This might well be called the slip-sliding economy because, for the vast majority of Americans, that’s exactly what it is. Last month, the creation of 103,000 jobs failed to even take care of half the growth in the labor force, continuing a deteriorating situation that has persisted throughout the economic downturn. Since the recession started over three years ago, the workforce should have increased by four million job positions just to keep up with the working-age population growth, according to the Economic Policy Institute, but, incredibly, it has actually shrunk.
Furthermore, the Labor Dept. reported that 445,000 workers filed first-time unemployment claims last week, marking the third increase in as many weeks. The one piece of good news recently was a small drop in the unemployment rate, but it turned out that one of the main causes was people giving up on the frustrating job of finding work.
President Obama says that jobs will have a high priority over the next two years. However, the political process is hardly known to crank itself up unless it is faced with a crisis. And, the mind-numbing, relentless erosion in the jobs market doesn’t appear to be a crisis to legislators who are, for the most part, living the high life that only lobbyists know how to provide.
Indeed, how can they be concerned when they are barraged with upbeat news reports? On Wednesday, for example, the Federal Reserve announced that the year 2010 ended strongly. A day earlier, the head of the U.S. Chamber of Commerce said that he was optimistic about the direction of the economy and about the White House’s recent approach to the business community.
Yet, reality tells us that, in addition to the disastrous jobs situation, the housing market continues to decline, that foreclosures continue to escalate (ominously, tens of thousands of sub-prime mortgages in California are about to be hit with another jump in their interest rates), and that the problems that have been gradually transferred from Washington to the state capitals are now rolling downhill to the municipalities. Furthermore, the number of bankruptcy filings were up 9% last year, according to the National Bankruptcy Research Center, and are expected to be even higher this year. Also, the Census Bureau reported that 15.7% of the population, or 47.8 million Americans, are now living in poverty. And the rate is even higher for children. Furthermore, right on cue, the misery index is being hit with rising oil prices.
California’s new governor, Democrat Jerry Brown, has already figured out how he’d like to solve the state’s financial crisis. He says he will transfer some of the operations “closer to the voters.” In other words, he wants to roll the costs on down to the cities and towns.
How will that work out? Well, consider this. They can’t afford it either. Several communities in the state are already in default on their obligations, or threatening to be in default, and the list of likely problem areas is growing daily. For example, the well known ski town of Mammoth is on the list. Furthermore, the economic carnage is expected to follow the “rust-belt” paths laid out by the state’s many vast developments of empty and unfinished homes.
Bloomberg News reports that the value of municipal bonds, nationally, is continuing to fall as concern spreads. Meredith Whitney, the analyst who accurately predicted three years ago that Citigroup, Inc. was headed for serious financial trouble, told 60 Minutes last Sunday that “hundreds of billions of dollars” in municipal bond debt would end up in default.
Does this all sound like a strong economy headed in the right direction?
Getting back to Jerry Brown, he has a few more solutions to California’s problems in mind. They involve cutting welfare by $1.5 billion, or 50%, Medi-Cal by $1.7 billion, services for the developmentally disabled by $750 million, and the State University systems by $1 billion. Nowhere, in this panoply of misery that apparently will be foisted on those who can least afford it, is there any mention of hitting up the wealthy for their share. In other words, those who have more wealth at their disposal than they and their families can possibly spend in their lifetimes - who belong to the precise sector of our society that actually caused this mess in the first place - these super-rich residents will continue to get a free ride in California, as they do in Washington.
Finally, if there is one golden rule in economics, it’s that you don’t embark on an austerity trip during bad times, and these are bad times. It will only make matters worse. Nations in Europe and elsewhere may learn this the hard way. Greece, Ireland, Spain, Portugal and Italy are all struggling with financial crises and the imposition of austerity measures is resulting in more and more civil unrest. In the last few days, violent riots have also broken out in Tunisia and Algeria over the same problems.
Don’t get me wrong, austerity is fine at the right time, and I consider myself to be a strong disciple. Right now, however, the problem is still the need to stimulate the economy, not smother it.
For those who would ignore the troubling signs that continue to exist, the specter of a “double dip” has not gone away.
Far from it…