Double dip or double down? A double double? The question is whether we are simply procrastinating on realizing that technology is essentially deflationary and we are accumulating a waiting list of unemployment. President Obama’s dinner with Silicon Valley high tech leaders last February was to urge them to invest some of their cash hoard with the expected employment payoff. Truthfully such an action would likely reduce personnel requirements, and further incentives to stimulate capital investment may hasten the demise of certain employment categories.
The sixty-four million American on Food Stamps is disheartening and an unemployment rate within hailing distance to the Depression if we use the same metrics is equally disconcerting. Even a rudimentary perusal of the economic indicators is showing marked increases of productivity with less hands on deck with the average period of unemployment on the increase. And there is still a hefty backlog of foreclosures on the horizon. Corporate profits are growing while, simultaneously, despite significant quantitative easing by the Federal Reserve, the core inflation rate is remaining below 2%. So, the dough is there but not much velocity. But, it seems to be our lot when we continue to rely on stock market titans for hiring leadership given and considering the technological game changing scenarios on the horizon.
We have some hot August nights, the stock market, despite the Feds best effort to inflate it, is tanking. Someone wants bear and it could get worse. People are rioting and foreclosures are accelerating. There is no shortage of answers from the usual suspects. And the voter, John and Jane Q Citizen? Well, they are becoming increasingly frustrated and angry.The result is jumping on one demagogic political bandwagon after another hoping to hit the lotto:
Stimulus! says Paul Krugman from the pulpit of the New York Times. Open the faucets. Stimulus! If this unleashing of financial fury was a metaphor for sexual appetite it would be easier to comprehend the near mystical ravings of Keynesian zealot with the attitude of a dope fiend. His demagoguery of waving the pennant of the Great Depression vol II owes more to the tactics of say a Rabbi Meir Kahane than a cerebral economist. Equally daft are the supply side shillers recycling Milton Friedman’s pencil example. Helas, more tax cuts will not “trickle down” to higher employment either. But who will sell the pencil sharpeners?
The administration has been talking about jobs – but White House aides tell the New York Times that there are no “magic beads” (aren’t they magic beans?) to encourage new jobs. Certainly the White House is offering no magic beads (or beans) — but that it isn’t to say that there aren’t good proposals out there that could have a positive impact on jobs and investment (the next column).
First, the administration’s proposals – a continuation of the payroll holiday for employees and an extension of the unemployment benefits for long-term unemployed. In addition, the administration has put forward a package of proposals to encourage hiring for veterans.Read More:http://www.forbes.com/sites/deanzerbe/2011/08/09/obama-tax-proposals-to-create-jobs-no-magic-beans/
According to Michael Ferguson the best course of action is to limit the Debt to GDP ratio to a value that the credit rating agencies require in order to keep or regain the triple A bond rating.Also, according to his latest posting “you know that we are heading right into the teeth of a wave of technological unemployment. In fact, all unemployment, and then some, based upon the 2001 GDP per Non-Farm Worker rate, is technological. My guess is unemployment in the U.S., and most of Europe, in the absence of constructive governmental intervention, will look something like this over the years of The Transformation..
If there is a way to improve matters from the current 9.2% range (slightly lower in Europe), it will not be easy and it won’t be done using Industrial Age economic and political thinking. In fact the normal, Industrial Age thinking about the use of fiscal and monetary policy to grow jobs is likely to backfire.” Read More:http://thefuture101.blogspot.com/
It is highly unlikely that the continuation of the payroll holiday will have a brass band greeting it on Capitol Hill. This proposal has been solely the President’s –neither Republicans nor Democrats on the Hill have been big fans. The price tag for the one year extension is over $110 billion dollars. Last time (December 2010) the Republicans agreed to the payroll holiday was part of a much bigger agreement on extending all the Bush/Obama tax cuts.
I can’t see a pathway where the Republicans will just by-your-leave bless a $110 billion dollar tax cut that is a priority for the administration. The Republicans will have their own tax priorities and there will remain concerns by many about the impact on the deficit. So the question is will the $110 billion be offset (the administration appears silent on this question and if the answer is yes – what are the offsets? – you could confiscate all the corporate jets flown by the Fortune 500 CEOs and not even begin to raise $110 billion dollars). The administration is going to have to be willing to give up a lot to get the payroll holiday extended (lobbyists are already beating the drums again for a repatriation holiday)….
…The same problems are at hand with the extension of the unemployment benefits. While the costs for an extension are somewhat lower (around $56 billion in the December 2010 bill) and there is an undeniable pull of compassion — the costs may cause a good deal of pause and will raise a call for a search for offsets – spending offsets – from Republicans. Read More:http://www.forbes.com/sites/deanzerbe/2011/08/09/obama-tax-proposals-to-create-jobs-no-magic-beans/
Michael Ferguson:However, there is a new Information Age wrinkle in the logic. When corporations increase their capital expenditure budgets (capex), they usually buy new, state of the art capacity often retiring old technology. By doing so, often they will increase their revenue capacity while actually lowering their labor component. This makes the supply side of the equation particularly troublesome. If you give enterprises tax incentives to make capital expenditures and demand does not increase, they are likely to translate that incentive into a program to replace older labor intensive technology with newer technology with a lower labor component. They will actually eliminate jobs….
…That does not mean that the demand side is without problems. For example, if an enterprise experiences a 10% increase in demand, they may replace the 20% oldest technology with technology that can actually produce 50% more with less labor input. Again, demand is met, but jobs disappear rather than being created.Read More:http://thefuture101.blogspot.com/
A long malaise now seems like the optimistic scenario.
Robert Reich, talking to people in the administration, says that there has been a deliberate decision to focus on the wrong issues, knowing that they’re the wrong issues: …
…So rather than fight for a bold jobs plan, the White House has apparently decided it’s politically wiser to continue fighting about the deficit. The idea is to keep the public focused on the deficit drama – to convince them their current economic woes have something to do with it, decry Washington’s paralysis over fixing it, and then claim victory over whatever outcome emerges from the process recently negotiated to fix it. They hope all this will distract the public’s attention from the President’s failure to do anything about continuing high unemployment and economic anemia.Read More:http://krugman.blogs.nytimes.com/