History: Job Creation by President

The Bush tax cuts didn’t really do much to “stimulate” the economy, contrary to the claims of many.  In fact, they really didn’t do anything other than run up the deficit.

From Angry Bear:

those who thought Bush did a good job and want to repeat his policies sure have some explaining to do. Even Carter created some five times as many jobs as Bush in only four years.

Even when banks pay back, they get bailed out.

Just sayin’…

Citigroup’s “Massive” Tax Break

by CalculatedRisk on 12/15/2009 11:11:00 PM

The WaPo has an article about a tax break for Citigroup: U.S. gave up billions in tax money in deal for Citigroup’s bailout repayment

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.

While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.

Federal tax law lets companies reduce taxable income in a good year by the amount of losses in bad years. But the law limits the transfer of those benefits to new ownership as a way of preventing profitable companies from buying losers to avoid taxes. Under the law, the government’s sale of its 34 percent stake in Citigroup, combined with the company’s recent sales of stock to raise money, qualified as a change in ownership.

The IRS notice issued Friday saves Citigroup from the consequences by stipulating that the government’s share sale does not count toward the definition of an ownership change.

Who benefits? The value of the shares the U.S. owns should increase, but only 34% of the share price increase accrues to U.S. taxpayers The other current shareholders receive the rest. So this doesn’t seem to make sense …

Unemployment and Things that make me go uh-oh.

Employment report is out for September 2009. Not good. Granted it’s not the horror show we were seeing early in 2009. The decline of 263,000 in total employment is much better than the 500,000 and 700,000 losses we were seeing earlier this year. But this has been happening a long time now. That’s a lot of accumulated loss. Even if the wound isn’t bleeding profusely, it will still kill you if the bleeding goes on long enough.  Graph below is courtesy of Calculated Risk. It shows how this recession (small depression?) has had the largest % loss of jobs since the Great Depression AND it has the makings of the slowest recovery since then also.

EmploymentJobLossesRecessions

But the headline numbers, 273,000 jobs lost and 9.8% unemployment don’t tell the full story.

  • Total hours worked continues to decline. (see Angry Bear).
  • The U-6 Unemployment rate, which includes some more discouraged workers not counted in the headline rate and also includes workers “marginally attached to the workforce” is now 17.0%.
  • Long-term unemployed (more than 26 weeks) is now 3.5% of the workforce, 5.4 million workers.
  • the labor force declined 571,000 — the only reason that unemployment didn’t exceed 10.0% [last] month–. This means well over half a million people gave up hope of having a job last month.  Of course that’s  a rational response given that so many workers have been unemployed so long without finding replacement jobs.

Overall, this tells us that the stimulus has not been enough or big enough.  Employment has not stabilized.   What’s worse, is the length of time people are being unemployed.  The economy is simply not creating replacement/new jobs.  Not only does this create a serious economic problem (unemployed people don’t spend much money), but it is of course a tremendous human cost.  People, families, and children suffer.  Eventually, extended long-term unemployment for large numbers poses a huge social cost and social risk.

US income gap widens as poor take hit in recession – Yahoo! News

Not much else to say:

The recession has hit middle-income and poor families hardest, widening the economic gap between the richest and poorest Americans as rippling job layoffs ravaged household budgets.The wealthiest 10 percent of Americans — those making more than $138,000 each year — earned 11.4 times the roughly $12,000 made by those living near or below the poverty line in 2008, according to newly released census figures. That ratio was an increase from 11.2 in 2007 and the previous high of 11.22 in 2003.Household income declined across all groups, but at sharper percentage levels for middle-income and poor Americans. Median income fell last year from $52,163 to $50,303, wiping out a decade’s worth of gains to hit the lowest level since 1997.

via Yahoo & AP.

There’s No Crowding Out Here.

People who worry the most about the recent increases in US government borrowing are generally worried about one of two things: crowding out or inflation.  They fear that either if The Fed doesn’t “print new money” for the govt to borrow, then the government’s demands for borrowing money will drive up interest rates.  This driving up of interest rates would then, in turn, discourage businesses from borrowing/expanding/growing.  I’ll deal with the inflation fear in a different post.  But right now, it appears there’s little prospect of crowding out.  It’s true businesses (and households) aren’t borrowing, but it’s not because of high interest rates.

In the past, when the government became a heavy borrower, there was talk about crowding out private borrowers. But this time, interest rates have remained low and no one seems to be worried about that.

The reason is simple: Rather than crowding out the private sector, Uncle Sam is now standing in for it. Much of the government borrowing went to investments in financial institutions needed to keep them alive. Other hundreds of billions went to a variety of programs aimed at stimulating the private economy, including programs that effectively had the government pick up part of the cost for some home buyers and some auto buyers.

via Off the Charts – A Rich Uncle Picks Up the Borrowing Slack – NYTimes.com.

Save the Whales! Abolish Patents!

Well, actually it likely wouldn’t save the whales. But, abolishing patents would likely re-invigorate the economy, revive competition, lower costs (particularly healthcare costs), and speed up innovation.

Levine and Boldrin help lay out the case against patents in this piece.  An excerpt ( I recommend following the link):

Abolishing so-called intellectual “property” (IP) won’t solve all social ills — and it certainly won’t save the whales. But it would be a big step in the right direction for solving a range of problems from the high cost of health care, to innovating our way out of the current recession. In a series of posts with my co-author Michele Boldrin, we’ll tackle these issues one at a time.

….

With the exception of Japan, the rest of the world spends only about 60-70% of what we spend for prescription drugs. The European countries’ average is 60%, with some countries at around 55%.That means that simply paying what the rest of the world pays would reduce our health care bill by at least 4% – that is about 0.7% of national GDP, or roughly $100 billion.

via David K. Levine: Save the Whales! Abolish Patents!.

Also, it’s worthwhile to go to their blog at