Saturday, November 28, 2009

The middle class--whats that?

Someone noted my Teamster sweatshirt--and I laughed, "yeah its my ticket to the middle class."  He laughed and said, "yeah, whats that?  I'm not sure it exisits any more."

The decline of the American worker is no laughing matter--and it reminded me why one of the things I was most thankful for this past thanksgiving was my union.  I had a conversation on Thursday that reminded me how working families are struggling--and have been for a long time--and why I am so lucky to be a union member.

As research shows for the typical U.S. worker (in the middle of the national pay scale) unionization raises wages about 14%.

For low-wage workers, unionization raises wages even more – about 21%.  For more on economic impacts or unions you can check out the Center for Economic and Policy Research.

Being in a union has given my wife opportunity and quality of life--not to mention a ticket into the middle class that we wouldn't have had without it. 

It was one thing I was thankful for this Thanksgiving!

Posted via web from Jim Nichols for GA State House

Monday, November 23, 2009

Why we need Health Care Reform---the US Budget Deficit

Why we need Health Care Reform---the US Budget Deficit

Click to view large

One of the top priorities of the Federal government over the long term is to cut the deficit.  In fact one of the single biggest reasons I opposed the Bush tax cuts was that is took a US budget surplus and turned it into budget deficits leading the US Government to bring in less revenue that was currently committed to by the Federal Government.

One of the key reasons I support health care reform is that the key source of our long term deficits are health care costs and starting the process of cutting costs we begin the serious task of taking on the long term deficit.

The Center for Economic and Policy Research's Health Care Budget Deficit Calculator is a great tool to get a better context on the health care debate...

Former Chair of the Henry County Republican Party Charles Mobley has taken to calling me "The Political Scientist" because I advocate research over political theory.  My degree in political science predisposes me to empirical data--and having watched a lot of nonsense transpire in the past two years working as a legislative aide at the Captiol I can tell you point blank citizens need to do their own homework because our politicians and the media can't be trusted when it comes to giving you "all the facts". 

So here's your "homework" so to speak--go check out the Calculator.

CEPR's calculator does a great job of putting health care reform into context using empirical data in an easily assessable manner.  So take a moment and check out the calculator----sidenote--- I have to use firefox to view it, when I did my last Internet Explorer update the Calculator no long works for me for some reason.  

Here are the long-term deficits with no change to our health care system in yellow and in blue you can see the deficit if health care costs are purely coming from aging within the population rather than the skyrocketing health care inflation we currently face.

Posted via web from Jim Nichols for GA State House

Monday, November 16, 2009

Volunteers Needed! Join an Issue Team!

Issue Teams– I am in the process of creating small work groups where volunteers meet to research, discuss, and brainstorm on many of the challenges our community and state face.  If you'd like to learn more about getting involved in this effort please let me know.

I have created these teams so that individuals who have specific areas of interest can come together to research, compile, and share information.  There are also opportunities for volunteers to reach out to people in the community so that we can receive feedback and guidance directly from the experts themselves--the voters. 

The goal in creating these teams is to not only run a campaign that is directly engaged with citizens on the ground, but also to nurture leaders that people in the community–myself included--can turn to as a resource. 

State Government is a complex with many issue and challenges.  No one person has the time or capacity to stay on top of every issue.  But when people join together to share time and information the challenge is less overwhelming.

Posted via web from Jim Nichols for GA State House

Local Resources -- websites, news, blogs for Henry County, GA

Local Resources

The intention of this page is to provide nonpartisan information/resources for voters to use. This is a work in progress, if there are items you feel should be added or removed from this page please contact me.

Email: JimN2010@gmail.com

Posted via web from Jim Nichols for GA State House

Saturday, November 14, 2009

On why we need more moderate Republicans...

As I've mentioned many times, I came to party politics distrusted and frustrated with both political parties but that I found the Democrats to have a bigger tent with a less ideologically driven agenda... (it goes without saying this was during the Bush era...) 

 

Former Chair of the Henry County Republican Party Charles Mobley recently posted a great example--legislating morality is not something government should be doing--stating:

Representative Davis should leave the teaching of moral values to the families and not subject the people of the state to what his moral beliefs are about. Davis seems to pander to the far right on issues sometimes. He believes he in what he does, however not everyone believes in him. Some things are better left alone. When the Republican far right wing is focused upon the center is ignored.

 

I can't agree more! We will be moving in the right direction[sic] as a nation when ideologues who hold these kinds of priorities lose power and influence within the Republican base. 

 

Until that day, moderates will have a tough time within the Republican Party, and our nation will be the worse for it.... 

 

I do hope some moderates show up in Republican primaries to challenge Republican ideologues... though I'm not confident that it will happen as seen from Glen Becks influence on Republican activists....
--------
On a similar front, Mobley recently stated that Davis' position on homosexuals not being real families could be considered heartless.  I disagree with him on this 100% interpretaton of Davis.   As I've stated before Davis holds a radical position when he states that homosexuals aren't a part of real families.  But Davis is a caring committed person, anyone who might consider him to be heartless is completely wrong. 
Davis and his family have sacrificed a lot for this community and he has always been open, honest, and responsive to my inquires when I was up at the Gold Dome over the past two years.  Though I disagree with many positions Davis holds, anyone who claims he is heartless is totally off base.

Posted via web from Jim Nichols for GA State House

Thursday, November 5, 2009

Monday, November 2, 2009

annual growth versus annual changes in the unemployment rate over the past 60 years

I posted on stimulus early this morning before work...

