Sunday, September 11, 2011

Do I detect a shift?

The arrival of the austerity ghouls was pretty dramatic and obvious.  Suddenly, all the governments were being told that they must cut their spending.  This triggered riots from London to Greece, the fall of dozens of governments, and good Wisconsin cheeseheads standing in the winter cold to protest the assault on collective bargaining.  It looked like the ghouls were reading from the same script probably because they WERE reading from the same script.

But suddenly, it seems like there is a tiny amount of evidence that the script has been changed.  I started noticing glimmers of a new script with the more-rapturous-than-expected reception to Obama's speech on jobs last Thursday night.  And several interesting examples follow below.  The interesting question is: why now?

Calling off the ghouls may have happened because the greedheads do not see a way for the debtors to tighten their belts further.  Maybe someone did the simple math and realized that a failure of debtors means a failure of lenders, and that debts that cannot be repaid will not be repaid.  Banksters may be rediscovering their oldest rule of thumb still holds, "NEVER bankrupt your borrower."  The austerity ghouls were obviously making things worse.  Is it possible to believe even THEY have gotten this reality through their thick skulls?

First up we read that the Fed president of Chicago, who is probably too young to remember how or why the laws were passed, has discovered that they are legally mandated to reduce unemployment, and more interesting, making note of that fact in an important speech.

Setting Their Hair on Fire 
By PAUL KRUGMAN  Published: September 8, 2011

First things first: I was favorably surprised by the new Obama jobs plan, which is significantly bolder and better than I expected. It’s not nearly as bold as the plan I’d want in an ideal world. But if it actually became law, it would probably make a significant dent in unemployment.

Of course, it isn’t likely to become law, thanks to G.O.P. opposition. Nor is anything else likely to happen that will do much to help the 14 million Americans out of work. And that is both a tragedy and an outrage.
Before I get to the Obama plan, let me talk about the other important economic speech of the week, which was given by Charles Evans, the president of the Federal Reserve of Chicago. Mr. Evans said, forthrightly, what some of us have been hoping to hear from Fed officials for years now. 
As Mr. Evans pointed out, the Fed, both as a matter of law and as a matter of social responsibility, should try to keep both inflation and unemployment low — and while inflation seems likely to stay near or below the Fed’s target of around 2 percent, unemployment remains extremely high. 
So how should the Fed be reacting? Mr. Evans: “Imagine that inflation was running at 5 percent against our inflation objective of 2 percent. Is there a doubt that any central banker worth their salt would be reacting strongly to fight this high inflation rate? No, there isn’t any doubt. They would be acting as if their hair was on fire. We should be similarly energized about improving conditions in the labor market.” 
But the Fed’s hair is manifestly not on fire, nor do most politicians seem to see any urgency about the situation. These days, the best — or at any rate the alleged wise men and women who are supposed to be looking after the nation’s welfare — lack all conviction, while the worst, as represented by much of the G.O.P., are filled with a passionate intensity. So the unemployed are being abandoned. more
The following little gem is priceless.  It's from Forbes—a known purveyor of right-wing economic horseshit.  It about the new head of the IMF, Christine Lagarde, who they are accusing of going all soft and worrying about employment.  And the accusation is that Lagarde, a conventional by-the-book Neoliberal, has somehow begun to act as if someone had passed an international Humphrey-Hawkins law.  Now Humphrey-Hawkins is probably the most ignored law in American history—and that includes Prohibition.  It was Keynesianism's last official gasp and even the bill's main author—the dying Hubert Humphrey—saw it as an attempt to make a final statement rather than a way to affect policy.
Humphrey-Hawkins Meets the IMF
Tim Ferguson Forbes Staff 7/26/2011

Lagarde wants to get her hands around jobs policy. 
It was but a brief passage in new International Monetary Fund chief Christine Lagarde‘s remarks in New York this morning–22 days into her job–but it may signify a bold new reach for the ambitious agency: Jobs shop. 
Just as the Humphrey-Hawkins legislation in the 1970s put a new burden on the U.S. Federal Reserve, that of seeking full employment, so did Madame Lagarde appear to add a mission for the IMF, which was founded after World War II to help manage international capital flows to ward off balance-of-payment crises. 
Noting that joblessness and bleak career prospects for the young are a factor in not only unrest-gripped emerging nations but most developed countries as well, Lagarde told the Council on Foreign Relations that this issue is part of a “social instability” challenge to be met at the Fund. (It was one of three “challenges,” she said, the other two being sovereign debt and economic growth. Growth and social instability meet at the workplace. ) 
In an extension of that thought in her prepared text, not delivered, she also mentioned that “older generations are fighting to protect their health and pension benefits. Combine the two, and we may face a ‘clash of generations,’ to borrow a term coined by the scholar David Rothkopf.”
This area may come naturally to a woman who just spent four years as minister of economic affairs, finances and industry in France, a nation whose government actively tends to such things. 
You might say, however, that Lagarde and the IMF will have their work cut out for them in tackling labor and benefits issues. As she herself acknowledged, her managing director post lacks direct international authority except when nations fall “under program” at the Fund, meaning that they require a workout to manage their monetary (and increasingly, economic) emergencies. more
I rarely copy info from Wikipedia, but folks should remember that Humphrey-Hawkins IS the law of the land.  And its citizens should know that unemployment is still technically illegal.
Humphrey–Hawkins Full Employment Act
From Wikipedia, the free encyclopedia

The Full Employment and Balanced Growth Act[1] (known informally as the Humphrey–Hawkins Full Employment Act), is an act of legislation by the United States government.

