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The Coming Obama-Romney Economic Debate-Economic Program Similarities and Differences

Posted in Uncategorized, tagged , , , , , , , , on September 30, 2012| 1 Comment »

This week the first presidential candidates’ debate will be aired on television. A good part of the topic of the first debate will focus on economic programs of the respective candidates. They will say they represent fundamental differences. This is in part true. But equally true is that their positions on the economy in many important aspects are strikingly, and disturbingly, similar. Read the following except from my just published article on this topic in Z magazine.

This week the first televised debate between the two presidential candidates will be held and a good part of the debate will address programs for economic recovery for the next four years. Both parties and candidates are now proclaiming there are historic, stark differences and choices between them; that this election will mean choosing two fundamentally different paths for the country for years, and perhaps decades, to come with regard to the future of the economy in terms of jobs, taxes, deficits, housing, state and local governments, and other economic indicators. A closer examination reveals, however, that while there are some clear differences between the two candidates on economic matters, the similarities in their economic proposals are both striking and disturbing.
JOBS
OBAMA
Upon entering office in 2009 Obama promised to create 6 million jobs if his $787 billion stimulus bill of (mostly business) tax cuts and spending subsidies to states and unemployed were passed. But after 18 months neither the tax cuts nor subsidies resulted in any appreciable job creation. Between June 2009 when the recession was officially declared over, and 18 months later in December 2010, an additional 1.1 million private sector jobs were lost. By year end 2010 the president had to resort to the claim he had at least had ‘saved’ further millions of jobs. With the effects of the $787 billion stimulus mostly spent, his job creation strategy then shifted mid-2010. A second recovery program passed late 2010 composed totally of an additional $800 billion in tax cuts—including $450 billion in extended Bush tax cuts Obama promised in 2008 he would not do.
This $800 billion more in tax cuts was supplemented by a new policy focus on manufacturing and promoting exports as the primary program to create jobs. Multinational corporate CEOs , like General Electric’s Jeff Immelt, were put in charge of his job creation program. That meant more free trade agreements, more deregulation for business, and more subsidies for U.S. export companies.
In 2011-12 still more business tax cuts were proposed as the way to create jobs. In 2011 tens of billions more for small business to hire unemployed and a so-called ‘JOBS’ (Jump Start Our Business Startups). JOBS was nothing more than a cover for more tax breaks and financial deregulation for start up companies, but Obama praised it as ‘a game changer’ for employment. More subsidies to the states to hire teachers and emergency responders, now being laid off in the hundreds of thousands, was also proposed but never passed Congress.

Obama’s Jobs Programs over the past 42 months therefore amount to the following:
• Tax cuts and more tax cuts for businesses
• Manufacturing-centric policies driven by more Free Trade agreements, more manufacturing export subsidies, and more business deregulation
• More subsidies to the states to hire teachers and emergency responders
These programs have proved pretty much a total bust, however: After $3 trillion in tax cuts and spending, total private sector employment has risen by only 2 million, or about 50,500 per month, which is well less than half that needed just to even absorb new entrants to the labor force. Total unemployment, as measured by the labor department’s U-6 rate, has fallen by a mere 1.3 million—from 24.6 million in June 2009 to 23.3 million in July 2012. Between June 2009 and July 2012 a paltry 200,000 manufacturing jobs were created, for an average of a mere 5,000 per month. And Obama’s much vaunted recovery of the Auto Industry has produced 157,000 auto jobs, which is still 180,000 fewer than existed at the start of the recession in December 2007.
Despite this embarrassing record on job creation, the President in his September 6 convention speech indicated clearly he would ‘stay the path’ with this business tax cuts + manufacturing promotion + free trade as his basic approach to job creation. He made it clear his second term’s strategy would be to “export more products” and that he would continue to work with business leaders to “create 1 million more manufacturing jobs over the next 4 years”. In his speech he also proudly proclaimed he had signed free trade agreements “bringing jobs back” and declared he would sign still more—a clear reference to his proposal for creating a ‘Trans-Pacific Partnership’ (TPP), a free trade agreement with all the countries of the pacific rim which Obama has been promoting for several months and an even bolder goal than George W. Bush’s Free Trade of the Americas that was proposed in 2005 to create a free trade zone throughout all of north and south America. In other words, in terms of jobs creation programs don’t expect much different from his first term in either job creation programs or results in an Obama second term.
ROMNEY
Romney’s view on how to create jobs focuses even more heavily on tax cuts as the primary approach. Romney proposes to create 12 million jobs by 2017. The primary engine would be extending the entire $3.4 trillion in Bush tax cuts of the last decade as is for another decade (minus extending the cuts for those households earning less than $40,000 a year). Obama would extend the Bush tax cuts for all but the top 3% households. So Obama cuts out part of the ‘top tier’ of households from the Bush tax cuts extension, while Romney cuts out the ‘bottom tier’ of households. (Both support, however, reducing the top corporate tax rate from current 35%, as noted below).
To create the 12 million, however, Romney proposes more than just extending the Bush cuts: he calls for even more tax cuts for corporations (as does Obama), reduced business regulations and more Free Trade agreements (ditto Obama), but adds more oil drilling and some token worker retraining as addenda to his jobs program.
However, Romney’s 12 million jobs goal is somewhat of a sham. It amounts to creating only 180,000 jobs a month on average, i.e. just 50,000 more than needed for new entrants to the labor force each month. That means reducing the current 23 million jobless by only 50,000 a month, which would leave 20 million still unemployed by 2017. So the Romney program is not really a program to eliminate the massive jobless overhang today—apart from the question of whether more business tax cuts, free trade, oil subsidies, etc. will even create the 12 million jobs in the first place.
In short, the relationship between job creation programs and business tax cutting is just a matter of degree between the two presidential candidates. Romney advocates ‘Bush tax cuts on steroids’ to create jobs, while Obama exempts the top 3%. Both strongly propose Free Trade and more business deregulation as job creation measures. Obama proposes subsidies to states to hire teachers and firefights, while Romney doesn’t and proposes token job retraining. Romney wants still more cuts and subsidies to oil companies; Obama does not. Both support multiple handouts to small businesses. But all these programs have been proven failures to date, so the unemployed have little to expect from either candidate once elected.

