Deficit Deal will Kill Jobs

[mame]

How do you guys feel about this? From Time:

Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, ran the numbers on what a deal that either cuts spending or raises taxes in order to reduce the deficit by $2 trillion would mean to the economy. Elmendorf estimates that the deal would likely slow the economy by as much as 0.6% in each of the next three years. Again, there is no science for translating GDP growth into jobs. But 0.1% of GDP growth usually means the economy will add about 5,000 jobs, and vice versa. So that means a debt-ceiling deal of the size Elmendorf is talking about could cost the economy as much as over a million jobs during the next three years.

The estimate is only for $2 trillion, the deal is likely to be $4 trillion... So 2 million jobs can quite easily be lost/not created in the next few years as a direct result of a budget deal.

This is nothing really new, I've been arguing that government cuts will cost jobs - not create them - the entire time on these boards (see the numerous anti-Austerity threads). But the magnitude - 2 million jobs... This is truly a fucking joke... So much for Republicans running on creating jobs...

Meanwhile, the NYTimes reports that deficit hawk Republicans who ran on cutting spending and of whom supported a ban on earmarks during this congress - are actively, and discretely, advocating for spending projects normally considered as "pork":

An examination of spending bills, news releases and communications with federal agencies obtained under the Freedom of Information Act shows that nearly two dozen freshmen have sought money for projects that could ultimately cost billions of dollars, while calling for less spending and banning pork projects.

...

Lawmakers like Representative Tim Scott, Republican of South Carolina, who advocated for the harbor dredging project with other members of the South Carolina delegation, insist their requests are neither earmarks nor wasteful. “This was a merit-based project that was open and transparent,” said Mr. Scott, who helped secure $150,000 for the first phase of a harbor-deepening project in Charleston, his hometown. The project is expected eventually to cost as much as $300 million. Mr. Scott, a favorite of the Tea Party movement, said he is opposed to earmarks and that dredging the port was in the national interest because it would accommodate bigger cargo ships and help create trade opportunities and jobs.

...

On the Minnesota-Wisconsin border, local officials and members of Congress have pushed for a new four-lane bridge over the St. Croix River that was co-sponsored by Representative Sean P. Duffy, a Wisconsin freshman Republican, and Representative Michele Bachmann, the three-term Minnesota Republican who is running for president.

Opponents labeled the bridge an earmark, but Mr. Duffy and Mrs. Bachmann said the bridge was critical to handle increased traffic that an 80-year-old bridge nearby can no longer handle alone. They defend the spending by arguing that it was not an earmark since there were no specific costs listed in the bill itself, nor is it a financing bill. The legislation calls only for a bridge to be built.

...

Last March, while the House was drafting the military authorization bill, 22 freshman Republicans wrote a letter to the House leadership requesting more military spending than President Obama had requested.

I just quoted a couple passages that stuck out to me, there are more than two dozen examples - many of which found in the NYTimes article... So much for cutting spending...

Another thing about these projects that Republicans are after... Normal people call these projects "Stimulus" - which Republicans swear doesn't work - but for some reason these projects are worth it? Mental gymnastics! It's appalling, really.

 

[beardo]

They have to kill jobs and increase inflation while wadges fall or remain stagnant for their plan to work.

 

[NoDrama]

They have to kill jobs and increase inflation while wadges fall or remain stagnant for their plan to work.

That IS the plan. We are already losing jobs at the rate of 400,000 people PER WEEK right now!!

 

[mame]

That IS the plan. We are already losing jobs at the rate of 400,000 people PER WEEK right now!!

and the net effect on employment is? You should really stop using incomplete statistics, it's misleading. if 400k+ people file jobless claims and there is a 20k positive net employment for the month, what does that mean? It means that those 400k jobs are refilled by other people even as the first 400k is now unemployed and it means that 20k people who were out of a job last month now have a job - and it's a new position, not a replacement hire. Now, obviously around 200k people enter the workforce every month on average so 20k net gains in jobs is still a loss when you look at the Employment to population ratio, so I'm not disagreeing that things are bad right now, but I am not going to just sit there and let you try and mislead people with that incomplete statistic like a politician.

 

[Dan Kone]

This idea that the deficit is a more immediate problem than jobs is insane. I understand that the republicans need to crash the economy in order to take back the economy, but it's mind boggling that people are believing this is something we need to do now.

We need another stimulus, not cuts. This is fucking crazy shit.

 

[beardo]

This idea that the deficit is a more immediate problem than jobs is insane. I understand that the republicans need to crash the economy in order to take back the economy, but it's mind boggling that people are believing this is something we need to do now.

We need another stimulus, not cuts. This is fucking crazy shit.

