With all the buzz around the election, few were talking about the looming sequestration tsunami, which, if not averted, will surely sink the economy in 2013. The Budget Control Act of 2011 is an emergency measure that was devised to force an agreement in the debt-ceiling debate of last summer. A supercommittee was charged with finding a way to achieve a $1.2 trillion reduction in the deficit. Republicans insisted on extending the Bush tax cuts— no new taxes!— while Democrats contended the revenue generated by their expiration would diminish the severity of the cuts in domestic spending demanded by the Republicans. Incorporated into the bill were measures abhorrent to both parties. The thinking was that Republicans wouldn’t permit steep cuts to the defense budget and Democrats wouldn’t allow domestic spending on social services to be slashed. But there is no agreement to date, and the cuts will kick in automatically on Jan. 1, 2013.
The White House proposed the deal, and Republicans signed on. House Speaker John Boehner and House GOP Leader Eric Cantor are now claiming that the Democrats are to blame for the lack of a plan to prevent the trigger of the draconian cuts, somehow forgetting that Republicans unanimously rejected the plan proposed by Obama.
GOP VP nominee Paul Ryan is saying (video above) that the supercommittee (of which he was a member) offered an alternative to the sequester. In fact, it did not, because Republicans on the committee, led by Ryan, denounced the cuts to entitlement programs as inadequate, and the Democrats refused to cut programs without increased revenue.
In the 64 years from the end of WWII to 2009, jobs under Democratic presidents have invariably increased at double the rate of growth under Republicans. Prof. Robert McElvaine compiled the data from the Bureau of Labor Statistics:
Reading McElvaine’s graph of job gain/loss by administration, it’s clear that the inauguration of a Republican president signals a drop in new jobs that will last until a Democrat takes the helm. This holds true even under the much-maligned Jimmy Carter and the sanctified Ronald Reagan. Only in the special case of 2009 did the number of new jobs plunge under a Democratic president. That was the year following the crash at the end of the Republican administration of Pres. G. W. Bush and before Democratic Pres. Obama’s stimulus could take effect. Remarkably, though, as weak as the recovery is, we have seen a net growth of more than 1 million jobs under Obama, more than twice the number under Bush. McElvaine crunches the numbers: Continue reading
A trader’s take on the coming crash:
I’m not an economist—far from it—but I keep reading and hearing that another financial crisis is inevitable.
In Europe, the finance ministers keep talking but do nothing while the situation deteriorates. The European Union’s central bank doesn’t have enough money to bail out the failing economies of its members. Italy, for example, with the third largest economy in the EU, is too big to fail and too big to bail. Yet Italian debt is so large — 120 percent debt-to-GDP ratio or a fifth more than its economic output — that some economists believe it can’t avoid default. The EU has the world’s largest economy, and if the eurozone fractures and the euro collapses, the impact on the global economy will be devastating.
China, with the world’s third largest economy, is also showing signs of strain. It still has large trade surpluses, but demand from troubled economies is decreasing, causing its manufacturing sector to slow down. The US, its largest customer, is placing fewer orders, reflecting the American worker’s reduced spending power. Inflation and a deflating real-estate market add to China’s problems.
In the U.S., the politicians don’t agree on the measures that could be taken to revive the economy. As a result, we draw ever closer to a deepening, double-dip recession. (When will we start hearing “depression”?)
Paul Krugman explains:
Suppose that Obama announces that we face a clear and present danger from Ruritania, and that to meet that threat we need immediate investment in roads and rail (to move troops, of course). The economy surges on the emergency spending — and newly employed men and women at last get to move out of their relatives’ basements. Home construction surges.
Then Obama apologizes, says that his advisers have learned that there is no such country as Ruritania, and cancels the program. But we still have the new roads and rail links; plus, the surge in housing demand is now self-sustaining, and the economy remains strong.
Of course, we could do all this without the Ruritanian threat; but we won’t.
It sounds so easy. Would that Congress and the President could act together to solve our problems!
It’s very upsetting that Obama had to accede to the Republican demand that tax cuts for the wealthiest Americans not expire, that with control of both the House and the Senate the Democrats have a hard time getting anything done. Sure, they’re angry. I’m angry too. Especially since it looks as though Obama caved without so much as a quibble, let alone a real fight. But what choice did he have in the face of a certain filibuster? Continue reading
Something special happened to me today. The computer was on, and I was nearby ironing some ribbon. (I’m trying to copy a crocheted garment—I don’t know what you call it—of my daughter’s, and I’ve started and ripped out so many times the ribbon was very twisted.) I heard a beep from the computer, so I looked and found the editor of Women’s Voices for Change had just asked me if I wanted to interview a woman from the Louisiana coast about the oil spill.
I’ve been following the spill pretty closely, so I jumped at the chance. I talked with the woman for 57 minutes about so many things— the fishing industry, the importance of oil to the LA economy, the destruction of the coastline, the sickening of the men cleaning up the spill, the global implications for the food chain and perhaps toxic rain, the loss of a heritage, traditions and way of life— and more. In the end the woman’s voice was cracking, and I knew she was crying in spite of herself. “My soul is being ripped apart,” she gasped. Continue reading
Filed under Musings, Women