Sunday, October 11, 2009

Job creation credits and the Great Recession

As I previously noted, we are now in the worst recession since the Great Depression if you look at job losses. And as Michael Klamperman points out, Democrats are sweating, rightfully so because their notion of a recovery program has been halfway measures intended to appease Republicans rather than a full-fledged program that was large enough to do any good.

So the latest gee-whiz thing to come out of Congress is the notion of job creation credits of $2500-$3000 per job created. At which point both Michael and I come to a screeching halt and say: What the fuck? What good is that going to do? The only way a job is going to be created here in the USA is if either a) demand increases (which isn't happening), or b) we un-outsource previously outsourced jobs and bring those jobs back. How are these job creation credits supposed to do that?!

Let's look at the demand side first. People aren't spending. They aren't spending for a damned good reason: They fear for their jobs, and are saving money as rapidly as they can rather than consuming in order to create their own half-assed unemployment insurance program because state unemployment benefits are a joke. I mean, $265 per week isn't going to pay the typical mortgage, much less provide enough money to buy food, pay for health insurance, and every other expense a family has. That's not even poverty level for a family of four, for cryin' out loud. We need to provide security to people before they can feel safe spending money again, and the only way to do that is to guarantee to people that if they lose their job, they do not lose their house, they do not lose their car, they do not lose their health insurance, and they do get sufficient money to live on while they search for a job. Without these kinds of guarantees, people are scared shitless, and are doing what they always do when they fear for their jobs: they save to create their own unemployment insurance, thereby costing themselves their own jobs due to the Paradox of Thrift.

The other possibility on the demand side is that if consumers aren't consuming, we can make government take over the consuming. Spend trillions on infrastructure projects, for example, and that puts people back to work building stuff, selling food to the people building stuff, and so on and so forth, and once it's built then we have the infrastructure to replace our current decrepit and decaying infrastructure. It's not as if we have any shortage of infrastructure projects, we've been trying to scrape together the money to extend BART to Santa Clara for the past twenty years here in the SF Bay Area for example, BART needs new rail cars because their current ones are thirty years old, Caltrain needs to be electrified and needs new rail cars because the current diesel locomotives are too slow and can't be sent into underground tunnels to get to the Transbay Terminal as well as needing to be triple-tracked to Gilroy to allow regular service there and again we've been trying to scrape up the money to do this for the past ten years, then there's the high-speed bullet train proposed between San Francisco and Los Angeles and San Diego, there's seismic refitting of the delta levees and rebuilding the levees that protect low-lying areas of the South Bay (said levees were built by salt companies 50+ years ago to empound salt evaporation pools and are woefully inadequate to protect the homes and businesses that now lie landward of these levees), and so on and so forth. But again, the Democrats in Congress are too busy trying to appease Republicans to do the kind of spending needed to replace the fall in consumer demand.

Okay, so we're not consuming more, and nobody in Congress is proposing anything to increase consumption, so the only way jobs are going to be created is if we un-outsource previously-outsourced jobs. And for that purpose, a job creation credit of $2500 to $4000 is... laughable. A joke. Seriously, a joke. Look, our international competitors will generally pay a FULL YEAR'S SALARY for any job we outsource to their country, as well as providing one to three years of free rent in a government-owned R&D complex. My previous employer opened an R&D lab in China for that reason -- it simply made more sense than trying to expand in the United States. $2500 to $4000 is not going to bring a single job back home from India or China. It's a joke, utterly a joke. If we're going to bring those jobs back to the United States, we're going to have to provide at least the incentives that our international competitors are providing... or at least provide some disincentives for outsourcing, perhaps via changes to the tax code to make it more expensive to outsource. But again, the Democrats in Congress are a chamber of Neville Chamberlains more interested in appeasing the Republicans than in behaving like Democrats.

So I guess we're fucked, good and hard. The Republicans want the Great Recession to continue because deflation is good for the wealthy -- it makes their cash increase in value and allows picking up the assets of the masses for pennies on the dollars as those assets are forcibly liquidated via foreclosure, bankruptcy, etc. And the Democrats are too busy channeling Neville Chamberlain and trying to appease the Republicans in order to do what has to be done in order to get demand jump-started again or bring outsourced jobs back to America. What's the end game? I don't know, but I'm starting to get shudders down my fine-feathered back about the possibilities, because the F word (Fascism) has been a traditional response to depressions, indeed FDR avoided a fascist coup against him only because of a single patriot who blew the whistle and the lucky(?) assassination of another incipient fascist. Well, that and because FDR's programs were much more ambitious and larger in scope than anything the Democratic Congress and President Obama have proposed. What's going to happen if the job losses continue into the mid-term elections and beyond? Well, you know the answer to that. What happened to George H.W. Bush (or Jimmy Carter) when the economy went into the crapper during his first term? Can you say "one term President"? Yet Washington keeps fiddling while Rome burns, and when the house burns around them, will say "what? It's just a flesh wound!". And we're the flesh :-(.

-- Badtux the Economics Penguin


  1. True so true Mr. Penguin. I can see that the bankers are are full and happy , but the rest of us , well not so much. I wonder if any stimilus has filtered down to bigger citites like the Bay Area? You mentioned the Rail system needing help, but has Any money been spent putting people to work? I live in small town USA and there is no stimilus or hope of. I saw a sign at a highway repaving job here that said it was paid for by the stimilus, but they sure weren't hiring.
    I'd be really thrilled at some kind of WPA job, there are miles of Forrest Infrastructure around here that need to be rebuilt, not counting roads and bridges of the State. But do we spend money to put money in the hands of the poor , hell No.
    Of the Rich and For the Rich .
    a disgusted w3ski

  2. America has a "jobs" programme, Tux. It's called "join the military." Lots of jobs there, if you're strong enough to undergo the barracks discipline, hump heavy loads through hellish territory and risk being killed to defend the Empire. If you can't do that, then go die, peasant.

    The other jobs programme, the one w3ski mentions in his last sentence, is to protect the jobs of those in the bankmaggotindustry and the politicians they bribe. But so sorry, Mr. and Mrs. America. If you're not already in the club, you do not qualify for this multi-trillion relief effort. Please refer to final sentence in paragraph above.

    Bukko, the cynical deserter who sorta saw this coming years ago, but always believed in the back of his mind that "Nah, that can't really happen. TPTB wouldn't let things get THAT fucked up. There must be something about the situation I don't understand. I'm just being paranoid."

  3. Well said, swim-bird

    I wound up on this subject on Mahablog today. My conclusion there was that the American worker has been mugged by Wall Street Capitlaism and conservatism. What's ironic is that the mugger has the victims as his chief advocates. Go figure.

    The 'good jobs' have been exported to China mostly. Getting them back would require what no politician in America has the cojones to tackle. FAIR trade as opposed to free trade. IF we level the playing field by taking into consideration factors like workers rights and global warming we could legitimately lay tarrifs on goods from China and other oppressive countries and no tarrifs,probably, on goods made in Europe. They respect the worker and recognize the need to address climate change (mostly).

    Take the revenue on goods from oppressive countries and use it exclusively as 'seed money' for job-creating industries in the USA. And make sure the US buyer understands the philosophy behind 'growing jobs' in America. I don't accept that we can't compete in a lot of industries IF we have a level playing field.


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