Friday, September 16, 2011

Obama's Recovery

David Brooks offers a pretty clear and critical analysis of the "recovery" that is being defended by Obama and criticized by the Republicans. Ultimately, the return of job growth after a recession always lags by years - and government policies rarely have the immediate impact of generating growth and returning economies to sound footing. Clearly, not all agree, as evidenced by Investore.Com in this analysis. As an independent voter, I'm not happy with Obama's leadership - especially on the economy as well as basic "politics."

However, this recession seems different. Obama didn't have an inflation problem that the Fed could just break, and there wasn't an oil shock that could be relieved. Downsizing of companies and increased productivity haven't existed like this before either, and Obama simply couldn't count on a tech boom or a housing bubble to grow the way out. That sums up the post-recession growth for the past several decades. So, I'll cut him some slack there.

Additionally, I'm of the mind that there's not a lot Presidents and DC can actually do to create jobs - other than infrastructure, public service, cash rebates, and tax credits for actual hires. That's why I won't give Perry too much credit for jobs in Texas, nor will I knock Romney for stagnant growth in Massachusetts. Thus, Obama has been pretty weak in terms of national leadership - that is no doubt. But Perry and Boehner are full of it on cutting taxes for "job creators" as a guarantee of creating jobs and generating economic growth.

So, we'll see. I think Brooks pretty much nailed it. And he may be the only one.

17 comments:

Darren said...

The people who *actually* create jobs keep telling us why they're not creating, or not able to create, jobs.

He who has ears to hear, let him hear :-)

MikeAT said...

Darren....

Got the creating part...what about the people who "actually" save jobs? Doesn't that count for anything? ;<)

Darren said...

The Messiah saves souls, I don't know about saving jobs :P

abellia said...

Government jobs are jobs, just like private sector jobs. Ask a public school teacher if they are working at a job, and I'll bet the answer is "yes."

The difference between public sector jobs and private sector jobs is that public sector jobs depend on public sector spending and private sector jobs depend on ... wait for it ... private sector spending.

If you want more jobs, you need more spending. It really is simple. Cutting taxes for "job creators" only makes jobs if those untaxed dollars get spent. The evidence is that, generally, they don't.

mazenko said...

Of course, Darren. Who are these people? The ones at GE who pay no income taxes but still complain they inhibit hiring. How about Pfizer who took tax rebates to hire and then cut 10,000 jobs. Maybe BOA who took bailout money to support lending, then cut lending further and is cutting 30000 jobs.

Gee, those are some real credible arguments. I'd expect you to be a little more astute when you are being manipulated. But ideology is curse.

MikeAT said...

Messiah......messiah...oh, here it is.

Messiah: One who is anticipated as, regarded as, or professes to be a savior or liberator

I would never equate Obama with a savior or liberator in any fashion although he professes that.  See the speech at Brandenburg Gate, the November 08 victory speech or acceptance speech at the 08 Democratic convention.  

Although the sycophants who votes for him may look at him as a savior.... 

MikeAT said...

If you want more jobs, you need more spending. It really is simple. Cutting taxes for "job creators" only makes jobs if those untaxed dollars get spent. The evidence is that, generally, they don't.

Wrong.  If there is a demand for a good or service out there (e.g. food, gas, housing) someone will try and satisfy the demand and make a profit while doing it.  This generates not jobs, but work.  A demand for work (e.g. farming, manufacturing, etc) leads to the creation of jobs.  This generates tax revenue of multiple types that funds government.  So it would be logical to keep the market active...a fact the present administration seems to not have learned.

Reagan cut tax rates in the 80s which led to increased investment in the private sector which led to more demand, more employment and get this...more tax revenue with lower tax rates.  Similar things happened in the mid 60s when Johnson enacted the JFK plan and when Bush did it in the 00s.  

Churchill had a great summary of a  planned economy.  "A nation trying to tax itself into prosperity is like a man standing in a bucket and trying to pull himself up by the handles."

One thing you are definitely  missing is the forced efficiency of the profit motive,  If the ACME Corporation builds a product no one wants, it doesn't sell.  So ACME either stops building it or it goes out of business.  If a government agency is a failure....well you haven't spent enough for the agency and it simply needs more of your money and a 500% increase in manpower.  The difference is ACME can go out of existence.  Name me one worthless federal agency that has every done with less?  

mazenko said...

Too narrow, Mike.

The economy grew under Reagan - but that is as likely to have happened from the breaking of inflation, the drop in interest rates, and the plummeting of oil prices. Correlation does not equal causation, my friend, and you should know that.

