Economic doldrums

The Labor Department's jobs data for August are in and show the country now has 1.8 million "long term unemployed," with an increase in unemployment of 1.2% over the last 12 months, most of it occurring in the last four months, resulting in 9.4 million who were officially unemployed in August.  At the same time, the number of people who are holding down multiple jobs increased to 8.1 million (about 5.5% of the total employed population).

As for the nonfarm payroll record: 605,000 jobs disappeared since January; 100,000 jobs gone in June (double the original estimate); 84,000 jobs cut by employers in August (more, even, than economists predicted). The unemployment rate has hit a five-year peak, and the eight months of job losses sound in recession.  Hourly wages haven't kept up wih inflation, just at the time that wealthy Americans are garnering more of the nation's income than ever before and paying considerably less in taxes on that income than they would have paid under the laws in place when Bush took over and led the passage of a series of tax cuts especially beneficial to multinational corporations and the wealthy.  According to Jared Bernstein at the Economic Policy Institute, “Whatever is growing the economy, it’s not showing up in the jobs market in any way at all.” Michael Grynbaum, Unemployment Rate Hits 6.1%, NY Times, Sept. 5, 2008.

This no-jobs information further confirms the categorical disconnect portrayed by former Senator Phil Gramm's "whiners" remark as the foremost economics adviser to McCain: he claimed that the U.S. economy was doing just fine and it was just a few whiners who were upset.  Fact is, the vast majority of Americans are suffering one economic catastrophe--or near disaster--after another, from the credit crunch to foreclosures, from job losses to medical emergencies without adequate health care coverage, from inflated prices for essentials to elimination of expected pension benefits by companies that profited from the promises and then failed to deliver, from weather damage to infrastructure that is left to continue to corrode the economy and well-being of the people to tax and accounting policies that favor multinational corporations and their high-paid executives over the ordinary Americans that do so much of their work.  Much of this is a predictable result from the change from Keynesian economic approaches prevalent among Democrats, to the so-called "Reagan revolution" of privatization, deregulation, and lowering of taxes on the wealthy that has guided the country for 26 of the last 28 years under a misguided concept of "trickle down" economic growth for the 80% of Americans who can't be classified as upper class. 

Trickle-down, supply-side economic policy hasn't ever made sense: it has left the vast majority of Americans struggling just to stay even.   

Comments

[Neil]

Professor, will you please clarify something for me regarding your comment on Democrats practicing Keynesian economics? I thought Keynes supported ideas like lowering taxes in order to increase the exchange of money throughout the economy, e.g., last summer's economic stimulus plan. In the past, what have Democrats done that is in line with Keynesian economics?

[LindaMBeale]

As I understand them, Keynes' economic policies are more like the Dems' than like the Republicans' in several respects. Keynes would indeed urge the government to act to counter recessions or depressions in the economy (as he did in correspondence with Roosevelt), but he would argue that additional government expenditures are more powerful than tax cuts (the multiplier is larger by one for government expenditures compared to tax reductions). As you know, Democrats tend to argue for public infrastructure expenditures as part of the package to stimulate the economy, which is more in accord with Keynes, while the Bush administration insisted on economic stimuli that could be cast as tax cuts. Keynes might also have been hesitant to recommend privatization in any case where there would be concerns about monopoly and concerns that privatization wouldn't produce collective or social returns.