Replies to post #101266 on Tornado Alley (PROG)

[StephanieVanbryce]

Punishing the Jobless

Paul Krugman July 4, 2010

There was a time when everyone took it for granted that unemployment insurance, which normally terminates after 26 weeks, would be extended in times of persistent joblessness. It was, most people agreed, the decent thing to do.

But that was then. Today, American workers face the worst job market since the Great Depression, with five job seekers for every job opening, with the average spell of unemployment now at 35 weeks. Yet the Senate went home for the holiday weekend without extending benefits. How was that possible?

The answer is that we’re facing a coalition of the heartless, the clueless and the confused. Nothing can be done about the first group, and probably not much about the second. But maybe it’s possible to clear up some of the confusion.

By the heartless, I mean Republicans who have made the cynical calculation that blocking anything President Obama tries to do — including, or perhaps especially, anything that might alleviate the nation’s economic pain — improves their chances in the midterm elections. Don’t pretend to be shocked: you know they’re out there, and make up a large share of the G.O.P. caucus.

By the clueless I mean people like Sharron Angle, the Republican candidate for senator from Nevada, who has repeatedly insisted that the unemployed are deliberately choosing to stay jobless, so that they can keep collecting benefits. A sample remark: “You can make more money on unemployment than you can going down and getting one of those jobs that is an honest job but it doesn’t pay as much. We’ve put in so much entitlement into our government that we really have spoiled our citizenry.”

Now, I don’t have the impression that unemployed Americans are spoiled; desperate seems more like it. One doubts, however, that any amount of evidence could change Ms. Angle’s view of the world — and there are, unfortunately, a lot of people in our political class just like her.

But there are also, one hopes, at least a few political players who are honestly misinformed about what unemployment benefits do — who believe, for example, that Senator Jon Kyl, Republican of Arizona, was making sense when he declared that extending benefits would make unemployment worse, because “continuing to pay people unemployment compensation is a disincentive for them to seek new work.” So let’s talk about why that belief is dead wrong.

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

Wait: there’s more. One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly — while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.

But won’t extending unemployment benefits worsen the budget deficit? Yes, slightly — but as I and others have been arguing at length, penny-pinching in the midst of a severely depressed economy is no way to deal with our long-run budget problems. And penny-pinching at the expense of the unemployed is cruel as well as misguided.

So, is there any chance that these arguments will get through? Not, I fear, to Republicans: “It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary”[ — or, in this case, his hope of retaking Congress — “depends upon his not understanding it.” But there are also centrist Democrats who have bought into the arguments against helping the unemployed. It’s up to them to step back, realize that they have been misled — and do the right thing by passing extended benefits.

http://www.nytimes.com/2010/07/05/opinion/05krugman.html?_r=2&ref=opinion

[StephanieVanbryce]

'The European Way' May Be Coming To End As Debt Crisis Mounts

07/ 2/10 02:53 PM

MADRID — In the ashes of Europe's debt crisis, some see the seeds of long-term hope.

That's because the threat of bankruptcy is forcing governments to implement reforms that economists argue are necessary to help Europe prosper in a globalized world – but were long viewed as being politically impossible because of entrenched social attitudes.

Changes such as making it easier for companies to fire workers or stare down unions were until recently dismissed as simply not being the "European way." Similarly, many were skeptical that European governments would or could tackle bloated public payrolls, trim entitlements or force people to retire later.

When it became clear earlier this year that Greece's debt crisis was rattling markets everywhere and dragging down Europe's common currency, it was business as usual: European governments seemed to dither, disunited.

Germany came in for particular criticism, appearing to hold up a bailout of Greece because it was unpopular with German voters.

But over two months of hectic activity a new narrative has started to settle in, to the surprise of many a euro-skeptic: When the chips were truly down, the countries of the European Union found a way to strike hard and fast – and together.

European leaders first joined with the International Monetary Fund in May and agreed on a $1 trillion rescue fund for financially troubled countries. Then Greece announced deep budget cuts, Spain cut employer costs and France raised its retirement age. France also joined Germany and the U.K in imposing harsh budget cuts.

