I went to dinner at a friend’s house and was forced to watch Barack Obama speak. Here’s what I noticed…
“These men and women grew up with faith in an America where hard work and responsibility paid off. They believed in a country where everyone gets a fair shake and does their fair share — where if you stepped up, did your job, and were loyal to your company, that loyalty would be rewarded with a decent salary and good benefits; maybe a raise once in a while. If you did the right thing, you could make it. Anybody could make it in America.”
Given the cheers that greeted this speech, it would seem that our politicians do not believe that there was ever any kind of market for labor in the U.S. Companies paid more than a market-clearing wage in the past because workers were “loyal” or “did the right thing” or because of a notion of “fair shake”. Wages for American workers have therefore not come under pressure due to the availability of educated workers in China and India because that would be a market effect and in fact wages were based on sentiment.
“Building a world-class transportation system is part of what made us a economic superpower. And now we’re going to sit back and watch China build newer airports and faster railroads? At a time when millions of unemployed construction workers could build them right here in America? “
According to Obama, China builds new airports because they are in some sort of race with the U.S. and they are winning. The possibility that China builds airports because they have some cities with more than 5 million population and no airport at all is not considered. The return on investment to building new infrastructure in the U.S. wouldn’t be nearly as high as building it in a fast-growing underdeveloped economy such as Brazil, India, or China. It would be nice if we had congestion pricing on our roads so that transportation times were predictable (the San Francisco and Los Angeles metro areas have traffic jams uncertainty levels equal to any Third World capital), but Obama did not propose anything like that.
“And there are schools throughout this country that desperately need renovating. How can we expect our kids to do their best in places that are literally falling apart? This is America. Every child deserves a great school — and we can give it to them, if we act now. The American Jobs Act will repair and modernize at least 35,000 schools. It will put people to work right now fixing roofs and windows, installing science labs and high-speed Internet in classrooms all across this country.”
Obama wants to spend billions of tax dollars running wires for Internet right at the same time that mobile carriers are putting the finishing touches on their 4G LTE wireless networks and right at the same time that school kids are acquiring smartphones and tablets. “Every child deserves a great school” so we’ll build palaces around the same teachers and curriculum that have produced inferior results to so many other countries?
“The plan also extends unemployment insurance for another year.”
Does that mean 99 weeks of Xbox is now 151 weeks?
“Or should we put teachers back to work so our kids can graduate ready for college and good jobs?”
The same teachers who currently are able to prepare only about 50 percent of their students adequately for college or a job are going to “go back to work” and suddenly they will do a lot better? I guess this is the one part of the speech where Obama has already delivered. As it is September, many more teachers are working this month than were working in July.
“If we provide the right incentives, the right support — and if we make sure our trading partners play by the rules — we can be the ones to build everything from fuel-efficient cars to advanced biofuels to semiconductors that we sell all around the world. That’s how America can be number one again.”
No mention of the $535 million in taxpayer money flushed down the toilet in the Solyndra bankruptcy last week (U.S. Department of Energy put the money in during 2009; Obama visited in May 2010).
“What kind of country would this be if this chamber had voted down Social Security or Medicare just because it violated some rigid idea about what government could or could not do?”
Hmmm… “solvent”?
“Let’s get to work, and let’s show the world once again why the United States of America remains the greatest nation on Earth.”
Why do we have to show the world that we’re the greatest? Are we in fact the greatest? What if China’s GDP surpasses ours, as it is forecast to? Will we then no longer be the greatest?
Yeah, I don’t get it either. He seems to be pandering to the unemployed. With this being 9% percent of potential voters, I think he is completely out of touch with the pulse of the nation. I feel for someone unable to find a job after 99 weeks but you have to wonder what are the circumstances where they can’t find _any_ job. Maybe if we didn’t keep extending unemployment, someone who has been unemployed for a couple years might lower their standards and go to work at a fast food restaurant or move to a place with more jobs.
