Category Archives: Economics

Miscellaneous economy stuff

Our Economic Recovery

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The Congressional Budget Office had some remarks last Thursday.

More than four and a half years after the end of the recession, employment has risen sluggishly—much more slowly than it grew, on average, during the four previous recoveries that lasted more than one year.  At the same time, the unemployment rate has fallen only partway back to its prerecession level…and a significant part of that improvement is attributable to a decline in labor force participation that has occurred as an unusually large number of people have stopped looking for work….  Moreover, the rate of long-term unemployment—the percentage of the labor force that has been out of work for more than 26 consecutive weeks—remains extraordinarily high.

And

CBO estimates that GDP was 7½% smaller than potential (maximum sustainable) GDP at the end of the recession; by the end of 2013, less than one-half of that gap had been closed.  With output growing so slowly, payrolls have increased slowly as well—and the slack in the labor market that can be seen in the elevated unemployment rate and in part of the reduction in the rate of labor force participation mirrors the gap between actual and potential GDP.

And [emphasis in the original]

Employment at the end of 2013 was about 6 million jobs short of where it would be if the unemployment rate had returned to its prerecession level and if the participation rate had risen to the level it would have attained without the current cyclical weakness. Those factors account roughly equally for the shortfall.

Any questions about the effectiveness of the Obama administration’s economic policies?

Union Greed, Extended

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Included in President Barack Obama’s latest budget proposal was a 1% raise for Federal employees.  Of course, in this time of profligate spending and exploding debt, that’s not enough for public service unions.

David Cox, president of the American Federation of Government Employees, the nation’s largest federal employee union, said Monday that the 1% increase is “pitiful” and fails to compensate for sacrifice by government workers.

“Federal employees have endured years of pay freezes and cuts in retirement benefits,” Cox said in a statement.  “Federal employees deserve a meaningful pay raise, not a token increase that will be more than eaten up by rising living costs, including higher retirement and healthcare costs.”

And

Union leaders argue the planned increase is not enough to compensate for recent hardships endured by federal workers, who will see an estimated $120 billion in lower wages and benefits during the next decade due to the pay freezes, according to the American Federation of Government Employees.

“I strongly believe that federal employees deserve more, and this amount is inadequate,” [National Treasury Employees Union President Colleen] Kelley [said].  “There is no question in my mind that inadequate raises will have consequences on recruitment and retention.”

All Americans have been sacrificing in this failed recovery, especially in the private sector, where too many have no job at all in which to get a 1% pay raise, and some Americans have been sacrificing far more in defense of this country—and these government unions—against threats and attacks by our enemies.  Government union employees are hardly special, except perhaps in their own minds.  If government employees don’t like their “rewards” for doing their jobs, they don’t have to stay in those jobs.  Not even government employment is a jobs welfare program.

These guys “deserve” a pay raise based on what useful criteria?  The actual “meritorious” job performance of the IRS?  Of State?  DoJ?

What rising living costs are being claimed in an environment of artificially depressed interest rates and low inflation?

Rising healthcare costs?  You mean Obamacare, which you guys (and your private sector counterparts) enthusiastically supported?

Beuller? Beuller?  Anyone?

The bit about lower future wages and benefits is especially…amusing.  This is of a piece with the fantasy of future-year “cuts” that exist only in the minds of those trapped in the Beltway Imaginary Friends World.

As to those cried over consequences to recruitment and retention, that works for me; we have too many Federal employees, anyway.  During the recent Democratic Party shutdown of the government, the EPA rated 94% of its employees non-essential, for instance.  And see my earlier remark about nobody being held in a government job against his will.

Misallocation of Resources

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…driven by Big Government.

JP Morgan Chase & Co said Tuesday it will cut more jobs at bank branches and its mortgage unit this year than previously planned, as the largest US lender adjusts to slowing home-loan demand and customers’ growing preference to bank online.

That’s one aspect of the restructuring.  JPM says they’ll lose some 8,000 employees from its branches and its mortgage unit.  However, they’re looking to increase their “controls staff” by some 3,000.  A company’s controls staff are the folks dedicated to ensuring company compliance with government laws and regulations, as well as with its own internal rules.