TAXES
OBAMA
As previously mentioned, Obama proposes to discontinue the Bush tax cuts for the wealthiest 3%. The top marginal tax rate for individuals would be allowed to rise from 35% to the 39.6% level of the Clinton years, impacting wealthiest households earning more than $250,000 a year. Taxes on the wealthiest 1% (earning more than $600,000 a year) would rise $93,000 a year. (For millionaires a tax hike of $296,000 a year). The tax on capital gains, now at only 15%, would also increase to 20% under Obama proposals. Oil and gas industry tax breaks would be reduced.
But what Obama proposes to ‘taketh away’ from the top tier of the personal income tax he proposes ‘to giveth’ to their corporations. His proposals include reducing the top corporate tax rate from current 35% to the 28% it was under Reagan. This shift is proposed despite the fact that in 2011 corporate taxes amounted to only 12.1% of profits—compared to the 1987-2008 period when corporate taxes averaged 25.6% of profits. For all businesses, corporate and non-corporate, the super-generous ‘bonus depreciation’ provision of the past two years, in which businesses can write off the cost of all capital investment in the first year of purchase, would also be continued despite its costing a whopping $55 billion a year.
Obama also favors changing the taxing of U.S. multinational corporations, reducing taxes on their offshore profits, even though that group today is hoarding $1.4 trillion of in their offshore subsidiaries and refusing to pay US taxes on it. In exchange for this tax reduction, Obama proposes to raise taxes in a yet unspecified way on those multinationals that offshore jobs.
ROMNEY
Romney’s tax program is once again an extreme version of Obama’s but with many content similarities. In addition to extending all the Bush tax cuts of the past decade, for yet another decade, which would cost the US Treasury another $4.6 trillion according to the Congressional Budget Office research arm, Romney proposes the following tax changes:
• Cut the personal income tax rate for the rich even further than Bush, by 20% across the board.
• Cut the top corporate tax rate from 35% to 25% (vs. Obama’s 28%)
• Introduce a ‘territorial tax’ for US multinational corporations, which would in effect end the current foreign profits tax they pay (or in fact now refuse to pay)
• Repeal the Medicare 2.9% additional tax on the wealthy contained in Obama’s 2010 ‘Affordable Care Act (Obamacare) by repealing the entire Act.
• Allow tax credits for those earning less than $40,000 a year to expire (i.e. earned income, child care, and other tax credits).
• End all taxation on capital gains, dividends and interest income for households earning less than $200,000 a year.
• Keep the capital gains, dividends and interest income taxed at current 15%.
• Bigger tax cuts for business research and development
• End the Alternative Minimum Tax (AMT) altogether, which impacts those earning around $150,000 a year and above
• End the Estate Tax altogether
In summary, apart from their respective positions on extending the Bush tax cuts, both Obama and Romney are largely in synch on introducing more massive cuts in corporate income taxes, reducing corporate taxes to the 25%-28% range from current 35%–despite corporations today paying the smallest share of taxes from profits. Both have plans as well to provide multinational corporations even more tax concessions. Romney differs in proposing to give upper middle class households bigger incentives to invest in stocks, bonds and other interest bearing securities—an ultimate boon to his stock-bond market buddies. He also proposes to give the wealthy big tax bonuses by ending the Estate, Alternative Minimum, and forthcoming Medicare 2.9% taxes. Both propose more tax cuts that will not reduce the projected US budget deficits over the coming decade, but actually make them worse—and much, much worse in the case of Romney—leading in both cases to even more massive cuts in spending programs than either candidate is so far admitting to.
BUDGET DEFICITS
OBAMA
Obama’s policy with regard to US deficits is his pledge to reduce the deficit by $4 trillion over the next decade. That has been Obama’s stated goal since the deficit debates in 2011 leading up to the debt ceiling crisis of August 2011. That $4 trillion goal, moreover, is the same as proposed by his Deficit Commission (Simpson-Bowles), Paul Ryan in the House of Representatives, and various other Senate and ex-government officials. Details of the president’s $4 trillion deficit reduction plan are to be found in his 2012 budget. It is perhaps of some interest to note that Obama’s budget projections include a $5.8 trillion bill for defense spending over the decade, an amount which is 23% greater on an annual average than defense spending during the Bush years, 2001-2008.
The Congressional Budget Office has issued a different estimate of the likely budget deficits over the next decade. Given current tax cuts and spending projections, the CBO estimates the Obama deficits will amount to $6.4 trillion from 2013-2022. In January 2013 government spending will decline by $1.2 trillion over the coming decade, based on the debt ceiling deal agreed upon by Obama and the Republican House of Representatives in August 2011. Raising the debt ceiling once again will therefore become a major issue in early 2013. That means major tax increases and/or further spending cuts will be on the agenda immediately after the November 2012 elections regardless who is elected president (the challenge sometimes referred to as the coming ‘fiscal cliff’ by the media). Republican insistence on no tax increases and on raising defense spending even higher than projected by law or in the Obama budget, will mean an historic confrontation between deficit reduction and massive cuts in social program spending, including not only Medicaid but Medicare, Education, Social Security, and other discretionary spending programs. As this writer has been predicting, the confrontation will start immediately, within days, of the upcoming November 2012 elections—again regardless of who is elected president.
ROMNEY
As frightening as the upcoming budget deficit confrontation following the elections will be with the Obama budget as starting point, the Romney budget-deficit proposals represent a deficit crisis of even far greater magnitude.
Romney tax cut proposals include the major elements of a continuation of the Bush tax cuts for another decade, at a cost of $4.6 trillion, plus adding trillions more in business-investor tax cuts. The result is deficits for the next decade equivalent to approximately $10 trillion! To address this massive deficit Romney proposes cutting federal spending from its current 24% of GDP to 18%-20%. That 6% of GDP in 2013 equals an immediate reduction in spending and/or increase in working poor and middle class tax cuts amounting to $300 billion. By 2015 the estimate is $500 billion, presumably rising further thereafter. In addition, he proposes to reverse the sequestered scheduled $500 billion in defense spending cuts agreed to in Congress in August 2011. The increases in working poor and middle class tax cuts were noted above. The spending cuts would mostly come from discretionary non-defense spending on items like education, transportation, healthcare, etc., for which Romney proposes a 5% cut across the board. The 5% represents no more than $60 billion a year. As others have pointed out, the Romney proposals do not add up and it is unclear how the 5% discretionary cuts, no defense cuts, retaining Bush tax cuts, adding trillions more in corporate-wealthy individual tax cuts can cover the $10 trillion. Proposing to reduce federal spending by 6% of GDP means spending cuts and/or tax increases totaling at least $900 billion a year. It can only mean unmentioned additional massive cuts in Medicaid-Medicare-Social Security and historic reversals in middle class tax breaks that are left conveniently unmentioned.
The Romney deficits therefore mean not only massive social spending cuts but hundreds of billions more in middle class tax increases as well. High on the list of the latter would have to include the elimination of tax deductions for health care and pension contributions by workers, virtually ending the mortgage interest and state income tax deductions, new taxation on Medicare benefits, and ending most of the earned income tax deduction for the working poor. Sharply reducing, or even ending, these deductions would be necessary to accommodate Romney’s proposed business and investor tax cuts. Romney would additionally end Obama’s Affordable Healthcare Act, reducing the deficit by another $.9 trillion. The rest presumably would come from other spending cuts in education, Medicaid, Medicare, and Social Security.
In summary, whoever wins the election, get ready for massive social spending cuts and a fight over how little to raise taxes. The deficit reduction proposals of both candidates envision historic cuts in social spending. Both envision more tax cuts for corporations that would additionally have to be made up from spending cuts and/or middle class tax hikes. Obama’s deficit reduction plan envisions some tax increases on the wealthiest individuals, while Romney’s envisions trillions of dollars more tax cuts for the wealthy, paid for by tax hikes by the poor and middle class as well as historic cuts in social spending of even greater magnitude than Obama’s.
FREE TRADE
There is virtually no difference between the two candidates on trade policy, and free trade agreements in particular. Both strongly supported recent free trade agreements with Panama, Columbia, and South Korea. And Romney supports Obama’s current drive to implement the biggest expansion of free trade with the ‘Trans-Pacific Partnership’ (TPP) pacific rim free trade policy, a development that will dwarf in scope and magnitude even Bill Clinton’s passage of NAFTA and his opening of China trade. According to the Economic Policy Institute, China trade alone has cost the US 2.7 million jobs just in the past decade. NAFTA millions more. Neverthless, both candidates unreservedly advocate accelerating free trade agreements.
The battle between Romney and Obama on trade amounts to token differences on how to show they are ‘tough on China’. Romney accuses Obama of being ‘too soft’ on China and demands more punitive action. Both candidates talk in vague generalities about the ‘offshoring’ of US jobs that has occurred by the tens of millions in recent decades, but neither offers any specific proposals for addressing the issue.