I don’t get the teacher hating. I can remember a time when there was a teacher shortage. Is there now a glut of people willing to take care of my kids all day while I’m at work
You’re assuming anyone in Congress or the White House understands basic economics. Since they can’t even balance a budget I think it’s safe to say that’s a false assumption.
What, is anything, does it actually mean to be “the greatest”?
And why is the president of the USA wasting his time and the people’s indulging in schoolboy boasts, instead of doing something useful for them?
Ryan, I quite understand your incredulity at the proposition that some Americans can’t find any job at all. Indeed, there are very low-paying jobs available in many places, but some of those aren’t good enough to keep body and soul together. See Barbara Ehrenreich’s excellent book “Nickel and Dimed”, which she researched by actually living the life of a poor person herself. http://tinyurl.com/4ymnude Just reading the customer reviews should give you a good insight. Likewise, see Ehrenreich’s less well-known but equally good (and perhaps still more shocking) “Bait and Switch” http://tinyurl.com/3dys6db to see how affluent, self-confident, well-educated Americans can suddenly disappear into the basement like victims of the villain in a James Bond movie. (And as the basement is full of sharks, they never come back up).
Last but perhaps not least. I believe the official unemployment figures are 9% or so. However, if you include all the permanently unemployed and those who have given up hope, you’ll find it is 22.5% of the labour force that is unemployed.
I do think infrastructure spending is one legit way of government stimulus that can actually be beneficial and worthwhile, but I have to agree with your analysis of the China comparison. Maybe China is building lots of airports because…. they didn’t have any? And we have tons. Infrastructure can be a plus, but at least pretend to do it intelligently, don’t just “build more airports than China is building” for some nationalistic infrastructure race BS.
Also, just dumping “internet” into classrooms is often a waste, there have been studies showing that teacher training is much more important than just throwing truckloads of ipads at the problem. When I was in high school, math was “calculator game” time, I can’t imagine how much more screwing off we would have done if we had multiplayer Starcraft on every desk.
I only expect 10% of the infrastructure money to be spent on anything useful, but there are two good uses. They have gotten less than 10% of past stimulus money, and I don’t expect any better now.
1) Elimination of bottlenecks. An old project example is the Alameda Corridor/Long Beach project. More current projects include the CREATE, Heartland Corridor, and the Tower 55 projects. An example of a planned project is the Bayonne bridge elevation. All of these eliminate major transportation bottlenecks and barriers by revising highway, port, and railroad configurations. These have real benefits.
2) Deferred maintenance. The failure to maintain and replace worn out facilities is a severe problem. My town recently replaced much of its wastewater treatment facility. This doesn’t create much new capability. It replaced equipment that was 30-80 years old, and most of which was more the 20 years past design life. The benefit is keeping cost under control and maintaining reliability. Roads, bridges, pipes, etc. all have finite design lives and become serious repair and failure problems eventually. I know that the available repair budgets for highways, water, and sewer do not include enough to cover replacing even half the systems that have gone past their design lives.
But, this is not the Obama target. Picking projects to eliminate bottlenecks and replace worn out systems does not meet the political goals.
Phil, so in essence you’re saying that these proposals and ideas of the President of the United States of America are utopian and have not much to do with the economic reality. I’m not sure why you’re surprised by this, given that both him and his entourage strongly support the idea that the government must intervene in the economy: in the housing market, in the banking sector, in the stock market, in the car manufacturing sector, in the transportation sector, in the healthcare sector, in the energy sector and on and on and on. Also, a large part of the public actually wants, even demands, such interventions.
Did you expect this to change? Or where you just trying to express your frustration at this?
Regards.
Peter: Do I expect the U.S. political system to adapt to reality? No. Democracy is a system for handing out the fruits of growth to cronies of politicians. As evidenced by Greece, Japan, etc., the very idea of democracy doesn’t make sense in an economy that isn’t growing.
