Bloomberg: Conundrum for U.S.: efficiency = fewer jobs

U.S. corporations now "live in a perpetual state of recession," thanks to globalization. There is always an outlet in lower-cost markets for production.

In the U.S., American mangers are cooperating with the shop floor to minimize labor and maximize machines. Those few workers remaining on the payroll, scared s***less by the Great Recession, are only too happy to oblige their bosses. It's real cooperation to benefit the corporate bottom line.

"When the productivity growth comes, then watch out because that is when companies start not needing so much labor," Edmund Phelps, a Columbia University economist and Nobel laureate, said.

So which political party is going to be honest about this when they lament U.S. unemployment? Or will they keep saying that taxes and burdensome regulations are the problem?

What nobody will admit is that downsizing/efficiency projects are always an easy sell for middle-management, which is operating under assumptions of zero- or low-growth in consumer demand in the short term. Companies are basically making plans under the assumption that sales will be flat for the next few years. So of course efficiency projects are getting all their attention and capital investment.

Bernanke Goal of Optimal Employment Elusive With Profits Bringing No Jobs

By Craig Torres and Anthony Feld

November 24, 2010 | Bloomberg

URL: http://www.bloomberg.com/news/2010-11-24/bernanke-goal-of-optimal-employment-elusive-with-profits-bringing-no-jobs.html

Without color-coding, how can we regulate fear?

I disagree with this change by Obama. First of all, color-coding is easy to understand. Duh. Secondly, how am I to know how scared I should be from day to day?

I need Big Guvmint to tell me! I miss Dubya-Cheney!! I can't hack it in this new uncertain terror-stricken world!

Color-Coded Terror Alerts To Be Dropped By Department Of Homeland Security

By Eileen Sullivan

November 24, 2010 | AP

URL: http://www.huffingtonpost.com/2010/11/25/color-coded-terror-alerts-dhs_n_788450.html

Johnston: Deliberate destruction of the middle class

One of my favorite financial journalists, David Cay Johnston, in this short interview describes how in the U.S. local tax breaks and subsidies are net "wealth destroyers" which do not abide by the rules of capitalism, i.e. raising funds on the capital markets, taking risks, and reaping rewards. Rather, these are special breaks given to politically connected companies and individuals at our expense.

All you fiscal conservatives and Tea Partiers, listen up! This is the real system of corporatism you should be fighting against, not "welfare" for erstwhile working people rocked by the Great Recession. He estimates that states spend $70 billion a year in subsidies, and the federal government spends about $1 trillion a year in subsidies to corporations and wealthy individuals with billion-dollar incomes.

Johnston asks simply, "Is that capitalism?"

Watch the interview!

The Rich Get Richer and They Have You to Thank, Says David Cay Johnston

By Peter Gorenstein

November 19, 2010 | Tech Ticker, Yahoo! Finance

Russia Today: U.S. taxes used to depose foreign gov't's?

Russia Today says that the U.S. has spent $9 billion on democracy promotion efforts over the past 20 years. According to RT, USAID and its grantees are all bad guys and a soft cover for the CIA's regime change efforts; moreover, Obama's "smart power" concept is just a continuation of a long-standing U.S. policy of regime change.

RT cites Americans like Ron Paul and Lawrence Wilkerson in criticizing U.S. democracy-spreading efforts. Said Paul to RT:

"It is particularly Orwellian to call US manipulation of foreign elections 'promoting democracy.' How would we Americans feel if for example the Chinese arrived with millions of dollars to support certain candidates deemed friendly to China?"

"I think it's terrible, we use taxpayer's money to go over and use our military and the CIA these programs that say 'this is what you outta do' and influence them. There is no authority for that, it doesn't work, it teaches a lot of people to despise us."

If it didn't work though, would it bother Russia so much?

Just interesting to read the official Russian state propaganda....

Democracy promotion: America's new regime change formula

November 18, 2010 Russia Today

URL: http://rt.com/usa/news/democracy-promotion-usa-regime/

Dubya's tax cuts didn't boost growth

Just in case facts still matter....

Were the Bush Tax Cuts Good for Growth?

By David Leonhardt

November 18, 2010 | New York Times

Liz Peek at FoxNews.com congratulates me for writing about the importance of economic growth. So in the spirit of maximizing growth, I want to pose a question: Why should we believe that extending the Bush tax cuts will provide a big lift to growth?

Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed?  The decade with the slowest average annual growth since World War II.  Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7.

The competition for slowest growth is not even close, either. Growth from 2001 to 2007 averaged 2.39 percent a year (and growth from 2001 through the third quarter of 2010 averaged 1.66 percent). The decade with the second-worst showing for growth was 1971 to 1980 — the dreaded 1970s — but it still had 3.21 percent average growth.

The picture does not change if you instead look at five-year periods. Here's a chart ranking five-year periods over the past 50 years, in descending order of average annual growth:

Bureau of Economic Analysis, via Haver Analytics

I mean this as a serious question, not a rhetorical one: Given this history, why should we believe that the Bush tax cuts were pro-growth?

Is there good evidence the tax cuts persuaded more people to join the work force (because they would be able to keep more of their income)? Not really. The labor-force participation rate fell in the years after 2001 and has never again approached its record in the year 2000.

Is there evidence that the tax cuts led to a lot of entrepreneurship and innovation? Again, no. The rate at which start-up businesses created jobs fell during the past decade.

The theory for why tax cuts should create growth and jobs is a strong one. When people are allowed to keep more of each dollar they earn, they are likely to work longer and harder. The uncertainty is the magnitude of this effect. With everything else that's happening in a $15 trillion economy, how large of an effect on growth do tax cuts have?

Every available piece of evidence seems to suggest that the Bush tax cuts did little to lift growth. I have yet to hear a good argument to the contrary, but I'd be fascinated to see another blogger or an economist take a crack at it.

Update: A reader asks for statistics on real economic growth (that is, adjusted for inflation). The above chart is already adjusted for inflation.