Impetus and strategy 
Unemployment and inflation levels began to rise in the early 1970s, reviving fears of an economic recession. In the past, the country's economic policy had been defined by the Employment Act of 1946, which encouraged the federal government to pursue "maximum employment, production, and purchasing power" through cooperation with private enterprise. Some Congressmen, dissatisfied with the vague wording of this act, sought to create an amendment that would strengthen and clarify the country's economic policy. 
The Act's sponsors embraced conventional Keynesian economic theory, which advocates aggressive government spending to increase economic demand. In particular, Keynesian theory asserts that the government can minimize the shock of business fluctuations by compensatory spending, intended to maintain or inflate investment levels by government spending. 
Consistent with Keynesian theory, the Act provides for measures to create temporary government jobs to reduce unemployment, as was attempted during the Great Depression
Somewhat contradictorily, the Act also encouraged the government to develop a sound monetary policy, to minimize inflation, and to push toward full employment by managing the amount and liquidity of currency in circulation. 
Overall, the Act sought to formalize (and to expand Congress's role in) the economic policy process, as governed by the Federal Reserve and the President. 
In response to rising unemployment levels in the 1970s, Representative Augustus Hawkins and Senator Hubert Humphrey created the Full Employment and Balanced Growth Act. It was signed into law by President Jimmy Carter on October 27, 1978, and codified as 15 USC § 3101. The Act explicitly instructs the nation to strive toward four ultimate goals: full employment, growth in production, price stability, and balance of trade and budget. By explicitly setting requirements and goals for the federal government to attain, the Act is markedly stronger than its predecessor. (An alternate view is that the 1946 Act concentrated on employment, and Humphrey-Hawkins, by specifying four competing and possibly inconsistent goals, de-emphasized full employment as the sole primary national economic goal.) In brief, the Act: 
  • Explicitly states that the federal government will rely primarily on private enterprise to achieve the four goals.
  • Instructs the government to take reasonable means to balance the budget.
  • Instructs the government to establish a balance of trade, i.e., to avoid trade surpluses or deficits.
  • Mandates the Board of Governors of the Federal Reserve to establish a monetary policy that maintains long-run growth, minimizes inflation, and promotes price stability.
  • Instructs the Board of Governors of the Federal Reserve to transmit an Monetary Policy Report to the Congress twice a year outlining its monetary policy.
  • Requires the President to set numerical goals for the economy of the next fiscal year in the Economic Report of the President and to suggest policies that will achieve these goals.
  • Requires the Chairman of the Federal Reserve to connect the monetary policy with the Presidential economic policy.
The Act set specific numerical goals for the President to attain. By 1983, unemployment rates should be not more than 3% for persons aged 20 or over and not more than 4% for persons aged 16 or over, and inflation rates should not be over 4%. By 1988, inflation rates should be 0%. The Act allows Congress to revise these goals over time. 
If private enterprise appears not to be meeting these goals, the Act expressly allows the government to create a "reservoir of public employment." These jobs are required to be in the lower ranges of skill and pay to minimize competition with the private sector.
The Act directly prohibits discrimination on account of gender, religion, race, age, and national origin in any program created under the Act. more
And The Atlantic—the same publication that regularly publishes the neoliberal Kool-Aide of Megan McArdle—gives us this little nugget from James Fallows.  If The Atlantic has become pro-investment, pro-stimulus, maybe the economic worm IS turning.
Why 'Infrastructure' Should Be Sexy: Lessons from Uganda, Russia, and China

JAMES FALLOWS   SEP 9 2011, 8:42 PM ET

I mentioned yesterday that the passage I liked best from Obama's "pass the jobs bill / pass it right away" speech was his discourse on "infrastructure." Yes, that most boring of words, which applies to all the equipment and investment that collectively distinguish first- from third-world countries.

A reader who has traveled in Africa sends this note:

If I had the power to snap my fingers and immediately grant every young person in "red state" America a week's vacation in Uganda, I would do it.

[After a trip there] my wife and our two teenage children and I came back "changed" in many ways and one of the most significant ways was that we no longer take for granted the vast and complex "infrastructure" of our own country.

Particularly with younger voters, Obama and the Democrats would be wise over the next 14 months to continually "re-educate" these voters about the national educational, transportation, scientific and social research, health, safety, energy, communication, natural and wildlife preservation, legal, social justice, national security, law enforcement, etc. "infrastructures" that are all so crucial to the individual prosperity and opportunity available, however unevenly, to all the citizens, of this great country.

We usually hear this message in the form of "Holy Moley, look what the Chinese are doing!" It's also worth considering it in the grimmer version of "here is how it looks if you just let everything run down." (Or, for most Westerners who have actually spent time in China, "here is how it looks if you let the smokestacks belch out full blast, and can't keep toxic chemicals out of the water or the food supply." more

No comments:

Post a Comment