Recall that Reagan cut taxes in 81 - and we were still at 10% unemployment by the end of 83, though it was dropping. By that time he had already started raising taxes, and did so on a large national scale eleven times from 82-88. History is not on your side here.

Additionally, the problem now, as I've pointed out with specific examples is that you can't prove a tax cut will spur demand and hiring, especially when you are talking marginal rates and capital gains for individuals.

By cutting revenue, you simply exacerbate the deficit ... and still no jobs are produced.

Quick question: The stimulus bill was 40% tax cuts and rebates all pushed for by the GOP. 40%, Mike. Why did those cuts not generate the job growth, and why are you not critical of that?

40% tax cuts. No jobs. Corporate profits up, corporate pay up, overseas holdings up, trillions in cash reserves.

Why no jobs? No demand, my friend. Why no demand? The middle class ain't got no money because they lost their jobs and are eating up savings trying to keep their houses. And the banks won't lend them any.

Another question? Why are bank profits up 140% but lending is down by 30%? And BOA lays off 30000.

You and D are naive about "job creators." They are playing you for your ideology.

mazenko said...

Government agencies don't go out of business because they are not in business. The FBI and the CDC and FEMA and Medicare will always have something to do. It's not about profit and loss, Mike. It's about public service.

Darren said...

You think Mike and I are naive, and Mike and I think you willfully ignore reality. This is clearly the way to get things done.

You talk about GE and Pfizer and such--I don't support crony capitalism, and I hope you don't, either. They can only do what they do when aided and abetted by the very government that you believe somehow creates jobs. Government doesn't create jobs that support the economy, the best it can do is create conditions ideal for job creation. Not every tax incentive is ideal for job creation; sometimes it's just pork to pay off a buddy. See: Solyndra.

MikeAT said...

Too easy Mike...

The economy grew under Reagan - but that is as likely to have happened from the breaking of inflation, the drop in interest rates, and the plummeting of oil prices. Correlation does not equal causation, my friend, and you should know that.

It wasn't correlation but interrelation. Reagan had an economic policy that had as a basic premise we must get government out of the way. One of the first things he did was deregulate the oil industry. After an initial rise in oil prices, oil prices collapsed and gas went down. That led to lower costs all around as transportation costs were reduced.

The Reagan years initially had high rates interest rates as the Fed, lead but the highly qualified Paul Volker kept the money supply tight to kill off inflation. Lower inflation
means lower costs all around.

You add this up with lower tax rates (along with certain tax changes like accelerated depreciation) led to the private sector saying "Woo, I can invest, bring something to market, make money and keep most of it without it loosing 10% of it's value before I deposit the check....I'm in"

Recall that Reagan cut taxes in 81 - and we were still at 10% unemployment by the end of 83, though it was dropping.

Partially true. Tax rate reductions went into effect in calendar year 1982 after the tax cut was passed in 82 (10% cuts in 83 and 84, final 5% cut in 85) and guess what, the economy boomed.

Quick question: The stimulus bill was 40% tax cuts and rebates all pushed for by the GOP. 40%, Mike. Why did those cuts not generate the job growth, and why are you not critical of that?

Because they were not tax cuts. They were tax rebates. You hire a person and we give you a break on you taxes if you met certain requirements. A law cannot image all requirements so the tax rebate was hardly used.

Now on this subject of hiring you may find this recent article from Bloomberg:

"The man in the aisle seat is trying to tell me why he refuses to hire anybody. His business is successful, he says, as the 737 cruises smoothly eastward. Demand for his product is up. But he still won’t hire.

“Why not?”

“Because I don’t know how much it will cost,” he explains. “How can I hire new workers today, when I don’t know how much they will cost me tomorrow?”
He’s referring not to wages, but to regulation: He has no way of telling what new rules will go into effect when. His business, although it covers several states, operates on low margins. He can’t afford to take the chance of losing what little profit there is to the next round of regulatory changes. And so he’s hiring nobody until he has some certainty about cost...."


Source: http://www.bloomberg.com/news/2011-05-26/carter-economic-stagnation-explained-at-30-000-feet.html

There it is in a nutshell. The only thing certain about America's business climate is it's hostile to business. Obamacare is already causing major increases in health care cost, fuel cost are increasing the cost of cost everything, the EPA is threatening Cap and Tax through the back door.

To answer your question, I'm not critical of businesses not hiring now because now is not a time to hire.

