http://online.wsj.com/article_email/SB124753066246235811-lMyQjAxMDI5NDE3NDUxMzQwWj.html
Mort Zuckerman is chairman and editor in chief of U.S. News and World Report. As such, his opinion is "informed" and well respected. His article (attached), released in today's WSJ, takes the position that the economy is even worse off than we think: the average length of unemployment is higher than it's been since government began tracking the data in 1948.
One of Zuckerman's most compelling points is that job losses are now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to WIPE OUT ALL JOB GROWTH FROM THE PREVIOUS EXPANSION.
Zuckerman gives 10 reasons why we are in even more trouble than the 9.5% unemployment rate indicates. All of his reasons are compelling.
He asks why aren't things moving when Washington has thrown trillions of dollars into the pot, "...including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent?" The answer is that too much money went to "transfer payments" such as Medicaid, jobless benefits and the like that do nothing for jobs and growth. The spending for new jobs is new spending, particularly on infrastructure. That spending amounts to less than 10% of the stimulus package today.
He concludes that the economy may oscillate between sluggish growth and modest decline for the next several years until the rebalancing of "excessive debt" has been completed. His idea of a "second act stimulus" would be something that has a real multiplier effect, not a congressional wish list of pet programs: "It's a shame that Washington didn't get it right the first time."
I would conclude that Zuckerman would be on the team made up of Warren Buffet and Paul Krugman (see a prior blog). Given their position, I would have a hard time arguing against them. President Obama's position that the stimulus has only had 4 months to work when it was planned to impact over 2 years sounds "reasonable" politically. But, if I'm a Democrat running for reelection in November of 2010, and the unemployment rate is continuing to go up, do I simply "wait", as one of my blog "Followers" has so accurately commented! I don't think so.
Economically, the case for Buffet/Krugman/Zuckerman is being made by the facts. Unemployment, always a lagging indicator, is now also a "current indicator"!
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It's a pretty chilling article, frankly. Not only are the numbers essentially underreported for a variety of reasons (some of which we discussed in class), they're also not getting better and according to almost anyone, will get worse before they get better.
ReplyDeleteOn top of that, the stuff about employers cutting back hours (and subsequently, when a recovery comes, bringing those back up first) mean that 'new' employment will be slow in coming.
Lastly, the stimulus - yuck. As I understand it, not only has a lot of it gone to the worthless (relative to this discussion) sources, but a whole lot of what got set aside hasn't even been spent yet.
It makes me wonder what they're waiting for. I sincerely doubt it's for any reason other than bureaucratic reasons, and that's a tough pill to swallow right now.