NAIRU...and all that

This is from an English site.  Good info and questions, but seems to miss the crucial point that inflation is a monetary phenomenon. Inflation is not caused by wages paid to workers any more than wages paid to owners (profits) causes inflation.  Inflation is caused by an increase in the money supply beyond increases in goods and services.  Still, the threat is a very handy club for beating people into excepting starvation wages and high unemployment.---rng

from laborlist.org

NAIRU...and all that

By Peter Barnard

As the coalition government unveils its plans to “get people off welfare and back to work” via the introduction of the workhouse without the walls, there is a fly in the ointment prescribed by Mr Iain Duncan Smith, and it is to be found on page 77 (para B.15) in the Pre-Budget forecast published by the Office for Budget Responsibility earlier this year :

"The prospects for the trend employment rate can be split into the outlook for the ‘structural’ unemployment rate, or non-accelerating inflation rate of unemployment (NAIRU), and the outlook for the labour market activity rate. For the purposes of the projection the NAIRU is assumed to be around 5.25%, which is broadly in line with the unemployment rate prior to the recession, and to remain flat over the projection period. "

The ‘projection period’ in the PBR was up to and including 2014/15.

In passing, the OBR also remarked (in the same paragraph) that the UK has “below average unemployment protection legislation”, but that’s another subject...

The remit (set by government) of the Monetary Policy Committee of the Bank of England is quite specific : non-accelerating inflation, with a target of 2.0% as measured by the Consumer Prices Index.

In other words, and as surely as night follows day, an unemployment rate of 5.25% is unavoidable : about 1.5 million people will be unable to find work between now and 2014/15 because the work and jobs just won’t be there.

If this is indeed the case,  government, and the Labour opposition, need to ask themselves a very basic question: if they are deliberately accepting one and a half million unemployed as a consequence of policy, is it equitable that those who find themselves in this unfortunate position should be denied the state-provided wherewithal to maintain human dignity?

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What To Do About Those Lousy Payroll Numbers? Grow!

This is a good start. Keep thinking growth. But always remember economic growth without job growth means social chaos. Whatever you do, don't ship those jobs overseas---because paying off the debt with taxes provided by the corporations will take centuries-if that.  I find nowhere in this piece one iota of attention to protecting and nurturing stateside jobs. -----lee 

James K. Glassman

Ideas in Action
Jul. 8 2011 - 12:48 pm 

     “Small gain in payrolls very concerning.”

     That’s the understated way Moody’s Dismal Scientist website headlined the news from the Labor Department this morning. Employment had increased just 18,000 last month – after an anemic 25,000 in May. Unemployment jumped to 9.2%. The stock market, which had risen every day since June 27 — a total of about 800 points on the Dow — quickly took a dive.
     These new data stand in stark contrast to the debate going on now in Washington, which is concentrated, to the point of obsession, on various plans to reduce the projected federal deficit (the annual shortfall between revenues and expenditures) and the debt (the accumulated deficits). 
     Let’s stipulate that a smaller debt would be helpful and that cutting unnecessary government spending is always a good idea. But the focus is all wrong. What the U.S. economy needs is growth. The lousy employment figures aren’t a function of high debt; they’re the result of an economy that isn’t growing nearly as fast as it should. High growth leads to low unemployment.
     Inherently, the U.S. is a boiling cauldron of growth. Unfortunately, government policies in recent years have kept a lid on that cauldron. To get back to job growth American innovation, animal spirits, and human creativity must be unleashed.
     If we can get faster growth and reasonable constraints on spending, the debt problem will shrink as the economy expands. The Congressional Budget Office calculates that every percentage point of extra growth in Year 1 reduces the forecast debt by more than $700 billion over Years 1 through 10.     
     An extra point of growth in all 10 years cuts the debt by many trillions. Alex Brill ran the numbers and concluded that simply boosting growth to 4% by 2017 and maintaining that level for five years would cut the debt in 2021 by $3.7 trillion.
     Four percent is not a figure plucked from thin air. It is eminently obtainable. The U.S. has grown at 3.3%, on average, since World War II and hit 4% in one-third of the past 40 years. The problem is that forecasts by the CBO and a consensus of economists see growth in the range of just 2% to 2.5% for the long term.
     Just as bad, economists’ short-term forecasts, which have been far rosier, aren’t being met. For this year, the CBO in January projected 3.1% growth, for next year 2.8%, and for 2013 to 2016 an average of 3.4%. After that recovery up-tick, projections are that the economy will settle into a sustainable – and disturbingly low – growth rate of 2.4%.
     But, in fact, the U.S. economy grew by just 1.8% in the first quarter of 2011, and The Economist magazine’s poll is predicting 2.5% for the year.
     The debt arithmetic works both ways. If growth is a point lower than expected, then the debt over 10 years will grow by more than $700 billion.
     But enough of these numbers! What the United States needs to do is not change the math but change the debate. Every policy change should be judged by a single criterion: Will it increase growth or not?
     The array of pro-growth policies is vast – and begins with changes with fiscal policy. Lower tax rates – both on businesses and individuals — encourage more savings, investment, and work by increasing incentives. Cutting unnecessary government spending allows enterprise to thrive by leaving more money in private hands and by reducing the drag of debt. Smarter policies on immigration and education increase the stock of human capital – the source of innovation and growth.
     The Bush Institute, which held a major conference in April on what’s called the 4 Percent Project, will soon release a blueprint for achieving that level of growth. But our ideas will, we hope, be a few among many. The greater goal is to get America focused not on green-eyeshade tinkering with budget numbers but on the more inspirational and more critical matter of getting the U.S. economy growing to its 4% potential.