HEALTHCARE-MEDICARE/MEDICAID
OBAMA
The heart of Obama’s Healthcare policy is, of course, the retention of his 2010 Affordability Care Act. Costing nearly $1 trillion over the rest of the decade, the Act does provide a number of meaningful benefits for the general populace. However, it has two great flaws: first, it amounts to a health insurance company subsidy bill. Health insurers will receive hundreds of billions of dollars of extra business. The second flaw is that it fails fundamentally to control health insurance and other health care costs. The problem of runaway healthcare costs will thus re-emerge and continue under the ACA, a problem which has already emerged as health insurance premiums and other costs have once again begun surging in 2011-12.
On the positive side, the ACA raises taxes on the wealthy by another 2.9%–which is the real source of much of the opposition to the ACA by the wealthy, transmitted through their manipulation of the Teaparty on the issue. But it also includes a reduction in payments to doctors and health providers in the amount of more than $700 billion. That will inevitably lead to doctors and providers refusing increasingly to provide services to Medicare patients. The ACA is thus a form of income shift that promises to reduce health care access. That is the price to be paid for the subsidization of health insurers and coverage extension to the tens of millions without any coverage.
It should further be noted, that Obama has signaled in July 2011, as he sought desperately an agreement with Republicans on the debt ceiling debate, that he was willing to cut Medicaid and Medicare by $700 billion despite the proposed expansion of Medicaid in his ACA. That public proposal provoked a near revolt by Democrats in Congress and was withdrawn. Nevertheless, it remains ‘on the table’, as they say, and will most certainly arise again immediately after the November elections. Voters will not hear of this during the election campaign, but will most certainly once the election is over.
ROMNEY
Romney’s program with regard to health programs and policy top priority is to repeal Obama’s health care act of 2010. Next in priority is his complete embracing of his Teaparty Vice President, Paul Ryan, view for Medicare. The Ryan plan is to voucherize Medicare, provide payments to senior to then go and buy private health insurance—an even bigger windfall for insurance companies than Obama’s subsidies to insurers in his ACA. Ryan has projected this will ‘save’ the federal government $700 billion. However, not all seniors will receive the same voucher payment. Some will get less than others, thus creating a kind of ‘two tier’ voucher system. Moreover, there are no assurances the value of vouchers will increase annually with the rising cost of healthcare services, thus requiring seniors to increasingly pay more out of pocket for healthcare insurance. The main beneficiary from this, apart from health insurance companies, is the federal government which Ryan estimates will save $700 billion in government spending over the next decade. The Romney-Ryan Medicare voucher plan thus represents an income transfer of hundreds of billions from seniors to both insurers and the government.
Romney-Ryan are also major proponents of massive reductions in the Medicaid program, proposing to cut federal and state Medicaid costs by turning it into block grants to the States—many of which would refuse to participate or would take the money in the block grant and spend it elsewhere.
SOCIAL SECURITY
Proposals by both candidates are almost identical with regard to social security. Both are purposely saying little before the election about how they would address social security. Romney proposes vaguely that the age for eligibility for retirement benefits should be raised, as does Obama. Neither say raised to what or how quickly. Both suggest cost of living adjustments annually should be lowered. Obama implies by changing the way the consumer price index is applied. Romney goes further and recommends the creation of a ‘two tier’ system in the future (similar to Medicare) in which seniors with a certain level of retirement income would receive less social security benefits. What’s left unsaid by both is their agreement to target social security disability benefits for major reductions.
HOUSING CRISIS
OBAMA
Apart from the failure to create jobs, the next greatest economic policy failure of Obama’s first term has been his reluctance to direct confront the housing crisis. The housing sector has languished in a veritable depression for three and half years, with home building and jobs stuck at only a third to half of pre-recession levels. More than 12 million of the 54 million mortgaged homeowners in the US have been forced into foreclosure, often illegally by the banks. More than 8.5 million on Obama’s watch, while than 10 million similarly languish with mortgages in ‘negative equity’.
From the beginning in 2009 Obama’s policies have focused on subsidizing mortgage lenders and mortgage servicers (big 5 banks), to help them move foreclosed homeowners out of their homes and to resell to new buyers. Early 2009 Obama programs like HAMP (Home Affordability Modification Program) are acknowledge failures, providing tens of billions of dollars of subsidies to banks and homebuilders and token assistance to homeowners.
In 2010 Obama then ignored the ‘robo-signing scandal’ that broke that summer, leaving it to state attorneys general to deal with. However, when it appeared legal suits would cost the banks potentially hundreds of billions of dollars, only then did the Obama administration intervene in 2011. That intervention was designed to help the banks—not homeowners—by limiting banks’ liability to homeowner and state legal suits. As part of that compromise, banks’ liability from legal suits arising out of robo-signing illegal foreclosures was capped at a mere $25 billion. Payments to homeowners illegally foreclosed have averaged only $1,500 each in the settlement and less than a billion of the $25 billion. Recent reports are that the $20 billion is not going to reducing loan balances for homeowners in ‘negative equity’ but is being deducted by banks against the $25 billion in the form of charges against short sales of homes in negative equity. In other words, homeowners are not being assisted to remain in their homes, but assisted in vacating them—which the banks then resell to new buyers at still further profit.
In exchange for the limits on liability, the banks were ‘encouraged’ to participate in latest OBAMA housing recovery program, his 2012 program called HARP 2.0. The HARP program was a ‘quid pro quo’ for relieving from pending massive liability action by the States. But HARP 2.0 is, in final analysis, just another ‘banker subsidy’ program. Not only are the big mortgage banks protected from further legal suits, but they are profiting nicely from the program. In exchange for refinancing homeowners in negative equity, the banks involved receive a commission of 5 ‘points’ (each point=1% of the value of the mortgage) from the quasi government mortgage agencies, Fannie Mae and Freddie Mac. Five points on a $500,000 mortgage refinancing amounts to a generous $25,000 fee paid to banks by the federal government for each refinancing. In turn, these costs incurred by Fannie and Freddie will have to be restored with funding from Congress and thus the taxpayer. HARP 2.0 remains as Obama’s latest centerpiece program for rescuing the millions of homeowners illegally foreclosed or in negative equity.
ROMNEY
Romney’s program for ending the Housing crisis includes the following measures: first, to sell the 200,000 estimated local government owned homes. Somehow that is supposed to help raise home values, according to Romney, but will actually increase the excess supply of homes on the market and thus further depress home prices in most cases. Another Romney proposal is a vague demand to ‘restart lending’ to credit worthy borrowers. How to force banks to lend to homeowners, when they have been clearly reluctant to lend to small-medium businesses, is not explained in the Romney proposals. Romney’s Housing solution also calls for major reform of the Fannie Mae-Freddie Mac government mortgage institutions as well as still further deregulation of mortgage lenders and banks—i. e. two long time conservative demands designed to further privatize and deregulate the housing market.
CONCLUSIONS
While there are several dramatic differences between the Obama and Romney economic programs, there are also several almost identical programs shared by both. Both favor major reductions in corporate taxes. Both advocate hundreds of billions in social spending cuts, including entitlement programs. Both are almost identical in their positions on Free Trade.
Concerning tax policies, both propose to extend much of the Bush tax cuts—Obama suspending the cuts for the top 3% and Romney eliminating tax credits for the working poor and lower middle class. Obama has proposed some minor tax loophole closings, while Romney proposes additional, massive tax cuts for investors and businesses on top of the Bush tax cuts. Obama’s deficit over the decade amounts to a sizeable $4-$6 trillion but Romney’s more than $10 trillion. Both mean massive cuts in social programs coming immediately after the November elections, with Romney requiring major middle class tax hikes as well. Obama’s budget is very generous to Defense, and Romney’s even more so. A big difference between the two exists with regard to healthcare programs, including Medicare and Medicaid. Romney wants to destroy Obama’s ACA immediately and Medicare eventually. Both appear quite willing to gut Medicaid spending, with Romney cutting other discretionary spending by additional trillions over the decade.
These comparisons mean that, regardless who is elected president, an historic reduction in social program spending is on the agenda for the weeks immediately following the November 2012 elections. Defense spending will be either totally or partly protected from the cuts. And taxes will be further reduced for corporations, tokenly raised for wealthy individuals, and most likely significantly raised for middle class and the working poor. Nothing of any significance will be done to address the Housing crisis and programs to create jobs will continue to fail to have much impact.
It is this scenario that has prompted this writer repeatedly to predict the likelihood of a double dip recession in 2013, especially if the Eurozone crisis continues to deteriorate and China and the rest of the global economy continue on a path to an economic ‘hard landing’. It is possible, if Obama is re-elected, the fiscal austerity coming in early 2013 may be delayed a year and effectively ‘back loaded’ to start taking its greatest effect a year later in 2014. But if Romney is elected and Republicans control either, or both, houses of Congress the more draconian austerity programs will take effect earlier in 2013. That alone will ensure a double dip recession. And if the Eurozone slides deeper in recession and banking instability, virtually guarantee a double dip.
Dr. Jack Rasmus
Jack is the author of the new book, “Obama’s Economy: Recovery for the Few”, April 2012, and host of the radio show, ALTERNATIVE VISIONS, on the Progressive Radio Network, PRN.FM, in New York, on Wednesdays at 2pm. His website is http://www.kyklosproductions.com and blog, jackrasmus.com. Copies of the book can be purchased at the website or blog bundled with a DVD and a 66 slide powerpoint slideshow on the current state and future direction of the US economy.

