Missed It By Several Weeks
I’ve been saying we went into a recession in October or November 2007 but the officials who get to rule on these things say I was wrong: It’s official: US has been in a recession all year
WASHINGTON (AP) – The U.S. economy has been in a recession since December 2007, the National Bureau of Economic Research said Monday.
I still think it was earlier, just look at the job and Dow numbers in the Fall. Throwing a few bankers in jail last year and extending unemployment benefits might have saved it, but the the Hedgemony kept claiming “the fundamentals were strong” as the economy collapsed.
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Besides a bump here and there it seems like it’s been a none stop 10 or 12 year recession around here.
I graduated from high school in Oneida County, New York in the mid 1960s. When all of the manufacturing was “outsourced” to the South the big decline began. Some areas held on for a while, like Rochester with Kodak and Xerox, but upstate New York has been in a downward phase for a long time. No one would invest in the future, they milked the old factories until they died, and then moved somewhere cheaper to maintain profits.
The South learned nothing from that action and are experiencing the same thing as the outsourcing is going overseas.
This is a Duh moment, right? (sigh)
According to Keynes, the root cause of an economic downturns is an insufficient aggregate demand. When the total demand for goods and services declines, businesses throughout the economy see their sales fall off. Lower sales induce firms to cut back production and to lay off workers. Rising unemployment and declining profits further depress demand, leading to a feedback loop with a very unhappy ending.
90% of the time you can make statistics show whatever you want 50% of time
http://nomedals.blogspot.com
The stock market dropped 680 points on the “news”.
You saw it last year on your trip to the antique stores – the vendors leaving and the stock missing, which was even worse this year.
I saw it in the stocking levels at all stores last Christmas, and it is even more grim this Christmas.
This recession, at a year, is already longer than anything since the 1970s with the oil embargo. They waited too long to do anything which just makes it worse and longer.
Keynes is the recognized authority on recessions and he hasn’t been wrong yet.
Actually I don’t think we actually recovered from the 2001 recession because we didn’t have any job growth or income growth to speak of the entire time Bush has been in office.
The main problem with “supply-side” economics [other than it is total piffle] is that economies are driven by demand. No one expands a business unless there is a demand for its product and/or services. By not creating jobs, and not passing benefits onto workers, you are reducing the number of consumers. This problem was masked by the housing bubble for a while, but the bursting of the bubble brought reality back into focus.
Henry Ford did not pay his workers well because he loved them, he paid them well so they could afford to buy his cars. When businesses outsource they are cutting their own throats. If people don’t have jobs, they can’t buy those cheaper products imported from Asia. It is obvious, but apparently they don’t explain it in MBA programs.
Tax credits for hiring employees is stupid. You don’t hire employees unless people want your product, and if people are buying your product you don’t need tax policy to tell you to make more.
Tax credits for hiring employees, along with other tax code changes, do offer real gains in U.S. employment for any business that has overseas subsidiaries. For example, one reason why my employer has three times as many employees in China as it has in the United States is because China offers significant and generous tax credits for employing Chinese engineers, while the US offers nothing. If the U.S. levied a per-employee tax on our China operation and gave us a per-employee tax credit for our U.S. operation, darn right we’d pull some of those jobs back to the United States.
The problem of course is that then you get into a race to the bottom, where all nations try to give better tax credits than the next to get that international job flow to come to *their* nation. But the U.S. currently has a lot more dollars to do that kind of race than any of the competition has…
But talking about small businesses you are, of course, correct. That’s why minimum wage hikes rarely have any real effect upon unemployment. Small businesses — the ones that pay most minimum wage employees — are already running with the minimum staff needed to service their customers. They’re not charities, after all, they’re in business to make the most profit possible for their owner. If wages rise, they’ll raise prices, not fire employees, because if they could serve their current clientele with fewer employees they’d already be doing so. But there isn’t much we can do directly for small business that will increase hiring there — we need to increase demand. And bringing back outsourced American jobs via tweaks to the tax code not only adds more high-wage jobs to the economy, but it increases demand since those people now have more money to spend buying things from small businesses…
– Badtux the Economics Penguin
Jobs are created by small businesses and shed by corporations. The mass of jobs that once existed in corporations was related to manufacturing, and that has moved overseas.
Programs targeted at corporations is all that we have had more decades, and they don’t work. a full-time minimum wage is around $12K these days, so a $3-4K tax credit isn’t going to convince someone to hire. Federal tax policy is background noise to a small business, who are really impacted by decisions at the state and local level. Unemployment and disability insurance changes have more of an impact on the small business that everything the Feds do. The IRS are kittens compared to most state tax authorities, and dealing with local business licensing can be the biggest hemorrhoid a business owner can face. [Try explaining that installing network cards is not the same as moving refrigerators for disability insurance purposes.]
The most efficient way of creating new jobs is to shift from helping corporations to at least not being hostile to small businesses, because most Federal programs are geared towards helping corporations by screwing over small businesses trying to compete.
When my local government installed traffic lights to help Lowes and WalMart, they screwed over a lot of local retailers who had been requesting traffic assistance for years.
Playing with the tax code is a zero sum game – someone has to pay for the government, and it would be nice if it were occasionally those who received the bulk of the benefits.
Indeed, any tax credit would need to be significant. A $3K-$4K tax credit would do little. The Chinese basically paid the wages of our new employees for an entire *year*. That was more than ample reason to staff up in China rather than the United States, free workforce for four quarters, then a cheap workforce after that? And even if they weren’t cheap, we got a whole year free to train them up to our standards (and get rid of the untrainable ones) before we had to start paying their salaries, so we might have kept them on anyhow even if we had to pay U.S. market rates for them.
Regarding large vs. small business and employment, I read somewhere that the Fortune 1000 had finally cracked 50% in terms of how many Americans they employ, either directly or through their franchisees and subsidiaries. In any event, my current employer most decidedly qualifies as a “small business” — our yearly gross is roughly what Microsoft made in net profit in the time it took you to read this sentence — and tax credits led us to outsource. They could lead us to in-source too, if generous enough — and there certainly is no shortage of potential U.S. employees for us, all we have to do is set up a booth at any middle-tier university and be showered with resume’s from new grads who are every bit as good as the Chinese guys we’re hiring. But why, when we get a year’s salary for free from the Chinese government?!
– Badtux the Engineering Manager Penguin
That isn’t a tax credit, that’s a direct subsidy. There was once a vocational rehabilitation program in the US that was similar, but the most that is proposed for the bailout bill is to cover the taxes paid for the new employee.
As for the Fortune 1000 having as many employees as small business, not hardly. Most of the people I know supposedly working for Fortune 1000 corporations receive 1099s not W-2s. The actual full time employees of large corporations has been falling for years, being replaced by body-shop employees and service bureaus.
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