the failure to generate a recovery in jobs represents the three great economic failures of the so-called current economic ‘recovery’—three great failures that the Obama administration still continues to inadequately address.

Following publication of the dismal January jobs report, in his weekly radio address Obama asked the nation's businesses to start creating jobs. After all, it had more than adequate funds to do so—i.e. more than $2 trillion in cash on hand it was hoarding.

Two days later, on February 7, Obama appeared before the U.S. Chamber of Commerce in its annual meeting in Washington D.C. and raised the same theme: Business should start creating jobs given its record level of cash. As Obama put it in his speech to the Chamber, it was time they “get into the game” of investing in the U.S. and creating jobs in America. Business investing offshore instead of in the United State, Obama added, “breaks the social compact” and “makes people feel as if the game is fixed.”

The response of the attendees at the Chamber of Commerce event was not particularly warm. CEOs' remarks in the business press ranged from saying that merely hiring more workers won’t necessarily stimulate consumption, which is what was needed first. Other CEOs added they wanted still more deregulation, more tax cuts and reductions in Medicare and other entitlements to reduce the budget deficit before they would invest and create jobs.

In short, what they wanted was even more incentives and concessions from the Obama administration before they would “get in the game,” as Obama put it.

The other game plan

What Obama and his advisers apparently don’t understand is that the Chamber, and Big Business in America in general, are pursuing a ‘different game plan’ than Obama’s. They have no intention of committing any large part of their current $2 trillion cash hoard on investing and job creation in the U.S. The lion’s share of that $2 trillion is already pre-committed in corporate business plans today to other uses. Those other uses include a massive stock buyback program and dividend payout increases to enrich their major investors and senior managers, which is now just beginning to roll out.

Obama’s team should learn a lesson from recent U.S. economic history. Between 2002 and 2006, Corporate America embarked upon a similar record stock buyback-dividend payout game. During those years they disbursed $2.6 trillion in corporate retained earnings in buybacks and payouts. The buybacks-payouts were most timely, given the then-historic $3.4 trillion in Bush tax cuts introduced between 2001-2004 that primarily benefited investors.

Capital gains, dividends, inheritance, and other taxes were reduced dramatically for investors between 2002-2006. The record buybacks-payouts promptly followed. Their corporate benefactors quickly ‘passed through’ the $2.6 trillion to their investors and senior managers. Afterward, investment in new plant and equipment barely grew in the U.S. And it took 46 months, not until late 2004, for jobs just to recovery to levels that prevailed in January 2001.

Given the recent extension of the Bush tax cuts for another two years, the timing is now perfect once again for a repeat in 2011 of that multi-trillion dollar handout that occurred in 2002-2004. The timing is once again perfect for corporations to pass through trillions of dollars more, given its cash hoard of $2 trillion on hand, in stock buybacks, dividend increases, and offshore acquisitions. That is the corporate ‘gameplan’ for 2011—not Obama’s plea to invest in America and job create here.

It is Obama who is “not in the game” because Corporate America’s game is not the one he wants to play. They will ‘play,’ but only on their terms and according to their rules—not his. And if he doesn’t like it, then he can just take his ball and bat and go home. That’s the message of February 7. (And, oh yes, someone should also tell Obama and his team that the so-called ‘social compact’ he says corporations are risking by not creating jobs was broken at their initiation decades ago, under President Ronald Reagan or even earlier.)

The new age of 'concession bargaining'

What we are witnessing today is the extension of ‘concession bargaining’ that was introduced by Corporate America and its managers at the industrial level three decades ago. The result at the industrial level was stagnating weekly real earnings, loss of ten million manufacturing jobs, and a collapse of the union movement in the private sector from more than 20% to less than 7% of the workforce unionized today. The last remaining bastion of unionization, the public sector workers, are now firmly in the corporate-government crosshairs for a similar rollback in membership, earnings, and benefits.

What we are witnessing today is the expansion of concession bargaining from the industrial to a social-wide scale. We are entering a period of social programs and social benefits ‘concession bargaining’ on a grand scale. And Obama and governors or states are the ‘negotiators’ in charge of delivering the ‘sweetheart’ contracts that will lower the standard of living for the country's 100 million middle and working-class households.

The problem with job creation in the U.S. today is not that business has not been given sufficient incentives to create jobs or invest in the U.S. Quite the contrary, they’ve been given historically generous incentives and cash injections by the Obama administration in its first two years, with even more apparently planned.

(Just a few examples: the $400 billion in business tax cuts in Obama’s original 2009 stimulus package. Hundreds of billions of dollars more in additional tax cuts, accelerated depreciation write-off rules, direct corporate subsidies, and government subsidized low cost loans between June 2009 and December 2010. Add a further $400 billion more in the recent extension of the Bush tax cuts last December. And let’s not forget the biggest handout of all—the $9 trillion in zero rate loans extended to virtually all banks and financial institutions by the Federal Reserve over the 21 months between the collapse of the banking system in late 2008 and last summer.)

Without this historic handout and subsidization of Corporate America by the federal government, big business could never have accumulated the $2 trillion cash hoard it has on hand today. Obama’s original 2009 ‘gameplan’ was to bailout banks, businesses and investors in the expectation they would eventually create jobs, lower mortgage rates and adjust terms to save homeowners and boost state tax revenues again. But that did not occur and there is little sign, moreover, that it will in 2011.

The president's recent encounter with the U.S. Chamber of Commerce clearly reveals that Corporate America has already changed the game and left the field in the middle of the fifth inning, leaving Obama standing there alone with no one to pitch to.