I think if their is to be any 'Stimulus' It would have to be something like what the CCC was and we would have to bus people from unemployment and welfare offices to farms or construction sites or factories and put them to work otherwise it will be a waste of more money.
And I think we need huge spending cuts now-Just not from the places they want to cut, We should be cutting military spending and government funding and government jobs positions and agencys- we could do all of this without raising debt cealing and could pay down deficit while improving the economy

 

[NoDrama]

and the net effect on employment is? You should really stop using incomplete statistics, it's misleading. if 400k+ people file jobless claims and there is a 20k positive net employment for the month, what does that mean? It means that those 400k jobs are refilled by other people even as the first 400k is now unemployed and it means that 20k people who were out of a job last month now have a job - and it's a new position, not a replacement hire. Now, obviously around 200k people enter the workforce every month on average so 20k net gains in jobs is still a loss when you look at the Employment to population ratio, so I'm not disagreeing that things are bad right now, but I am not going to just sit there and let you try and mislead people with that incomplete statistic like a politician.

LOL OK so we are only losing A NET of 180,000 jobs each month!!!!!!

By the way, when using BLS statistics,The BLS is also NOT INCLUDING people unemployed less than 5 weeks, or people unemployed for more that 27 weeks. Also the BIRTH/DEATH model is plain WRONG, its a simple guess used to make the numbers look better than they really are, they are unable to prove even a single job attributed to it. The Birth/Death model was used to show 244,000 jobs as being created last month. ITS BS!!
Half the Population has no Job!!

Were LOSING jobs at a rate of nearly 400,000 a month more than we are creating.

 

[Dan Kone]

I think if their is to be any 'Stimulus' It would have to be something like what the CCC was and we would have to bus people from unemployment and welfare offices to farms or construction sites or factories and put them to work otherwise it will be a waste of more money.
And I think we need huge spending cuts now-Just not from the places they want to cut, We should be cutting military spending and government funding and government jobs positions and agencys- we could do all of this without raising debt cealing and could pay down deficit while improving the economy

All those spending cuts = people losing jobs. That doesn't improve the economy, it makes it much worse.

 

[mame]

LOL OK so we are only losing A NET of 180,000 jobs each month!!!!!!

IDK how you got to this conclusion, I specifically said the last jobs report was a net gain of 20k jobs. The employment to population ratio will suffer, which is obviously bad - but we aren't losing 180k jobs a month... Not enough jobs are being created though, that's true... We all agree, you dont have to make things seems worse than they are to try and make a point.

By the way, when using BLS statistics,The BLS is also NOT INCLUDING people unemployed less than 5 weeks, or people unemployed for more that 27 weeks. Also the BIRTH/DEATH model is plain WRONG, its a simple guess used to make the numbers look better than they really are, they are unable to prove even a single job attributed to it. The Birth/Death model was used to show 244,000 jobs as being created last month. ITS BS!!

Just because you dont understand the reasoning behind something, doesn't make it BS; It makes sense not report people unemployed less than 5 weeks. In construction for example, my dad is always off for anywhere between 1-4 weeks before he gets a new site to work at and he'll be working at that site for a few months... Rinse, repeat. And this is often with different companies, all through his union - he just puts his name on the list and they find a company in need of his services. If they counted every guy like my dad in the unemployment statistic - it would lose effectiveness as an indicator would it not?

half the Population has no Job!!

Eh, about 42% or so have no job but that includes kids, the underemployed(even if they want only a part time job) and retirees, etc etc. The last time we were at full employment only 60-64% of the population had a full time job.

Were LOSING jobs at a rate of nearly 400,000 a month more than we are creating.

No, we aren't. people are getting FIRED and REPLACED. You're quoting "jobless claims". Once you consider replacements for those newly fired folks most "jobless claims" are offset by other people who just got a job. The 20k number is the NET gains/losses in terms of NEW jobs created over that month... An employer firing one guy and hiring another cancels itself out in the BLS statistics - they're only looking for how many NEW jobs were created or destroyed. They list all that other shit, to be as specific and transparent as possible but usually what happens is some dick politician uses those incomplete stats to mislead people, just as you are doing now... Unless you really just dont understand how they structure the statistics, in which case I just explained it to you.

If we were losing jobs the employment to population ratio would show it, what it shows is virtually no real change in employment since "the bleeding stopped". If we were losing a net of 400k jobs a month it would still be heading downwards and we would still be under the technical definition of a recession:

 

[beardo]

All those spending cuts = people losing jobs. That doesn't improve the economy, it makes it much worse.

what i'm talking about would equal people losing jobs which sounds bad but what if those jobs are a major part of the fundemental problem? we need to fire lots of people and make huge spending cuts to fix things.

 

[mame]

what i'm talking about would equal people losing jobs which sounds bad but what if those jobs are a major part of the fundemental problem? we need to fire lots of people and make huge spending cuts to fix things.