To Marco Annunziata, the London-based chief economist for Unicredit, those are signs that Europe is finally facing the reality that it must make structural changes.

"Governments are reluctantly acknowledging that reforms are needed and there is no more room for delays and excuses," he said. "It looks like perhaps we are past the longest stage of denial, which in Europe has lasted at least 20 years."

Annunziata said governments now face a crucial test of political will: Can they implement the reforms they have announced?

Already in Italy, Premier Silvio Berlusconi has suggested he will reconsider some of the austerity measures he announced last month to trim the deficit after facing opposition and seeing his popularity dip. And France will have to steel itself for strikes.

Still, there are signs that Europe may muster passing grades.

In Spain, employers had long moaned that laying off workers is so expensive that they were wary of hiring in the first place. Political leaders felt no urgency as the economy grew at a healthy clip, buoyed by a construction boom and cheap credit. Nor did they when the boom ended and the jobless rate soared to 20 percent.

Then came the May 28 decision by the credit rating agency Fitch to downgrade Spanish debt.

Facing a growing risk of a debt default, the Spanish parliament quickly passed measures that make firing cheaper and even let companies talk their way out of collective bargaining agreements if times go bad.

The changes were imposed by Prime Minister Jose Luis Rodriguez Zapatero's government almost overnight, after nearly two years of state-sponsored talks between unions and management finally collapsed a few weeks ago.

Sandalio Gomez, a professor of management at IESE Business School in Madrid, noted that the government also has enacted euro15 billion ($18.7 billion) in spending cuts to slash the deficit. The cuts reduce civil servants' wages and public investment and freeze retirement pensions.

"If we were not in the midst of a sovereign debt crisis they wouldn't be doing it," said Stephen Lewis, chief economist at Monument Securities. "They wouldn't be inviting the negative reaction from their own labor forces."

Spain's workplace package was passed as a fast-track decree and is now subject to amendments by Parliament over the next month or so.

Under the old law, many workers have contracts that give 45 days of severance pay per year worked. These will remain for old contracts, but for new ones the figure goes down to 33 days of severance per year of work.

Also, companies in economic trouble can now negotiate with workers to lower salaries and reduce shifts or other terms of employment, and call in an arbitrator for a binding ruling if the talks hit a deadlock. That's still generous, compared with practices in the U.S. and other less regulated economies, but a start.

Spanish unions are furious and have called a general strike, but not until Sept. 29, after the sacrosanct monthlong summer vacation ends.

Like Spain, Greece is shaking up its stodgy, rule-bound practices on hiring and firing. The hope is to encourage hiring and stimulate economic growth that will be needed to help pay down a swollen debt load.

Last year, the newly elected government revealed that its predecessors had fudged the country's deficit numbers. Prohibitively high interest rates soon followed, prompting Greece to accept a euro110 billion ($138 billion) EU and IMF bailout, with policed austerity as the price.

Last month, Greece announced that it would allow companies to lay off more people and make lower severance payments. The maximum notice period, if Parliament approves, would be reduced from 24 months to six months.

The short-term response to those moves has been a wave of strikes and riots. Demonstrations also have been held in Spain and France.

In fact, such measures were called for by the European Union in its Lisbon Strategy, an ambitious blueprint adopted in 2000 whose goal was to make Europe the world's most competitive economic bloc. Little got done.

One reason: the courage to enact change can be costly. Then-Chancellor Gerhard Schroeder loosened Germany's heavily regulated labor market as part of social spending reforms he undertook in 2003 and implemented for the most part by 2005.

Economists say the changes helped get the German economy on track before the recent financial crisis. But they hurt Schroeder and his Social Democrats politically – in 2005, voters dumped him and Angela Merkel became chancellor.

Not everyone has the same sense of urgency. While Italy's debt totals 115 percent of gross domestic product, higher than Spain's, few structural reforms are being discussed there.

One reason is that its unemployment rate of 8 percent is far better than in Spain, thanks to government-sponsored jobs support programs. Interest rates on Italy's long-term debt also haven't spiked as they did in Spain and Greece – at least not yet.