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U.S. GDP–Why the US Slowdown Will Continue

Posted in Uncategorized, tagged , , on July 28, 2012| 3 Comments »

THE FOLLOWING IS THIS WRITER’S CONTINUING ANALYSIS OF THE MOST RECENT GDP DATA RELEASED YESTERDAY BY THE US COMMERCE DEPT. THE DATA CONFIRMS PAST PREDICTIONS AND ANALYSES LAST JANUARY AND APRIL CONCERNING THE DIRECTION OF THE US ECONOMIC SLOWDOWN, REASONS WHY, AND FUTURE SCENARIOS

On Friday, July 27, 2012 the US Department of Commerce released its report on Gross Domestic Product (GDP) results for the 2nd quarter for the US economy, with GDP revisions for the economy as well from 2009 through 2011.

Last winter the broad consensus among mainstream economists, politicians and the press was the US economy was finally on the way to recovery. Economic indicator after indicator was flashing green, they argued, proving recovery was in full swing. GDP for the 4th quarter 2011 recorded a moderately healthy 4% growth rate and was predicted by widespread sectors of the media would continue. But GDP numbers just released on July 27, 2012 show that 4% growth dropped precipitously by half, to only 2%. And in the latest report issued last week, 2nd quarter 2012 GDP continued to fall further to only 1.5%.