What you're saying can happen but it isn't happening(supply side crunches are pretty rare, last time it happened was in the mid 70's to early 80's due to the pressures of globalization). Our downturn was not caused by government workers in any way and will not be solved by firing them. This is a demand side downturn so you want to prop up demand, not destroy what little demand is left.

 

[beardo]

What you're saying can happen but it isn't happening(supply side crunches are pretty rare, last time it happened was in the mid 70's to early 80's due to the pressures of globalization). Our downturn was not caused by government workers in any way and will not be solved by firing them. This is a demand side downturn so you want to prop up demand, not destroy what little demand is left.

Everyone I know wants lots of big screen T.V.'s and a McMansion and a swimming pool and corvette and a high paying job-I think their is a lot of demand.
The percentage of people creating wealth=Working meaningful jobs that add value, Is to small
Govt spending and public sector jobs are to big a portion of the pie, and now getting to the point where their existance and need to maintain and expand control is so large it is actually overtaking and stifling the private sector which leads to a further decrease in the economy and the elimination of more of the few real jobs that are left.

 

[NoDrama]

Everyone I know wants lots of big screen T.V.'s and a McMansion and a swimming pool and corvette and a high paying job-I think their is a lot of demand.
The percentage of people creating wealth=Working meaningful jobs that add value, Is to small
Govt spending and public sector jobs are to big a portion of the pie, and now getting to the point where their existance and need to maintain and expand control is so large it is actually overtaking and stifling the private sector which leads to a further decrease in the economy and the elimination of more of the few real jobs that are left.

Spot on!!! +rep

 

[mame]

Everyone I know wants lots of big screen T.V.'s and a McMansion and a swimming pool and corvette and a high paying job-I think their is a lot of demand.
The percentage of people creating wealth=Working meaningful jobs that add value, Is to small
Govt spending and public sector jobs are to big a portion of the pie, and now getting to the point where their existance and need to maintain and expand control is so large it is actually overtaking and stifling the private sector which leads to a further decrease in the economy and the elimination of more of the few real jobs that are left.

yeah, you know people who want those things but can they afford them? No? Then there is not enough demand, try again. People lose jobs, it worsens demand; Therefore cutting government jobs in a demand constrained economy is a retarded idea. Austerity is not expansionary, ask Greece.

If government spending and public sector jobs were crowding out private investment you'd need to see reduced profits and reduced liquidity among corporations, which we dont (record profits actually). None of the indicators are showing a supply side crunch, meanwhile the economy is billions of dollars below capacity... Companies aren't hiring more workers because there aren't enough customers buying their shit at a rapid enough pace... This is a demand side downturn.

 

[mame]

Actually, Krugman explains it well:

Cash Is Not the Problem

A couple of followups to my repatriation post.

First, are corporations really awash in cash? Yes. Here’s corporate cash flow versus business investment spending; since not all investment spending comes from corporations, this actually understates the degree to which corporations are taking in more cash than they are willing to invest:

Second, banks are also sitting on large amounts of cash that they aren’t lending:

These aren’t abstruse points. On the contrary, the fact that corporations aren’t investing as much as they could has become a major right-wing talking point, with repeated claims that companies are holding back because of political uncertainty. Actually, they’re holding back because they don’t see enough consumer demand — but in any case, cash is not the problem.

So it’s truly remarkable — an impressive case of doublethink — that the same people who decry the fact that firms and banks are sitting on cash insist that it’s totally vital that we give those firms and banks more cash, so that they can invest and create jobs.

You see this in a number of contexts. The repatriation issue — in which we’re going to give companies a big tax incentive to bring cash home, and then sit on it or use it to buy back their own stock — is one.

Another is the way Republicans are defending against attempts to curb things like the tax break on corporate jets; as Greg Sargent reports, they’re basically saying that if you take money away from “the wage payer offering a job”, you’ll reduce employment. Um, but those “wage payers” are sitting on lots of cash already, and not using it to pay wages or anything else.

And then there are the banking issues. We mustn’t hold the banks accountable for the mortgage mess, or impose higher capital standards, or anything, because that would reduce their ability to lend; never mind the fact that if they wanted to lend, all they would have to do is withdraw some of those huge excess deposits they have at the Fed.

So repeat after me: lack of cash at major corporations, both financial and nonfinancial, is not the problem with our economy. And showering more cash on these players will do nothing except, well, shower cash on these players.

Net Lending By Domestic Business

A better picture to illustrate the point that cash is not the problem: here’s net lending by domestic business:

Bureau of Economic Analysis
Data.
http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1


Before the crisis, businesses were net borrowers, and to the extent that they preferred to rely on internal finance, anything that increased their profits might have led to at least some extra investment. Now, however, businesses are by and large taking in more in profits than they want to invest in expanding their businesses, so they’re lending out the excess, parking it in various securities. There’s absolutely no reason to believe that taxing their corporate jets would reduce investment, or that giving them a tax holiday on repatriated funds would increase investment.