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The Rise in Structural Unemployment in the US Recession

As usual, the real solution is overlooked--end the outsourcing, offshoring and illegal immigration, and create a tight labor market.   Then, end the unemployment extensions, and start eliminating welfare.  Voila, you have high wages, low unemployment and the return to American greatness. (Also, stop printing funny money; but that's another story.)---rng

from forbes.com
Jun. 21 2011 - 10:24 am 

     I regard this as really rather sad.

     Felix Salmon notes that there’s been a rise in structural unemployment in the US in the recent recession. Which indeed there has been. As long as we accept the similarity between structural unemployment and long term unemployment, a connection that in the world of economic wonkery is generally accepted.

What’s going on here is pretty clear. For short-term unemployment, little has changed: the structural rate has been around 2% for decades. But look at any of these charts and they show structural unemployment at an all-time high, with the situation getting much worse the longer the duration of unemployment. Overall, the structural rate of unemployment is now more than 8%, which means that we’ll only dip below that level temporarily, during cyclical upturns.

     All entirely true however Felix is overlooking one major point:

And what I fear is that the Great Recession has moved the US towards European levels of structural employment, without any kind of Euro-style social safety net.

     Ah, but in one crucial respect, during this recession the US has moved much closer to having a Euro-style social safety net. Recall, unemployment benefits were extended from their usual 26 weeks to 99 weeks. Now one can argue about whether this should have been done or not but the effect was always understood, even if denied in some parts. From Richard Layard, the English economist and expert on this very point of long term unemployment:

The evidence for the first proposition is everywhere around us. For example, Europe
has a notorious unemployment problem. But if you break down unemployment into short term (under a year) and long-term, you find that short-term unemployment is almost the same in Europe as in the U.S. – around 4% of the workforce. But in Europe there are another 4% who have been out of work for over a year, compared with almost none in the United States. The most obvious explanation for this is that in the U.S. unemployment benefits run out after 6 months, while in most of Europe they continue for many years or indefinitely. The position is illustrated in Figure 1. The vertical axis shows how long it is possible to draw unemployment benefit, and the horizontal axis shows how long people are actually unemployed, as measured by the percentage of unemployed who are out of work for over a year. The association is close, and it remains close even when we allow statistically for all other possible factors affecting the duration of unemployment.

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Disappearing Middle-Class Jobs

Why is everybody so clueless?  The good jobs have all disappeared because we've shipped them overseas!  Also, when you have a surplus of any commodity, including labor, the price of that commodity will fall.  This is why both parties allow illegal immigration, outsourcing and offshoring--to make huge contributions from employers who want cheap labor, subsidized by tax payer supported schools, jails, public hospitals, and welfare rolls.  Unfortunately, lower wages means people can't buy their products because their wages are too low.  Next step, the employers keep prices up by cutting production, laying people off, thus increasing social welfare costs to the taxpayers while maintaining their profit margins.  This is known as the race to the bottom.---rng

End offshoring, outsourcing, and illegal immigration.  Now! These policies are economic treason.

Jun. 22 2011 - 1:53 pm

     “The American dream is dead for the majority of America,” financial guru Suze Orman told Forbes last year, speaking about her upcoming book The Money Class.
     The dream she was referring to isn’t a Cinderella story. Rather, Orman believes the hope of someday owning a home, of working one job for life and retiring at 65 has been crushed by the financial crisis. “The middle class has disappeared,” she said. “Many of the millions of jobs lost I don’t think are coming back. I am really afraid for the majority of Americans today.”
     Are stable, well-paying middle-class jobs an endangered species? Economists say: Sort of.