___

AP Business Writer Barry contributed from Milan.

http://www.huffingtonpost.com/2010/07/02/the-european-way-may-be-c_n_634172.html

[StephanieVanbryce]

Greenspan, Rubin, and Herbert Hoover

Robert Reich August 8, 2010 11:22 PM

Herbert Hoover's disciples are making noises even as America moves closer towards a double dip recession.

Fed Chair Alan Greenspan tells the New York Times all the Bush tax cuts should expire as scheduled, even those that benefit the middle class and not the rich. His reason: the nation's looming deficit requires it.

On Sunday, former Treasury Secretary Robert Rubin, appearing on CNN, says any further effort to stimulate the economy would be "counter productive," and that policy makers instead should craft a deficit-reduction plan.

Greenspan is only partly wrong. The Bush tax cuts should expire for the top 2 percent of filers (those earning over $250,000) because they save rather than spend a large portion of their incomes, and we need all the spending we can get. The cuts should be extended for everyone else because they'll spend them. The top 2 percent now receive almost a quarter of total national income, which is one reason why the middle class doesn't have the purchasing power to lift the economy on its own. The best way to give them even more purchasing power would be to give the middle class a larger tax cut -- say, a payroll tax holiday on the first $20,000 of income.

Rubin is entirely wrong. As Friday's jobs report shows, the gap between total private spending (consumers plus business plus net exports), on the one side, and the nation's capacity to produce goods and services at or near full employment, on the other, is still a chasm. So government needs to do more spending now, in the short term, in order to get people back to work and the economy back on track.

In 1999, both Greenspan and Rubin urged Congress to repeal the Glass-Steagall Act that had safely separated commercial from investment banking. In 2000 they argued against allowing the Commodity Futures Trading Corporation to regulate derivatives. Until recently, Rubin ran the executive committee at Citigroup, whose excesses required a massive taxpayer bailout. In 2001 Greenspan supported the Bush tax cuts that blew a gigantic hole in the federal deficit and mostly benefited the wealthy. In 2002 he lowered interest rates to near zero but refused to oversee how banks were using their almost-free borrowings.

Both Greenspan and Rubin are deficit hawks. So was Herbert Hoover and so was Hoover's Treasury Secretary Andrew Mellon. And look what Hoover and Mellon got us into. When we least need him, Hoover is being exhumed.

This post originally appeared at RobertReich.org.

http://www.huffingtonpost.com/robert-reich/greenspan-rubin-and-herbe_b_675067.html

[StephanieVanbryce]

The Myth of Austerity - The austerity measures that were supposed to fix Greece's problems are dragging down the country's economy. Stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places. Frustrated workers are threatening to strike back.

Tensions Rise in Greece as Austerity Measures Backfire

08/18/2010

The austerity measures that were supposed to fix Greece's problems are dragging down the country's economy. Stores are closing, tax revenues are falling and unemployment has hit an unbelievable 70 percent in some places. Frustrated workers are threatening to strike back.

The feast of the Assumption of Mary on Aug. 15 is the high point of summer in the Greek Orthodox world. Here in one of the country's many churches, believers pray to the Virgin for mercy, with many of them falling to their knees.

The newspaper Ta Nea has recommended that the Greek government adopt the very same approach -- the country's leaders have to hope that Mary comes up with a miracle to save Greece from a serious crisis, the paper writes. Without divine intervention, the newspaper suggested, it will be a difficult autumn for the Mediterranean state.

This dire prognosis comes even despite Athens' massive efforts to sort out the country's finances. The government's draconian austerity measures have managed to reduce the country's budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years. The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.

The problem is that the austerity measures have in the meantime affected every aspect of the country's economy. Purchasing power is dropping, consumption is taking a nosedive and the number of bankruptcies and unemployed are on the rise. The country's gross domestic product shrank by 1.5 percent in the second quarter of this year. Tax revenue, desperately needed in order to consolidate the national finances, has dropped off. A mixture of fear, hopelessness and anger is brewing in Greek society.

Unemployment Rates of up to 70 Percent

Nikos Meletis is neatly dressed, and his mid-range car is clean and tidy. Meletis used to earn a good living at a shipbuilding company in Perama, a port opposite the island of Salamis. "At the moment, I'm living off my savings," the 54-year-old welder says, standing in front of a silent harbor full of moored ships.