Oh what where the eleven specific tax increases signed by Reagan. I know of the Deficit Act when he was supposed to get 3 dollars in cuts for each buck of tax increases and the increase in the payroll tax in 83.

MikeAT said...

Too easy Mike...Part 2

My exact quote is If a government agency is a failure....well you haven't spent enough for the agency and it simply needs more of your money and a 500% increase in manpower.  The difference is ACME can go out of existence.  Name me one worthless federal agency that has every done with less?  

I didn't say the government agency would go out of business or was in business. Quite the contrary. But your putting up a straw man. No one questions the purpose of the FBI. I do question the Energy Department because it is a complete failure. It was established on the wake of the Arab Oil Embargo when we got 25% of our crude from the Middle East. It's purpose was to get the US off of Arab oil. We now get 50% of our oil from an even more unsteady Middle East. That looks like complete failure to me. In the private sector you loose your ass or die. In public service the servants tell the tax payers "you screwed up because you didn't spend enough money on us...."

mazenko said...

Deregulated oil? Really, Mike? The oil market shifted at exactly that time because of huge discoveries and production in the North Sea as well as Mexico and Venezuela. That broke OPEC's hold and prices plummeted. You are missing big pieces of economic history, Mike. So, at least you get the oil and interest rate issue. That freed up spending money which drove demand and subsequent growth.

Of course, many businesses can say they aren't hiring out of uncertainty. But the CEO of Honeywell argues that if you believe that, he's got a bridge in Brooklyn to sell you. They don't like to pay taxes period - and they take tax cuts and rebates anyway they can get them. But nobody in business is turning down good investments or not hiring to expand when the opportunity is right just because the future is uncertain. The future is always uncertain, Mike. Get real.

Then again. You want to trust them. I don't. I see them take the tax cuts and cut jobs and that pretty much exposes them as disingenuous to me. If you want to believe them, not much I can do. But there are plenty of companies investing in German manufacturing right now - and taxes ain't low.

There are simply too many arguments that refute your tax burden on business charge. The second half of the Reagan years when the boom happened is one - and historically it was more of a recovery than a boom. Secondly, you have 1993-2000. Third, you have 1941-1965. Then, of course, there is Germany and Sweden and actually most of northern Europe to contend with. You're simply arguing a point that even conservatives economists like Feldstein and Mankiw won't defend. And Greenspan has reversed course too.

Tax Equity Act 1982
Highway Revenue Act 1982
(both these were tax increases during an economy that was struggling with 10% unemployment. Yet they didn't stop recovery. It's a miracle!)
Social Security Act 1983
Deficit Reduction Act 1984
Railroad Resolution 1984
(Still a down economy that handled increases)
Omnibus Act 1985
Superfund Act 1986
Continuing Resolution 1987
Omnibus Reconcilliation 1987
Continuing Resolution 1988

MikeAT said...

Mike, I'm a little longer in the tooth than you and remember how Jimmy Carter put on the Windfall Profits Tax to fund "getting the US off of Middle East Oil". Gee, Jimmy's knowledge of Economics is rivaled by B Hussein Obama. It didn't work because oil companies were not going to go through the expense of drilling to have over have their revenues seized and pissed away. Easier to look overseas for fields and get the oil there. My how history seems to have repeated itself.

Yes, Reagan did deregulate the oil industry and allow our companies to get to our own resources. He also tried to rid us of the collections of oxygen thief's called the Energy Department. I pray the next President follows a similar policy.

They don't like to pay taxes period -
You're right on that...there is John F Kerry, the haughty French looking former junior senator who BTY served in Vietnam, but who earned his money the honorable way....he married it. And let's not forget Charlie Rangle, the crook from New York. Or the head tax cheat of all, little Timmy Geithner.

Name me a company that has hired because of Obama tax rebates from the 2009 pork bill...one please. Name me the man hired because Obama said he would give a the company's owner a tax rebate.

Uncertainty is part of business and life....but the outright hostility of the current administration to legitimate commerce will continue to keep the economy depressed until some point in the future. Hopefully soon after January 20, 2013.

Then again. You want to trust them. I don't

One, looks like the damned auto correct screwed you after again. Two, you're assuming facts not in evidence, i.e. my thoughts. You don't really know who I trust. But you seem to be willing to trust B Hussein Obama as he leads this country down the path to bankruptcy.

I see them take the tax cuts and cut jobs and that pretty much exposes them as disingenuous to me. If you want to believe them, not much I can do. But there are plenty of companies investing in German manufacturing right now - and taxes ain't low.