Since our government cannot adapt, we must adapt as individuals. For older people with money, that means investing in foreign countries. For young people it may mean finding government jobs here or emigrating to growing economies with more opportunity.
“China builds new airports because they are in some sort of race with the U.S. and they are winning.”
See also: the USSR baited into a race that we weren’t really running, for more cars for everyone, more houses for everyone, larger factories for everything… until the Soviet system collapsed in exhaustion and confusion.
The UK wasn’t ever in a race, right? Except perhaps to the bottom?
Never kid yourself about the social security or medicare costs. Just grab a pie chart of where the federal dollar is spent.
It is nothing but the wars. Without the wars we would be solvent. More people would be alive and we wouldn’t be in debt. The wars are the only real issue, and they will not discuss it.
I can only interpret comparison with China as fear mongering. Our per capita GDP is nearly 11x theirs (based on Wikipedia numbers). The reason they are building roads is because, while we built our interstate highway system, they were teaching their educated population how to become peasants. I’m sure by ANY reasonable measure our transportation and infrastructure capacity dwarfs theirs.
For a comparison, the Shanghai Pudong airport serves 23m people and served 40m passengers last year. The New York City airports serve some 18m people and served 104m passengers last year. That’s more than 3x the per capita capacity.
As for investing in schools, Planet Money had a series about attempts to build a school in a village in Haiti after the quake (the classes were held under some trees). One economist was quoted as saying that constructing a school has a terrible return on investment. The money would be much better spent hiring better teachers or buying school supplies (pencils, notebooks, books, etc.)
I imagine the same is true in America, particularly hiring better teachers. Here is the relevant link to Planet Money:
http://www.npr.org/blogs/money/2011/07/07/137632625/the-haiti-school-project
Colin: I don’t think “grab a pie chart” is as simple as it sounds. http://www.warresisters.org/pages/piechart.htm shows two pie charts for the same federal fiscal year. One pie chart shows defense as just 20 percent of the spending pie and the other shows more than 50 percent to be military.
http://www.cbpp.org/cms/index.cfm?fa=view&id=1258 is arguably a more neutral perspective and also a bit different from the previous two charts.
Plainly a lot of the things that federal, state, and local governments do are not affordable. If we shut down the wars (which I would be in favor of doing), it might simply free up money for politicians to waste in other ways. Fewer people would be killed, but it isn’t clear that less money would be spent.
“but you have to wonder what are the circumstances where they can’t find _any_ job”
isn’t that the very definition of 9+% unemployment? That there aren’t jobs for these people? Sure, as mentioned, there are a few jobs at the very bottom, and a few jobs with specialized skills that may be available. But all these people, mostly who had jobs and then lost them, and would love one now, can’t find jobs now.
infrastructure spending not optimally targetted?
This spending will have to get past a very obstructionist congress, which means that the optimal projects may be very hard to do.
“him and his entourage strongly support the idea that the government must intervene in the economy: ”
“in the housing market,” yeah, the housing market was in wonderful shape when Obama started
“in the banking sector,” the banking sector was also in great shape, if your aim was to ruin the economy
“in the stock market,” ?
“in the car manufacturing sector,” hasn’t the bailout of the auto companies worked?
“in the transportation sector,” get the gov out of transportation, all those interstates and airports have ruined everything
“in the healthcare sector,” uh, the highest in the world costs of the private sector run healthcare are what is most likely the thing that will most destroy our economy in the long run
Wally: Not to argue with your perspective point-by-point, but when you ask “hasn’t the bailout of the auto companies worked?” I’m wondering if you considered the possible alternative uses of the money and effort spent. GM and Chrysler could have reorganized under Chapter 11 without government assistance and they probably would still be operating today in some form (though obviously the union pension holders would be receiving much less). The money used to bail them out of their pension obligations could have been used for something else.
So it depends what you mean by “worked”. Did throwing $50-100 billion at Detroit have a positive effect on two companies? Yes. Keeping in mind that Google was financed for about $20 million, was subsidizing two companies the best use of $50-100 billion? Harder to say.