     “The idea that one can have a single-earner family, get a good job, keep it for life and have a comfortable living is all but gone,” says Kevin Hallock, professor of labor economics and director of the Institute for Compensation Studies at Cornell University. “Long-term job stability is declining, and there aren’t good unionized jobs like there once were.”

     In Pictures: 10 Disappearing Middle-Class Jobs

     The recession may have just complicated and compounded what was already occurring. Generally, jobs are disappearing where there’s been a technological advance—“where a human was doing something, now a technology is doing it”–or a change in the way that organizations function, says Hallock. And not only are old-fashioned assembly line jobs on the decline, several white-collar office positions are also in jeopardy.

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What really makes America exceptional?

WHAT IS SO EXCEPTIONAL ABOUT AMERICA?

When we decry the people who deny American exceptionalism, why do we decry them?  What are they denying and what are we defending?

According to Wikipedia, “American exceptionalism refers to the theory that the United States is qualitatively different from other nations. In this view, America's exceptionalism stems from its emergence from a revolution, becoming "the first new nation",[1] and developing a uniquely American ideology, based on liberty, egalitarianism, individualism, populism and laissez-faire.”

This is partly true but misses the central point--what makes America unique is her celebration of the common man.  There is no caste system, there is no hereditary aristocracy, there is no entrenched belief in underlings and overlords.  In America, in theory, any man, and now woman, can hope to be President someday.  John F. Kennedy proved someone other than Protestants could be President and Barack Obama proved someone other than a white could be President.

This, of course is a commonplace, and most people don’t give it a second thought.  Too bad.  It deserves very deep thought indeed.  

Do you really want to go back to a world where heredity decides your opportunities and your children’s opportunities in life?  If we go back to the Old World way of doing things, that is what will happen, over time.  Perhaps we will learn to be sensitive and tolerant of the Hindu caste system with its Brahmins and Untouchables.  Maybe we will evolve Lords, Dukes and Counts.  Maybe even a King.  

If you are one of the unlucky ones, maybe you’ll get to stand on the curb, knuckle your forehead and give a rousing cheer for the Count of New Jersey as his limo goes roaring by. 

But, you say it can’t happen here.  This is America.  And that is correct and that is what makes America exceptional.  No matter who your parents are, you have the right to go as far as your talents, drive and luck can take you.  There is no law or custom to prevent that, and we have been steadily eliminating the barriers that remain as the election of Obama proved.  (Reverse discrimination is a festering problem, of course, and must be dealt with and it’s corrosive poison removed from society.)  

And this is what the opponents of American exceptionalism are really after--a return to the rule and privilege of power and prestige for the elite and their offspring.  They want to crush the common man just as he has been crushed throughout history in every nation in the world. For them American exceptionalism is a curse, for the rest of us it is a blessing from God.

Have a happy Fourth of July.

rng

A Rebuttal to the SBC on Immigration and the Gospel, Part III

MONDAY, JUNE 27, 2011

from Dow Blog

Having previously discussed the economic and political implications of mass immigration, particularly of the illegal variety, I’d like to consider in a bit more detail some of the thorny biblical and theological matters surrounding the issue. Here I will interact with Dr. Russell Moore’s biblical and ethical arguments. Because this will likely get a bit lengthy, I intend to write two posts. First, I’ll deal directly with Dr. Moore’s sundry assertions defending the SBC resolution “On Immigration and the Gospel”. In a second post, hopefully later this week, I’ll try to provide a brief outline and sketch of what the Bible says about nationality.

First, let me praise Dr. Moore for explicitly tying the immigration issue and other matters of public policy to Scripture. God’s Word is inerrant and sufficient for all of life and gives us a worldview grid to thoughtfully examine the issues of the day. Unfortunately, misinterpretations and poor applications of Scripture combined with faulty logical assumptions flaw his overall analysis.

The Jesus Was an Illegal Immigrant Fallacy, or There is No Such Thing as Illegal Immigration

Dr. Moore repeatedly claims that Jesus was an illegal or undocumented immigrant. He begins with this Jim Wallisesque doozy: “First of all, our Lord Jesus himself was a so-called ‘illegal immigrant’”. I’ll address shortly the truth of the statement, but take note of Moore’s choice of language. By his use of scare quotes Moore repudiates the use of the word “illegal” and implies that there should be no moral distinction made between legal and illegal immigrants. He prefers the term “undocumented” workers or immigrants, by which he appears to mean aliens who may not have followed proper bureaucratic procedures but have otherwise done nothing immoral or sinful. It stands to reason by Moore’s rationale that if the sinless, perfect Son of God was an “illegal immigrant” then there must be nothing inherently sinful about violating immigration laws.

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