GDP for the first half of this year therefore has averaged about 1.7%–which is about the same 1.7% GDP growth for all of 2011. The US economy, in other words, is not growing any faster this year than it did last year. It is essentially stagnant, unable to generate a sustained recovery despite $3 trillion in spending and tax cuts over the past three and a half years. This scenario will at best continue, and may alternatively even worsen in the coming months; and if not worsen this year, certainly so in 2013.

This rapid slowing of the US economy in 2012 was predicted by this writer early last December 2011, in a general economic forecast for 2012-13 that appeared in the January 1 issue of Z magazine. Contrary to the 4th quarter 4% GDP trend, in December 2011 this writer contrarily predicted “the first quarter of 2012 will record a significant slowing of GDP growth” and “the US economy will weaken further in the second quarter, 2012”.

The US economy has been essentially stagnant for at least the past two years, bumping along the bottom at a sub-par 2.5% GDP growth rate. The economy needs to grow in excess of 2.5% for net job creation to occur. Given the economy’s longer term 1.7% growth rate, it is not surprising net job growth the past three months has averaged barely 80,000 a month—i.e. well below the 125,000 or more needed just to absorb new entrants into the labor force. So we are in fact losing jobs again this year, 2012, despite what the official unemployment rate says.

Readers should note this 1.7% sub-par GDP growth the past 18 months has occurred despite the $802 billion tax cut passed by Congress in December 2010, virtually all of which was tax cuts for businesses and higher income household investors. In fact, it was more than $802 billion if further tax cuts for small businesses over the past 18 months are also factored into the total. Perhaps as much as $900 billion in pro-business/investor tax cuts have been passed, which have had minimal to zero impact on the economy and job creation. So much for that myth, and conservative-corporate ideology constantly pushed by politicians and the press, that ‘tax cuts create jobs’. Readers should keep that factual absence of any positive relationship between tax cuts and jobs and economy in mind, when more tax cuts for corporations and the wealthy are proposed by both parties once again as part of the year end deal coming immediately after the November elections. Expect both sides, Republicans and Democrats alike, to agree on reducing the top bracket tax rate on personal and corporate income both, from current 35% to at least 28% (the old Reagan years rate).

1st Quarter GDP: Temporary Growth Factors Disappear

While the hype about economic recovery was in full swing last winter, this writer pointed out in various publications that the 4th quarter GDP numbers were based almost totally on one-off developments that would disappear by mid-year 2012. At least half of the 4th quarter’s 4% growth rate was due to business inventory spending, making up at year end for the collapse of the same in the preceding 3rd quarter. Auto sales driving consumer spending was also noted as a temporary effect, given they were based on deep discounting and temporary demand that would not continue. Business spending that surged in the 4th quarter was also identified as temporary, as it was driven by year end claiming of tax credits, while manufacturing export gains in late 2011 would soon dissipate, it was predicted, as the global economy and trade slowdown eventually reached the U.S. in 2012.

The halving of GDP growth by the 1st quarter 2012 was due in part, as predicted, to the slowing of auto sales. The previously predicted slowing of business inventory spending occurred, while the 4th quarter’s business investing also disappeared as predicted. In addition to the dissipating temporary factors, new developments added to the 1st quarter’s GDP decline: Consumer spending slowed, as escalating gasoline prices began once again (for a third year in a row) taking their toll on consumers and as auto sales growth began to show signs of weakening. The global slowing of manufacturing also finally began to penetrate US economy by 2012, as US exports grew more slowly than imports and thus depressing GDP still further. Finally, the 30 month long decline in government spending, especially at the state and local government level, continued unabated into 2012.

In late April this writer predicted that the 2% first quarter 2012 GDP would continue to decline still further. In a piece in Truthout.org on May 8, it was predicted the 1st quarter GDP “decline will likely continue further in the months immediately ahead, to possibly as low as 1.5% the second quarter, April-June 2012.” (In a piece in Znet on May 6 it was predicted for the second quarter 2012 that “The growth rate could slow to possibly as low as 1.5%”).

2nd Quarter GDP’s Continuing Downtrend

The same factors that have been driving the 4% GDP to 2% in the January-March 2012 period have driven it lower still, to the recent 1.5%.

In the most recent 2nd quarter 2012, both consumer and business spending showed even further weakening—while government spending continued to contract for the 33rd consecutive month and the contribution to GDP by exports fell further as well.

Consumer spending on goods declined from its 5.4% rate in the 4th quarter to only 0.7% this past quarter. Durable goods spending in particular fell off a cliff last quarter, as auto sales not only slowed dramatically, as in the 1st quarter, but now in the 2nd actually turned negative. But perhaps the most dramatic indicator is the fall off in retail sales in general. Retail sales April-June fell in each of the three months. That is the first time for a three consecutive month decline since the deep collapse of 2008! Even services consumption recorded its slowest and lowest growth in two years!

What consumer spending did occur in the 2nd quarter was driven by sharply rising credit card debt as well as household auto and education debt, credit cards growing by 11.2% and auto-student loans by 8%. In other words, to the extent consumer spending is occurring at all it is not due to rising household real disposable income—which is actually falling—but due to households taking on more debt. So much for the mainstream argument that consumer spending is slowing because households are working off debt (i.e. so-called deleveraging). That may be true for the wealthiest 10% households with income growth from stocks and bonds, but not for the bottom 90%, i.e. the more than 100 million rest of us. But consumer spending increasingly dependent on credit cards and other borrowing portends poorly for further spending down the road. It is not sustainable and will result in yet a further slowing of consumer spending and consequently economic growth.

Consumer spending is not the only major trouble spot in the 2nd quarter that promises to continue into the 3rd and beyond. Business spending also showed new signs of trouble in new places as well as the old last quarter. Business spending on plant expansion, which shows up as business ‘structures’ spending, collapsed last quarter from prior double digit levels in the 4th quarte—from 33.9% to only 0.9% in the last three months. That plummeting structures spending will eventually translate into a slowing of new job creation going forward as well. Businesses that don’t expand don’t add jobs. Slowing business spending was also evident in new orders placed for manufactured goods that turned negative for each of the past three. Watch next for the other business spending sector, on equipment and software, soon to flattened out in the future as well.