Meletis is a day laborer who used to work up to 300 days a year; this year he has only managed to scrape together 25 days' work so far. That gives him 25 health insurance stamps, when he needs 100 in order to insure himself and his family -- including his wife, who has cancer. "How am I supposed to pay for the hospital?" Meletis asks. Unemployment benefits of at most €460 ($590) per month are available for a maximum of one year -- and only if he can produce at least 150 stamps from the past 15 months.

There's hardly a worker in the shipbuilding district of Perama who could still manage that. Unemployment in the city hovers between 60 and 70 percent, according to a study conducted by the University of Piraeus. While 77 percent of Greek shipping companies indicate they are satisfied with the quality of work done in Perama, nearly 50 percent still send their ships to be repaired in Turkey, Korea or China. Costs are too high in Greece, they say. The country, they argue, has too much bureaucracy and too many strikes, with labor disputes often delaying delivery times.

Perama is certainly an unusually extreme case. But the shipyards' decline provides a telling example of the Greek economy's increasing inability to compete. Barely any of the country's industries can keep up with international competition in terms of productivity, and experts expect the country's gross domestic product to fall by 4 percent over the course of the entire year. Germany, by way of comparison, is hoping for growth of up to 3 percent.

Sales Figures Dropping Everywhere

Prime Minister George Papandreou's austerity package has seriously shaken the Greek economy. The package included reducing civil servants' salaries by up to 20 percent and slashing retirement benefits, while raising numerous taxes. The result is that Greeks have less and less money to spend and sales figures everywhere are dropping, spelling catastrophe for a country where 70 percent of economic output is based on private consumption.

A short jaunt through Athens' shopping streets reveals the scale of the decline. Fully a quarter of the store windows on Stadiou Street bear red signs reading "Enoikiazetai" -- for rent. The National Confederation of Hellenic Commerce (ESEE) calculates that 17 percent of all shops in Athens have had to file for bankruptcy.

Things aren't any better in the smaller towns. Chalkidona was, until just a few years ago, a hub for trucking traffic in the area around Thessaloniki. Two main streets, lined with fast food restaurants and stores catering to truckers, intersect in the small, dismal town. Maria Lialiambidou's house sits directly on the main trucking route. Rent from a pastry shop on the ground floor of the building used to provide her with €350 per month, an amount that helped considerably in supplementing her widow's pension of €320.

These days, though, Kostas, the man who ran the pastry shop, who people used to call a "penny-pincher," can no longer afford the rent. Here too, a huge "Enoikiazetai" banner stretches across the shopfront. No one wants to rent the store. Neither are there any takers for an empty butcher's shop a few meters further on.

A sign on the other side of the street advertises "Sakis' Restaurant." The owner, Sakis, is still hanging on, with customers filling one or two of the restaurant's tables now and then. "There's really no work for me here anymore," says one Albanian employee, who goes by the name Eleni in Greece. "Many others have already gone back to Albania, where it's not any worse than here. We'll see when I have to go too."

No Way Out

The entire country is in the grip of a depression. Everything seems to be going downhill. The spiral is continuing unabated, and there is no clear way out. The worse part, however, is the fact that hardly anyone still hopes that things will improve one day.

The country's unemployment rate makes this trend particularly clear. In 2009, it was 9.5 percent. This year it may rise to 12.1 percent and economists expect it to reach 14.3 percent in 2011. Those, though, are only the official numbers, which were provided by Angel Gurría, secretary general of the Organisation for Economic Co-operation and Development (OECD). The Greek trade union association GSEE considers those numbers far too optimistic. It considers 20 percent to be a more likely figure for 2011. This would put the unemployment rate as high as it was in 1960, when hundreds of thousands of Greeks were forced to emigrate. Meanwhile, purchasing power has fallen to its 1984 level, according to the GSEE.

'Things Are Starting to Simmer'

Menelaos Givalos, a professor of political science at Athens University, has appeared on television, warning viewers that the worst times are still to come. He predicts a large wave of layoffs starting in September, with "extreme social consequences."