Wally, the problem is that centrally managed economies fail in the long run. Always.
The alternative is to let the market decide what is the price for a house, how much money can someone borrow and at what interest rate, which car manufacturers survive, which banks go bankrupt, what kind of cars people drive, whether people travel by using cars, airplanes, buses or high speed trains, what type of energy sources are used and how much the energy costs, what kind of light bulbs people use, whether the investors can short-sell stocks, where hospitals get built, how many doctors and nurses they have and how much they’re paid, where can airplane manufacturers open factories and so forth.
If you have the impression that the government employees, in their infinite wisdom, are better at deciding on these things and at predicting all the consequences of these actions, you’re gonna be very disappointed eventually, my dear.
Well…not to worry. When Texas governor, Rick Perry, becomes President he’ll take care of us. Just like he’s doing with health care in Texas:
http://www.latimes.com/health/healthcare/la-na-perry-healthcare-20110908,0,5515472.story
Really, what is Obama to do? The bidding of Congress? Here’s an eye opening piece:
http://www.truth-out.org/goodbye-all-reflections-gop-operative-who-left-cult/1314907779
Peter:
When you make a blanket statement saying that centrally managed economies fail in the long run, it sounds like a statement of religious belief rather than something that can be seen in the historical record. What does it mean for an economy to fail? Don’t have all industrialized countries have centrally managed economies to one degree or another?
Jim: What is Obama to do? In a genuine time of crisis, you’d want political leaders to be frank with citizens regarding a country’s problems. Our current leaders have failed to grapple seriously with the mismatch between our government’s ambitions for spending and our economy’s ability to pay for it.
“Democracy is a system for handing out the fruits of growth to cronies of politicians. As evidenced by Greece, Japan, etc., the very idea of democracy doesn’t make sense in an economy that isn’t growing.”
Phil, this is awfully pessimistic. I understand the irritation at the current state of things but this is quite a leap. As far as the American democracy goes, it’s important to remember that while the Spanish, Greek, Italian, Portuguese, Israeli etc youth have protested and asked for more things to be provided by their governments it was in this country where a very significant number of people have protested against the first bailout and later were able to make important changes to the political landscape, both at the state and the federal level.
“Since our government cannot adapt, we must adapt as individuals. For older people with money, that means investing in foreign countries. For young people it may mean finding government jobs here or emigrating to growing economies with more opportunity.”
Regarding the first suggestion – you are assuming that the US is more or less decoupled from those foreign countries. I’m not so sure this is the case. Besides, things are looking very bad right now in Europe and Japan has had problems for years. I’d be very surprised if China or Brazil were able to continue growing when things will worsen significantly in the Western world.
Regarding the second – darn it, so I should have stayed back home, in Eastern Europe, and not immigrate to the US. Except that things are looking very bad there right now. Quite a few Greek, Italian and French banks (which dominate the local market) will go down in flames in the not too distant future, thanks to the problems they have in their home markets. The value added tax was raised by a quarter last year (it’s 25% now!!!). The incomes of the public sector employees have been slashed too, significantly.
Peter: Why can’t China, India, and Brazil grow while the U.S. stagnates? The U.S. managed to grow very nicely from 1950-2000 despite stagnation in many parts of the world.
Phil: Agree totally. Our “leaders” are also members of Congress . Are we forced to choose the lessor of two evils?
I’m approaching 60 years old. I’m worried about Social Security and Medicare. I spent the last 45 years paying into those plans. I selfishly want people to have jobs to help fund my retirement…and I want them to have the same.
We need a balance of government and private enterprise. Both sides have to find some common ground. I don’t see any “new” or “frank” proposals from Republicans either.
rjh –
Just to throw a little more sunshine on the “aging infrastructure” challenge…
Over the past 50 or so years we’ve added an entirely new component to the infrastructure mix… software systems.