A third sector of the economy that contributed to growth in 2011, but has also reversed now as well, is exports. New orders for US exports have declined the past two months in a row, the first back to back fall since 2009. That confirms that any contribution of exports and manufacturing to GDP is now clearly over. It never really contributed that much in the first place, despite all the Obama administration hype in 2010-11 that manufacturing and more free trade would ‘lead the way’ to sustained US economic recovery. It was all hype to reward multinational technology and other companies—big contributors to Democratic election coffers—while diverting attention away from the obvious failures to generate sustained recovery after the three Obama ‘recovery programs’ introduced in 2009, 2010, and 2011.
Not least there’s the continued poor performance of the government sector in the 2nd quarter. It has continued to decline every quarter since the 3rd quarter of 2009, or 33 consecutive months now. That spending decline at the state and local government level has been the case despite more than $300 billion in federal stimulus subsidies to the states since June 2009 and hundreds of billions more in unemployment insurance payments by the federal government to the states. Why state-local government spending has declined every quarter since mid-2009 despite the massive subsidies is an anomaly yet to be explained. Like corporations hoarding their tax cuts, and banks hoarding their bailouts, both refusing to use the money to lend and create jobs—perhaps the states and local governments also hoarded their subsidies. Perhaps that’s why the Obama administration quickly shifted its promise that its stimulus package would create jobs, to a message that it would, if not create, at least ‘save jobs’.

In answer to the obvious further deteriorating in the 2nd quarter in both consumer, business, and government spending, the press and media in recent weeks have tried to grab at straws and hype a ‘recovery underway in the housing sector’. But this line has been based on the slimmest of evidence: the indicator that home builders’ new construction has risen. But the media hype in recent weeks regarding housing has conveniently ignored various other indicators recently showing continued housing sector stagnation: For example, new home sales declined by 8.4% in June, the largest fall since early 2011. Mortgage loan applications and new building permits also fell, while median home prices recorded a –3.2% decline compared to a year earlier. That amounts to nothing near a housing recovery. To the extent home building has risen, it has been largely limited to multi-family units—i.e. to apartment building. That’s not surprising, given the 12 million plus homeowners who have been foreclosed since the recession began and need some place to live. But housing sector indicators as a whole still show that sector languishing well below half of what it was pre-2007 and with little indication of any kind of sustained growth or recovery. As in the case of net job creation, without a housing recovery leading the way there is no sustained general US economic recovery.

In all the 11 prior recessions since 1947 in the U.S., state and local government spending increases, net job creation in the private sector equivalent to 350,000 jobs per month for six consecutive months, and housing sector recovery have all been necessary to ‘lead the way’ out of recession. But for the past four years none of the above has been the case. There have been no effective jobs program, housing-foreclosures solution program, or state-local government spending program. That tripartite failure is at the heart of the failed economic recovery of the Obama first term.

Jack Rasmus
Jack is the author of the April 2012 book, “Obama’ Economy: Recovery for the Few”, published by Pluto Press and Palgrave-Macmillan. His other recent articles, radio and tv interviews, are available on his website, http://www.kyklosproductions.com

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WEATHER METAPHORS AND THE JUNE JOBS REPORT

Posted in Uncategorized, tagged , on July 9, 2012| 1 Comment »

FOR THREE CONSECUTIVE MONTHS NOW, APRIL TO JUNE, MAINSTREAM ECONOMISTS HAVE BEEN PARROTING THE POLITICOS’ SPIN MESSAGE, THAT GOOD WEATHER LAST WINTER IS THE CAUSE OF THE COLLAPSING JOBS GROWTH SINCE APRIL. THIS ANALYSIS BY METAPHOR IN LIEU OF REAL CONDITIONS IS CRITIQUED IN THE FOLLOWING, WHICH LOOKS AT THE REAL CAUSES OF LAST WEEK’S DISMAL JOB REPORT BY THE LABOR DEPARTMENT, THE THIRD IN AS MANY MONTHS (AND PREDICTED LAST WINTER BY THIS WRITER).

The US Labor Department released its monthly jobs numbers for June 2012 this past week. Once more the numbers showed a dramatic slowdown in job creation for the third consecutive month. Job creation averaged around only 80,000 a month for April to June, about a third of that in the 1st quarter, January-March period earlier this year.
The reason most often offered for the jobs relapse in June and for the past three months—the third such mid-year jobs relapse in as many years—is that the weather last winter quarter was the cause of the last three months’ dramatic drop off in job creation. As the argument goes, the ‘good weather’ of this past winter somehow drew forward the economic activity and therefore job creation that would have been otherwise created the past three months. That explanation, however, is nothing more than an excuse designed to avoid an otherwise more fundamental analysis why job creation has been collapsing once again in recent months.
Never mind that the last three months’ job creation collapse represents the third consecutive mid-year slowdown in job creation. If good winter weather were the explanation for the latest, 2012, such slowdown, then good winter weather should have been the explanation for 2010 and 2011. But those previous winters were quite ordinary. Second, if winter weather were the primary cause in 2012, then an inspection of those sectors of the economy—construction, agriculture, transport, retail—over the past six months should show significant jobs gain in the winter months followed by the exceptional collapse in jobs in those sectors this past April-June. But there is no such evidence, if one bothers to take a look at these potentially seasonal sectors.
The industries that might conceivably benefited seasonally from extraordinary better weather last winter—in effect pulling jobs into the winter quarter from this spring and thereby lowering net job creation this past three months—in fact produced very few additional jobs this past winter. We’re talking about around 20,000 jobs at most for all the preceding sectors noted—out of a reported total of 700,000 new jobs created in the winter quarter.
So if it wasn’t weather and seasonality that produced the 700,000 extra jobs over this past winter quarter, what then was responsible for that growth? Equally important, what then was responsible for the collapse in jobs the past three months, April-June, if it wasn’t winter weather effects? And will those real (non-weather) factors continue to have a similar impact on job creation going forward?
The ‘Good Weather’ Metaphor Explanation of Job Creation
When economists explain by resort to metaphor it is usually a good indication they have little idea as to what the actual causes may be.
The inordinate ‘good winter weather’ was no more responsible for job creation this past winter, and the consequence decline in job growth the past three months, than arguments that ‘sunspots activity’ can explain economic growth and job creation—i.e. an argument that in fact was once offered in the distant past by economists to explain economic growth despite its obvious ridiculousness. ‘The weather last winter’ thus represents a retreat by economists to past absurd modes of ‘analysis by natural metaphor’—in effect an excuse substituted for a real explanation and analysis of the sad state of the jobs market in the US today. Such explanations should be left to political and press pundits who are more inclined to avoid the facts than reveal them.
Actual Explanations of the Jobs Reports
So what might otherwise explain the 240,000 average job creation record of this past winter, followed by the dismal record of only 80,000 jobs a month on average created this past April-June?
The reasons are threefold and none has to do with weather hypotheses: (1) growing evidence of a problem with statistical methodologies used by the US labor department to estimate jobs; (2) the timing of policies, both fiscal and monetary, by the Obama administration and the Federal Reserve bank over the past three years; and (3) the convergence of global economic developments.
1. A Problem with Statistical Estimation?
As this writer has been arguing in publications the past six months, the 240,000 average jobs creation this past winter did not represent actual job creation. It was the outcome of statistical estimation methods by the US labor department that have consistently over-estimated job creation over the winter quarter for three consecutive years now. Without repeating the arcane details here (see the blog, jackrasmus.com), suffice to simply say those methodologies are based on an economy pre-2007, and are now, in today’s relative economic stagnation in the US (and increasingly globally), no longer as accurate and should therefore be fundamentally overhauled.
2. Ineffective Policy Responses to the Labor Market
The recent collapse in job creation is more obviously due, in part, to policies both fiscal and monetary of the past three years: specifically, with the timing of government policies in 2009, 2010 and 2011 that provided an insufficient dose of tax-spending stimulus earlier in the year that quickly dissipated by the following mid-year. The Obama administration has introduced three ‘fiscal stimulus programs’ (tax cuts and spending) to date that provided in each case a limited boost to the economy around year end that subsequently ran out of steam by the following mid-year. The reasons for the rapid dissipation of the stimulus are only in part due to the inadequate magnitude of each of the three programs. The rapid fading of the stimulus has been due even more so to the problems of composition and timing at the heart of the recovery programs.
Concerning monetary policy, the past three years have also been characterized by three Federal Reserve ‘quantitative easing’ policy programs that have also been ‘seasonal’ in their timing and impact, and subsequently therefore dissipated in their effects by mid-year as well.
Considering just the current year, 2012, an analysis that doesn’t rely on the excuse of ‘good winter weather’ must ask what happened in the winter quarter of this year that resulted in the definite slowing thereafter of the US economy, and job creation, the past three months? Among the possible real explanations, there was the spike in gasoline prices in the first half of this year, together with other inflation factors, that hit median households hard in the winter, with after-effects on consumer spending just felt in recent months. Food prices, utility cost increases, health insurance premium hikes, rental costs escalation—to name but the most obvious—are now having a major influence on real disposable income growth for the majority of US households. This is now showing up in recent months’ retail sales weakness and service sector spending slowdown, the latter of which represents 80% of the economy.