No kidding...Germany welcomes investments, corporations,etc. They have lower corporate taxes than us. The question is why the hell should anyone invest in America right now. The country is bankrupt, the budget is out of control and the executive leadership is quite contend to see us fall to a second place country. Is that what you voted for in November 08 Mike?

There are simply too many arguments...that refute your tax burden on business charge. The second half of the Reagan years when the boom happened is one - and historically it was more of a recovery than a boom. Secondly, you have 1993-2000. Third, you have 1941-1965. Then, of course, there is Germany and Sweden and actually most of northern Europe to contend with. You're simply arguing a point that even conservatives economists like Feldstein and Mankiw won't defend. And Greenspan has reversed course too.

As usual, wrong. The recovery of the Reagan years started in late 82 and expansion lasted until 91. No Mike, there was no real expansion of the economy in the 90s until after the elections of 94 and the election of a conservative majority in the Congress that forced a balanced budget and other actions on Bill Clinton, such as Welfare reform and the death of Hillarycare. 1940-1945, there was a war going on and it ended the great Depression. From the end of 65 till the late 90s we had a very high marginal tax rate that no one paid. You got to deduct pig snot. Not to mention a minor detail leftist life to forget. We had no competition. Germany and Japan were still recovering for the first couple of decades after WWII.

I see your list of ten acts. Question. Which ones raised income tax rates? Because two facts are indisputable. In January 81 the highest tax rate was 70%. In 1989, it was 28%. And revenues to the treasury had almost doubled.

mazenko said...

Ah ha. Now, we are getting somewhere. I completely agree with lower taxes creating better conditions for growth. That is why dropping marg rates from 70% (or originally 89%) to low thirties or high twenties was significant. But fiddling around between 28 and 38 has no impact - See Mankiw and Feldstein.

It's this simple, Mike. The 08 Crash and subsequent slowdwn was not caused by tax issues. It was not caused by regulation. The current slump is not extending because of tax issues - because there have been no changes - other than cut taxes more. This is about cash on the demand side. It was about lost wealth from a housing crash that imploded the lending industry. And that came from deregulation. This is not about taxes - it's about no cash. And companies aren't hiring because they don't have to. They don't need workers - except for the skilled labor ones for which there are tens of thousands of vacancies. They are making money and increasing dividends and it's that simple. It didn't start with taxes (at lowest rates in 60 years) and it won't be solved by tax cuts - because they aren't the probelm. If you wnat to continue to believe so, feel free.

Your knowledge is good, young Skywalker. But you are not Yoda, for you still have too many blindspots.

Remember, I agree with you on overall taxation.

mazenko said...

Mike, check out this answer to your claim of "uncertainty" leading to no job growth ... then check out my link in the latest post to Nocera's piece from where this comes.

Paul Kasriel, chief economist for Northern Trust wrote a piece, titled “If Some Dare Call It Treason, Was Milton Friedman a Traitor?” (the title will become clear shortly), it has the force of revelation.

The first part of the paper is spent “dispelling the nonsense” (Kasriel’s words) that factors besides credit are the root of the problem. He persuasively mocks the idea that “uncertainty” is holding back companies from borrowing. (“Uncertainty,” Kasriel told me, “is the last refuge of economists who can’t explain what is going on.”) Ditto for onerous taxes, record budget deficits and lack of demand.

MikeAT said...

Mike

You seem to want to switch from economic policy to recent history on the collapse of the American economy. If you want to discuss that I would recommend Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon which discusses how the government and Fannie and Freddie led to the creation of the sub-prime market in mortgages and the eventual collapse. You obviously need some help.

Ah ha. Now, we are getting somewhere. I completely agree with lower taxes creating better conditions for growth. That is why dropping marg rates from 70% (or originally 89%) to low thirties or high twenties was significant. But fiddling around between 28 and 38 has no impact - See Mankiw and Feldstein.
Some progress. You seem to get the concept that letting more people keep more of their own money will led to increased grown. Progress Grasshopper. And yes, dropping from 38 to 28 will have significant impact.

Your knowledge is good, young Skywalker. But you are not Yoda, for you still have too many blindspots.

Pleassssse. If I saw that in a movie in five minutes you would be scene on the floor keeling over and grasping your throat as the last breath escapes your body while Dick Cheney looks down with a look of disgust, “Apology accepted Middie mazenko.’

You can have the rest of this...continue to rant, I won't waste my time on it...onward to court.