Are the two related?  Not directly, although burgeoning Federal rules are hampering the housing industry and mortgage lending, generally.  Yet the fact remains,

The new figures show…a continued buildup in the bank’s staffing levels dedicated to dealing with regulators and legal issues.

An increase of 3,000 for its controls staff out of a total company employment of some 260,000 (net of those cuts) might not seem like much, but its Controls section is much smaller, and this is a significant (re)allocation of its employment emphasis.

The problem is, compliance isn’t productivity.  Compliance employees don’t increase the amount of product—or improve competition for product sales—in an economy.  All they can do is cost money to appease government.

“Pass the Bill…”

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“…in order to see what’s in it….”

Here’s another of those tidbits that’s in it that Pelosi and her gang chose not to know about before passing Obamacare:

Tucked deep in the Affordable Care Act is language requiring all restaurants with at least 20 locations to list nutritional information alongside each and every item on their menu.

Sit-down restaurant chains, with their menus now required to be cluttered with “nutrition” information instead of letting their patrons see a readable menu—because Big Government knows better—are also faced, unfortunately, with a rapid-fire alteration of their menus as this “nutrition” information gets frequently “updated:” recall how rapidly the USDA’s food pyramid has been changing over the last several years.

Those places have it easy, though.  Consider the walk-/drive-in places, like hamburger joints and pizza houses, where the customer gets to mix and match from among “each and every item” to form a custom meal to buy.  As Peter Doocy put it at the above link:

Take Domino’s.  There are 34 million different pizza combinations available at the chain, when all crusts and cheeses and toppings are factored in.

Now imagine walking into a Domino’s and navigating a menu board with 34 million different options on it.

And in Domino’s case (and most pizza houses, come to that),

90% of their business comes in over the phone or online.  And none of those people ever set foot in the store, where the menu board would be.

Think about the advertising brochures Domino’s might have to send out to potential callers that included this information.  Think about how many pages on their Web site would be needed to carry this information.

Think about an utterly mendacious law that needs to be repealed, even if its replacement is the status quo ante.

Chained CPI, Taxes, and Spending

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In years past, Obama had offered to trim cost-of-living increases in Social Security and other benefit programs—known as chained CPI.  Not anymore.

The Obama administration also has taken to making this claim:

Social Security has not contributed one penny to the deficit.

This, of course, is mendaciously false—it’s government spending, and the government is spending more than it takes in.  The only thing is the bookkeeping fiction that it’s off-budget, and so (so the claim goes) that deficit spending doesn’t exist.  But this meme depends on a carefully distorted definition of the official “deficit”—that of being only an on-the-books deficit, and not including the off-the-books spending that is Social Security (and Medicare).

But, maybe Obama would reconsider.

“The president was willing to step forward and put on the table a concrete proposal.  Unfortunately Republicans refused to even consider the possibility of raising some revenue by closing some loopholes that benefit only the wealthy and well connected,” [White House Principal Deputy Press Secretary Josh] Earnest said.  Officials said Thursday that those potential reductions in spending, included in last year’s Obama budget, had been designed to initiate negotiations with Republicans over how to reduce future deficits and the nation’s debt.  But Republicans never accepted Obama’s calls for higher tax revenue to go along with the cuts.

Never mind that the only legitimate uses of closing loopholes are two: to reduce tax rates, and to pay down the national debt.

Beyond that, government doesn’t need more tax revenue; although it would get more, even at lower tax rates, if it got out of the way of the economy and let that grow.  Government needs to cut pending to below collected tax revenue, and it needs to use the increased revenue from loophole closing (all loopholes, including, say, tax credits for “green” energy boondoggles, not just those convenient to Democrats) to reduce tax rates even further—and then keep that tighter lid on spending.

[Obama’s latest budget proposal] says deficits as a share of the economy will be below 2% after 2025.

In other words, Obama continues to ignore our out of control national debt, since those deficits can only continue to add to the debt.