"Everything is getting more expensive, I'm hardly earning any money, and then I'm supposed to pay more taxes to help save the country? How is that supposed to work?" asks Nikos Meletis, the shipbuilder. His friends, gathered in a small cafeteria on the pier in Perama, are gradually growing more vocal. They are all unemployed, desperate and angry at the politicians who got them into this mess. There is no sympathy here for any of the political parties and no longer any for the unions either.

"They only organize strikes to serve their own interests!" shouts one man, whose name is Panayiotis Peretridis. "The only thing that interests me anymore is my daily wage. A loaf of bread is my political party. I want to help my country -- give me work and I'll pay taxes! But our honor as first-class skilled workers, as heads of families, as Greeks, is being dragged through the dirt!"

"If you take away my family's bread, I'll take you down -- the government needs to know that," Meletis says. "And don't call us anarchists if that happens! We're heads of our families and we're desperate."

He predicts the situation will only become more heated. "Things are starting to simmer here," he says. "And at some point they're going to explode."

Photo Gallery: Hopeless in Athens [ http://www.spiegel.de/fotostrecke/fotostrecke-58347.html ]

http://www.spiegel.de/international/europe/0,1518,712511,00.html

[StephanieVanbryce]

300 Economists Warn Obama: Grave Danger Ahead


Thursday, 09/16/2010 - 2:37 pm

Three hundred economists released a letter to President Obama today with one message: focus on jobs, not on the deficit. Robert Borosage, co-director of the Institute for America’s Future and one of authors of the statement, said the letter is “a call for action on the economy and a return to economic common sense” in a conference call with the media this morning. This is not the time for balancing the budget and slashing the deficit, he pointed out; rather, it is “the time for bold initiatives to rebuild America and to generate jobs and growth.”

The storyline that we have out of control government spending right now is “one hundred eighty degrees from reality,” said Dean Baker, ND20 contributor and co-director of Center for Economic and Policy Research on the call. What is the real problem here? Long-term, it’s spiraling health care costs. Without getting those under control, no matter what else happens the US will have a huge financial burden in the long run. “It’s not the deficit; it’s health care,” he warned.

Robert Kuttner laid it all out plainly: it’s “really about a high road to recovery versus a low road to fiscal balance.” The high road: increased public investment, leading back to easy fiscal balance. The low road: fiscal austerity now, at the cost of whacking the economy. Want a great example? Look no further than World War II. The modest deficit spending of the New Deal was no match for the spending in the run-up to war, which thrust the economy back into recovery.

And finally Robert Reich, the former Secretary of Labor, was perfectly clear on where he stands: “There is a serious danger that if we continue with the policies that we are now seeing in Washington, we’re going to have not just a double dip recession, but we are toying with the possibility of much more serious deflation and a US lost decade analogous to Japan’s lost decade.” There are only four sources of economic demand, three of which — consumers, businesses, and export countries — have problems of their own, he reminds us. Government is the last source when all else fails — and all else IS failing. If we can’t learn the lesson from these facts, Reich thinks we risk repeating 1937, when FDR listened to budget balancers and deficit hawks. His move “plunged us back into depths of very deep depression,” and he says we’re in danger of doing the same thing all over again unless we can “stop our obession with short-term deficits and understand both economic logic and history.”

Read the full letter here.[ http://dontkilljobs.org/ ]

Other economists are also making noise about this issue. The New America Foundation recently released “Plan B for Economic Recovery“, which included a statement from ND20 contributors Marshall Auerback and James K. Galbraith, called for a focus on jobs and progressive ideas to get the economy back on track. And Washington Post blogger Ezra Klein just ran an interview series, “Blue Skies,” that lays out different ideas to kick-start job creation from Dean Baker, Heather Boushey, Michael Lind, and others. Moral of the story: this recession demands creative and bold action, not a resort to fear.

REferences:

Readying a Plan B for Economic Recovery
http://www.newamerica.net/publications/policy/readying_a_plan_b_for_economic_recovery

Blue Sky series: Michael Lind's plan
http://voices.washingtonpost.com/ezra-klein/2010/09/blue_sky_series_michael_linds.html

http://www.newdeal20.org/2010/09/16/300-economists-warn-obama-grave-danger-ahead-20341/