One of the first thing I learned about systems & software: “Smart people write new code & dumb people maintain old code.” Not a very helpful attitude when systems often live for decades & become extremely difficult to to change… to say nothing of being written in out-of-fashion languages.
Replacing old/existing systems clearly isn’t happening… we’re too busy with client-server, web & now iPads. Layer upon layer upon layer.
Vince, first of all, I grew up behind the Iron Curtain and I have experienced first hand the failure of a centralized economy.
What did that particular failure look like? Basic parts of the economy had become completely non-functional: the food was really hard to find and eventually rationed, the heat, electricity and water were not always available, the medical services were a disaster (two patients in a hospital bed, hard to find the medicine, hard for the doctors to get the medical instruments they needed etc), if you wanted to purchase a car you had to put your name on a list and wait for four years, the gasoline and the propane were rationed and sometimes you had to wait in line for more than 24 hours to be able to get it, there was an insufficient number of schools so kids sometimes were studying in three shifts (6:30am-11am for one group, 11am-3:30pm for the second, 3:30pm-8pm for the third). All of these aspects of the economy were directly managed by the government bureaucrats.
Other countries throughout Eastern Europe have been affected by similar issues, to a greater or a smaller extent. Non-European countries with similar economic systems have also had this type of problems.
Do the industrialized countries have centrally managed economies? Yes, but as you said this is partially centralized management. However, you seem to imply that it works fine and will continue to do so, so this reminds me of an old joke about a guy falling from the top of a tall building who says “so far so good” while still in the air. In any case, I believe it’s obvious that a partially centralized system can function but only as long as its inherent mismanagement issues don’t overwhelm the entire system.
Finally, I’d like to provide you with two samples of the infinite economic wisdom of the government:
http://www.realclearpolitics.com/video/2011/08/16/obama_ag_secretary_vilsack_food_stamps_are_a_stimulus.html
http://www.realclearpolitics.com/video/2011/08/10/carney_unemployment_benefits_could_create_up_to_1_million_jobs.html
“Why can’t China, India, and Brazil grow while the U.S. stagnates? The U.S. managed to grow very nicely from 1950-2000 despite stagnation in many parts of the world.”
Although I don’t have data to support this, I suspect that at least China, if not also Brazil and perhaps India too, are currently heavily dependent on exports, probably mostly going to the Western world. Can this change? Yes, but it will take a long time in my opinion.
Regarding the US growth from 1950-2000, I believe that situation was quite different due to factors such as the fact that the other major economies were ravaged by the war at the beginning of this period so the US was an important exporter for a while, the fact that an amazing number of innovations have occurred in this country (e.g. semiconductors, information technology and mortgage based securities 😉 ), a highly entrepreneurial and optimistic spirit specific to this nation, rapid growth in friendly economic partners (Japan and Western Europe) and so on.
Peter,
Heavily dependent on exports? In order to export anything you must trade that for something of value. I don’t buy this “we have to export more stuff” generalization. The U.S. could export plenty of stuff, if it filled a ship with many products and sunk it in the middle of the Atlantic. Then we’d have a trade surplus, since we didn’t get anything in return, but that wouldn’t make people happy….
The problem is we keep destroying our wealth:
Wars – Building a $1M Cruise missile and blowing up ignorant, angry people simply means we lost $1M in wealth. There is not much to be gained from creating piles of unproductive burning rubble and giving small children in other countries a $1M reason to hate you when they get old enough to afford some of their own ideas.
Social engineering – Drug wars that produce massive imprisonment, Dept of Education that does not educate and pensioners who get paid $100K yr at age 55 to play golf on govt owned golf courses.
Regulations – Why does it cost $700K to drive a Taxi in New York? Why does a business owner need to give himself a surprise drug test? Why do we have to attempt to license every last thing down to florists and hair braiding? Then the same whiners that want more regulation complain about the lazy ones who don’t want to take out $50K in student loans to get their hair braiding license and get a real job.