 
Service sector jobs rose by about 250,000 in both the first and second quarters. But the composition of those jobs created in this sector differed significantly in the 2nd quarter compared to the 1st. Service sector jobs this past quarter have tended to be heavily weighted toward part time and contingent work. Since March more than 500,000 involuntary part time (i.e. non-agricultural) jobs have been created, along with more than 100,000 temps and who knows how many middle management & professionals laid off who immediately designate themselves as ‘self employed’ and thus avoid the unemployment rolls.

 

Given weak to non-existent real disposable income growth, businesses have begun to add only part time jobs in the 2nd quarter in anticipation of a potential slowdown in services spending. Simultaneously, they are also eliminating full time jobs, as more than 700,000 full time jobs were eliminated the past three months. In other words, a kind of ‘churning’, from full time to part time employment has been occurring in recent months. And when that occurs, few net jobs are added.
Another ‘non-weather’ factor explaining the real slowing of job creation the past quarter is attributable to the global slowdown in manufacturing that inevitably began to penetrate the US manufacturing sector by the late spring 2012. Much has been hyped since late 2010 by large corporations and the Obama administration about how manufacturing is ‘going to lead the way’ to recovery and job creation in the US. But according to the Labor Department’s Table B-1 for June, manufacturing jobs grew by only 68,000 over the winter quarter, and since March by half that, at 34,000. Moreover, virtually all that roughly 102,000 manufacturing job creation in the first half of 2012 represents jobs for managers, supervisors and other professionals in the industry. Net job creation involving production and non-supervisory workers in manufacturing have actually declined by 170,000 from March through June 2012. This represents clear evidence that employers are now, effective the 2nd quarter, cutting back on production employment as the global manufacturing slowdown begins to impact the US in recent months. That job cutting will accelerate in coming months, given that new orders for factory goods in June fell at the worst rate since 2009.
A third real, non-weather, explanation involves job hiring trends involving government workers. Their numbers have been steadily declining over the past three years. Especially hard hit has been local government, and therefore teachers. Layoffs and decline in jobs reported for this group does not occur in the winter quarter, but does in the spring quarter. That also therefore, in part, explains the 2nd quarter fall off in job creation. But the ultimate causes here are government policies since 2009. Obama policies provided subsidies to the public sector to prevent (not create) job layoffs for one year. After mid-year 2010, those subsidies were gone and state and local governments began deep spending cuts that continue to the present.
Finally there is the Construction industry. Good weather also does not explain what’s happened with jobs in the industry. Employment in Construction declined by 13,000 in the industry over the 1st quarter, as typically occurs in winter months. But it has continued to decline, on a seasonally adjusted basis, from April to June, by another 42,000. That’s because there is no job recovery in Construction. The press has been contorting itself to try to pry some evidence that somehow housing is recovering. Because home prices did not fall last month, and home sales are bouncing along a bottom, according to the press that somehow constitutes recovery. However, the only evidence of growth in the industry is apartment construction—predictable since tens of millions have lost their homes since 2007 and must live somewhere. But construction employment has been unaffected by this ‘faux recovery’ in construction. Construction jobs declined by 13,000 in the first quarter of 2012, and then another 42,000 in the second.
When economists who should know better simply repeat the ‘weather’ as responsible for the April-June collapse in the monthly rate of job creation they in effect parrot the prevailing ‘spin’ of politicians and their media friends who prefer the public does not point fingers at their policy failures ultimately responsible for the jobs collapse. There has not been a bona fide job creation program since the current recession began. There have been massive tax cuts for business that never got invested to create jobs; there have been bail outs of banks who were supposed to lend to smaller businesses to invest and create jobs but didn’t; and there has been a turning over of jobs programs to manufacturing corporate CEOs, like GE’s Jeff Immelt, whose idea of a jobs program is more free trade and more deregulation, in exchange for hiring a couple thousand jobs temporary status workers in the US at half pay.
3, Converging Global Economic Slowdown
Combining with the preceding real explanations is an accelerating slowing of the global economy, led by a contraction in manufacturing across all major economies. This slowing began well back, in late summer 2011, recovered slightly and now is trending down once again more strongly. This time it also includes China, Brazil, India and other economies—in addition to the Eurozone wide recession now well underway and the clear slowing of the US economy in recent months as well.