Oh, about the banks: higher capital requirements or penalty charge would force them to shrink their balance sheets. But so what? With much of their balance sheet simply parked at the Fed, there’s no reason to believe that such a shrinkage would reduce lending to businesses (which aren’t much looking for loans anyway).

 

[NoDrama]

yeah, you know people who want those things but can they afford them? No? Then there is not enough demand, try again. People lose jobs, it worsens demand; Therefore cutting government jobs in a demand constrained economy is a retarded idea. Austerity is not expansionary, ask Greece.

If government spending and public sector jobs were crowding out private investment you'd need to see reduced profits and reduced liquidity among corporations, which we dont (record profits actually). None of the indicators are showing a supply side crunch, meanwhile the economy is billions of dollars below capacity... Companies aren't hiring more workers because there aren't enough customers buying their shit at a rapid enough pace... This is a demand side downturn.

No one can afford to take out any more loans in order to get the money to buy them the things they would like to have. People are saturated with debt, total slaves to their debt! There is so much debt that hardly a soul can afford anything but the basics, especially with all time highs in prices of things NEEDED to live. With no new loans there is no new money.

On the flip side you have the banks which were highly fucked by the Crash in real estate. Real Estate is the bread and butter of all the bankers ever since Fannie may and freddie got in the game. With the real estate market still going in the shitter with the end no where in sight for at least 4 more years its no wonder there isn't any money to spread around. Banks don't want to lend except to the most qualified people, they are already totally insolvent and have to work with "Alternate" accounting methods just to show the bare necessary reserves to stay in the game.

Businesses loaning out money does nothing to the money supply, money is only created through the issuance of a BANK loan.

Your data also only measures LARGE well connected businesses, more than 60% of our economy is due to SMALL business. Small business is not doing so well.

 

[beardo]

You can say whatever you want- the concept is easy to understand
We need to produce things-govt does not produce
40% of people can not be paid in other peoples money- we can not run an economy that way.

 

[NoDrama]

Government produces...red tape. i.e. Anti wealth, which is like antimatter in that when it touches wealth they both disappear in a fury.

 

[beardo]

The whole system of credit and debt creation and the creation of unrealistic expectations has screwed the economy- Someone working at a pizza place should not be able to finance a brand new car- save for one maybe..if he works hard and is smart with his money. A guy working for the state in a clerical job should certainly not be able to finance a brand new car and should not be expecting lavish vacations or a high life retirement.
A farmer should be able to look forward to a comfortable retirement if he works hard and is smart with his money.
An auto mechanic should be able to support a family and maybe take a vacation every year or two if he is smart with his money as well as look forward to a stable retirement.
If you want something you should work and save until you can afford it not get a loan
Not everyone can work for top pay and minimal work.

 

[mame]

No one can afford to take out any more loans in order to get the money to buy them the things they would like to have. People are saturated with debt, total slaves to their debt! There is so much debt that hardly a soul can afford anything but the basics, especially with all time highs in prices of things NEEDED to live. With no new loans there is no new money.

On the flip side you have the banks which were highly fucked by the Crash in real estate. Real Estate is the bread and butter of all the bankers ever since Fannie may and freddie got in the game. With the real estate market still going in the shitter with the end no where in sight for at least 4 more years its no wonder there isn't any money to spread around. Banks don't want to lend except to the most qualified people, they are already totally insolvent and have to work with "Alternate" accounting methods just to show the bare necessary reserves to stay in the game.

This is correct, debt is a huge issue ATM. I'd advocate for debt restructuring and other forms of assistance to alleviate this issue combined with regulations designed to keep banks from lending to people who can't afford them (I'm looking at you, housing bubble)... Combine that with getting people to work(infrastructure would help, especially because construction workers are generally paid decent and are good sources of consumer demand which will create more jobs which creates more demand, etc) and you're set. The massive debt is holding down consumer demand and is keeping the economy from creating enough jobs to reach full employment.

Businesses loaning out money does nothing to the money supply, money is only created through the issuance of a BANK loan.

Your data also only measures LARGE well connected businesses, more than 60% of our economy is due to SMALL business. Small business is not doing so well.

This is true, and I generally support anything that helps small business thrive... But is the reason small business is not doing well ATM more related to the massive lack of demand or is it because of high taxes, red tape, etc? For big business at least, they are awash in cash and are not investing in job creaton because they dont need more workers - because of a lack of demand. Among small businesses that are close to family and friends I keep hearing about how people aren't buying their products because everyone is broke...

I also always hear about ridiculous card swiping fees. At my old job, a small business, my employer paid the credit card company more in swiping fees than they payed me each month... My old employer always talked about how they needed a new guy for some paperwork/accounting but couldn't really afford it and the first thing that came to mind was "those god damn credit card companies! Always gouging me!"...