The government can do three things in the economy: Make it worse, get out of its way or try to take credit for someone else’s productivity. Stop thinking the govt has anything positive to offer the economy besides basic law and order. They have enough trouble with just those two.
Peter:
One thing that jumps out at me about your post here is the statement about studying in shifts. I went to high school on Long Island, NY in the late 70s/early 80s and we too studied in shifts, two of the grades in the morning and two in the afternoon. On the other hand, this was a public (i.e. government) school district, so maybe that proves your point. Yet South Korea, which is considered to have one of the top education systems in the world, has much more “central planning” in education, administered by the ministry in Seoul, than the U.S., where education is highly decentralized (see http://en.wikipedia.org/wiki/Education_in_South_Korea)
You also mention health care. You probably know that the American health care is much more decentralized than the countries that we typically compare ourselves to – Canada, UK, Germany, etc. We pay about twice as much (in dollars per capita) than the rest of the industrialized world and receive basically nothing for it.
You assume that the partial central planning employed by all of the world’s major economies will lead to eventual demise of those economies. But that’s really just a prediction based on a hunch. We really have no idea what a major developed economy without a significant amount of planning would look like.
$450 billion is $32,142 for each of the 14 million job-seeking Americans (9% per BLS).
6 quarters of vocational tuition at Shoreline Community College? $7,226.
(Note to news media: for someone unemployed longer than 3 months, the key metrics are course credits received, internships conducted, weeks left before receiving a vocational certificate in an understaffed field, and industry networking events attended. Resumes sent is not on this list.)
Phil,
I am certain that this forum isn’t set up for simple
comments as much as it’s for replies and responses
that have contrast to your subject matter, but I really
would like to say that I found President Obama’s address
nothing short of embarrassing.
You ably refuted his speech line by line as though it’s almost
comedic (and I am sure that wasn’t your intention), and
for a person living in his twilight years, I find it tough to swallow
that our country has fallen this far. I found myself thinking that
if Bush had delivered the same speech, he’d be lampooned in the
press, yet Obama gets a pass.
That we are now gonna allow “hard working Americans” to sit home
for a total of THREE YEARS and draw unemployment I find to be
nothing short of incredible…
Reality is, that as the Baby Boomers retire, GDP will drop. Just like if you looked at the first 20 years of a person’s life and what they earned, then extrapolated that they would always be below the poverty level, so we will have a lot of hand-waving about dropping GDP but really it will just be that so many people are retiring. No one wants to talk seriously about demographics and what that is going to entail for the next 20 years.
Then again, maybe we’re all just looking at this the wrong way.
http://www.rushkoff.com/blog/2011/9/7/cnncom-are-jobs-obsolete.html
The 1950’s version was that automation would make life easier for everyone.
Instead, as far as work is concerned, automation has allowed those at the top to “earn” many times more for their work, while those at the bottom can earn nothing.
Wally: The idea that humans have a limited number of wants and that we can all stop working as soon as the basics are fulfilled is an old one. Nobody needs a smartphone and yet people make them, buy them, work harder in order to afford the service.
As a suburban homeowner I would be delighted to hire someone at $12/hour to pull weeds and do other landscape chores. However, I can’t find anyone willing to do the work for that price (some folks initially say that they are, but then don’t bother to show up), so I end up doing it myself.
I find it amazing that there hasn’t been
more hue and cry from people in
reference to this outrageous extension
unemployment benefits.
Why not give us all a few weeks extra pay?
Next time you need a present for your friends, get them a TiVo, so they won’t be forced to subject guests to such cruelty.
“These men and women grew up with faith in an America where hard work and responsibility paid off. They believed in a country where everyone gets a fair shake and does their fair share blah blah blah”
“And that’s why I voted for the Wall Street bailout, over the puling objections of all you uppity proles, so you’ll learn your place and quit pretending to the rights of your betters. Now get back to work, maggots.”