Manufacturing was touted as the solution to job creation in late summer 2010, and the Obama administration made a concerted shift toward it as the solution to a then faltering recovery. That shift has produced little to nothing in terms of job creation, however. The third jobs relapse in as many years is therefore on the horizon this summer.
But one doesn’t need a weatherman to know which way the jobs winds are blowing in America.

Jack Rasmus, July 8, 2012

Jack is the author of the April 2012 book, ‘Obama’s Economy: Recovery for the Few’, available at discount at this blog. Click on the book icon on the right sidebar.

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Revisiting ‘Are Central Banks Worldwide Preparing for a Global Banking Crisis?’

Posted in Uncategorized, tagged , , on July 5, 2012| Leave a Comment »

COMMENTARY: Earlier this month, I wrote and predicted that central banks appeared to be moving toward a coordination of monetary policies in anticipation of an accelerating of the decline of the global economy. Today that appears to be the case.

On July 4, central banks in China, Europe and the UK simultaneously undertook action to stimulate monetary variables in an attempt to get ahead of the curve of the declining global economy. But they will find that monetary policy has very little impact on this current global condition.

The European Central Bank, ECB, cut rates to a record low of 075%, as it is now clear virtually the entire Euro economy, including the UK, are in recession or rapidly approaching it–as this writer predicted 8 months ago would happen.

The Bank of England, with rates already at near zero (0.5%), opted for even more ‘quantitative easing’, that is printing another $78 billion, an addition to its already nearly $500 billion such QE injection to date.

China simultaneously announced another surprise cut in interest rates, the second in as many months. China economic data forthcoming probably shows a weaker economy than even currently assumed. As this writer also predicted, China’s GDP is likely to fall well below 7% (which it needs to absorb new labor force entrants), and that notwithstanding the likely forthcoming fiscal stimulus China will have to undertake before year end.

That leaves only the US and Japan among major central banks not having yet taken action. Japan will likely wait on the US to do so first. The US federal reserve does not meet until July 31, but another round of QE can be expected if the June and July job figures remain in the dismal level that they have, below 100,000 jobs created a month (and thus also below new entrants to the labor force in the US), and if US manufacturing and services remain in decline or stagnant.

But monetary action by all these central banks, coordinated or not, will have little impact on stemming the global decline. Monetary policy, that is liquidity injections into the banking system, in the current ‘epic recession’ do not result in significant increases in bank lending and,in turn, business investment that creates jobs, income growth, and therefore economic recovery. The monetary injections largely are hoarded, or else committed to short term speculation in financial markets to realize quick profits. The QE and easy money results in a temporary stock and commodity markets surge, that eventually dissipates in less than a year.

As this writer has also written on this blog earlier this year, this cycle of QE and zero rates has led to the banking system and financial markets becoming increasing addicted to the free money.

Now the banking system itself also is showing signs of growing fragility. On the surface the Euro banks are apparently the main trouble spot, especially in Spain and the Euro periphery. But the core Euro banks are also increasingly in distress. The Eurozone’s last week summit was primarily focused on a pre-emptive bailing out of the Euro banks–or at least future plans to do so. But fiscal stimulus announcements were token and not of any consequence, at best indicating plans merely to ‘move the money around’ sometime in the future. Thus the Eurozone continues to focus on monetary solutions as well, which will prove disastrous to the effort to slow the decline toward a hard landing recession. (More on the Euro Summit and its solution in a couple days, now that the ‘dust is starting to settle’ on the initial overly ‘euphoric’ response to its pronouncements regarding use of its ESM fund to directly bail out the banks and create a more bona fide central bank out of the ECB at some distant point in the future.

Today’s coordinated central bank response to the growing global slowdown will no doubt result in more coordination to come. Despite the clear effort to coordinate, ECB president, Mario Draghi, denied ay such coordination–the last time such occurred was circa the Lehman Bros. collapse in 2008. Draghi also replied to the direct question of whether the global banking system was more fragile today than in 2008 by saying it was more stable today. That too is another misunderstanding of the global situation.

The weak point in the global banking system may not prove to be Spain and its banks, but what is going on in London today, the major financial center, and has been apparently since the 2008-09 collapse. London has become the ‘Cowboy Finance Capital’ center of the global economy. High risk taking and continuing speculative excesses have been the rule and now it’s becoming apparent. UK financial regulation has been a bigger joke than even the US Dodd-Frank bill. JP Morgan’s recent losses, centered on speculation in derivatives, is one indicator of London out of control. Another is the now emerging massive scandal involving Barclays and other banks’ manipulation of Libor rates–again to maximize derivatives revenues it appears. JP Morgan’s losses have risen to $9 billion from the original $2 billion estimate. And that doesn’t count its $25 billion plus, and rising, losses in stock values. The JP Morgan speculation involves its $350 billion portfolio. The losses may be much much greater, but we won’t know for months. Meanwhile, the Barclays-Libor scandal promises unknown financial losses. This is potentially of great significance. Hundreds of trillions of dollars of derivative trades were based on Libor, not to mention 90% of US mortgage contracts. How this scandal will result in liability suits and claims, and how that uncertainty will impact financial markets, remains to be seen. The unknowns are potentially significant.

In other words, the global banking system is growing more fragile, not less, and potentially even greater in terms of its negative impact on real economies already slowing rapidly. This is unlike 2008, when real economies were booming when the financial instability hit. 2008 also was a situation when central banks’ balance sheets were not overburdened with trillions of liabilities yet, as they are now. When the global consumer had not suffered five years of unemployment, negative income growth, trillions in asset wealth destruction, and real debt accumulation. Finally, 2008 was a period when government balance sheets were not in as terrible a shape as well, or the inclination as strong toward austerity and spending contraction.

No, Mr. Draghi, the global economy–especially in the Euro and UK, and increasingly in China and the BRICS, and soon again in the US as its economy now clearly slows, is not in a ‘better shape today’.

More on the Eurozone Summit and why the US economy will continue to slow, in a subsequent post.

Jack Rasmus
July 5, 2012
Jack is the author of the April 2012 book, ‘Obama’s Economy: Recovery for the Few’, which predicted 9 months ago the current US and global economic slowdown. The book may be purchased from this blog site at discount. (see icon).

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