Here is scatterplot via economist Paul Krugman to remind us why more money to do things like extend unemployment, patch holes in state budgets to fill in for declining revenues, and other efforts to keep the economy on life support is vital:
DESCRIPTION
Free Exchange blog over at The Economist magazine chimed in on Krugman's chart Third quarter growth not nearly enough:
And consider this: the last time the unemployment rate hit its current level was during the recession of 1981-1982 (during which the unemployment rate actually peaked at 10.8% during the final quarter of the recession). Here are the quarterly growth rates for the six quarters immediately following the end of that recession: 5.1%, 9.3%, 8.1%, 8.5%, 8.0%, 7.1%. And at the end of that period, the unemployment rate was still above 7%. For the last recession, which ended in the fourth quarter of 2001, quarterly growth in the next six quarters looked like this: 3.5%, 2.1%, 2.0%, 0.1%, 1.6%, 3.2%. 

Essentially, we are looking at a situation in which, absent some significant and surprise change in the economic outlook, American unemployment will remain near 10% through the end of 2010, at least. It is difficult to predict the political fall-out from that kind of sustained level of joblessness, but I can imagine some of the probable effects, including growing anger at Wall Street and foreign exporters, particularly China. The seeds will be sown for an unpleasant populist uprising, which might well do a lot of damage to American economic policy.

It's not a happy place to be. And I don't really understand why there isn't more visible concern in Washington (or on Wall Street, for that matter) about this state of affairs.

Until the economy is powered by the private sector again, you're stuck with two options--do nothing ad watch things remain stagnate if not dip down again, or have government keep the economy on life support. 

Americans need jobs and our economy needs to get back to strong growth.  The impacts of unemployment are devastating---in the real world, where real people are facing, real struggles...  keeping revenues up and further reducing unemployment should be top priority. 

Talking heads might take a blase approach to the unemployment numbers and lack of strong growth--from them you get the do nothing, wait it out approach.  Generally speaking these were the same people who said that government spending wouldn't prop up the economy until the private sector could get back on its feet. 

Americans have gotten the short end of the stick from government over the past decade--no wonder nobody trusts they can do anything right....  8 years of Republican leadership got me to work for Democrats, Tonjia must be rolling in her grave!

Democrats need to do the right thing and take the lead in passing some kind of jobs bill or at the very least extend unemployment.  The job of government is to protect and empower its citizens.  We have the tools to keep the economy on life support and throw life rafts out to American families who are struggling--we need the leadership to make it happen.

Posted via web from Jim Nichols for GA State House

Obama's stimulus is working...

I wrote recently on the need for more stimulus.  I wanted to follow up with more recent items on the stimulus package front...

Wall Street Journal: Stimulus Fueled Much of Expansion

Economist Mark Thoma: A Shaky Start

The recovery we are seeing is being driven, in large part, by government stimulus programs.  The fact that growth is weaker than we need to fully recover losses in a reasonable amount of time, and the even slower recovery we are seeing in employment markets, indicates that the stimulus programs already in place are too small. Thus, even though it’s unlikely to happen, the economy could use more help than it’s getting, but in any case it’s imperative that we avoid cutting back too soon.

The signs are encouraging, and at some point the private sector will be able to sustain growth on its own, but it’s far too soon to declare victory.

The Economist Magazine: Here's your recovery

A FEW more pieces of data have come in this morning, which offer a pretty clear look at the kind of recovery America can expect. First, the good news: the Institute for Supply Management Chicago index—a measure of business activity—unexpectedly increased and moved into expansion territory in the month of October. There is growth out there. But other data releases showed that consumer wages and salaries declined slightly in September, as did consumer spending. And in line with the generally poor conditions for workers (those not unemployed are seeing an erosion in earnings) consumer confidence fell in the month of October.

Absent real job growth, wages will likely continue to lag, as will confidence. And if confidence and spending remain restrained, investment will also be tepid. That will make for a very slow and uncertain recovery, unless something breaks this cycle.

That something could be a major boost in exports; that is what has worked in the past for slumping economies like Japan. But the question then becomes: who will be the buyer?

Another possibility is a renewed commitment to stimulus. Scott Sumner continues to advocate for a much more aggressive monetary policy. Others have been pushing for a programme of subsidies for new hires. Given the likely protracted nature of the recovery, there is a strong case to be made for an agressive push to invest in infrastructure. And for starters, the federal government might reconsider its decision to play stingy with state and local governments:

 

 

According to the above chart, from Econbrowser, federal non-defence spending was almost entirely offset by cuts in state and local spending in the third quarter. Those cuts are extremely painful, hitting core services in education, health care, and public safety.

Misguided deficit concerns have probably made aggressive fiscal moves politically difficult, and the Federal Reserve seems to be happy with its current policy path. That means that as American discontent grows, Congress will have to channel that anger in otehr directions, and we can imagine what those directions will be—popular but inefficient subsidies for homes and cars, protections from foreign competition, and a populist squeeze on high earners. That's a dangerous direction to travel.

Former Bush Treasury Department Economist Bruce Bartlett on conservative opposition to government spending : The Great Depression And The Great Recession

Many conservatives still believe the government should have done nothing [to end Great Depression], or at least different things than it did, because it just made things worse. In particular, conservatives are highly critical of deficit spending during the Roosevelt administration.

Most economists do not accept the do-nothing theory. They believe that government must play an active role in stimulating growth when the economy is suffering from a large, sustained deflation. Government spending must compensate for the fall in private spending that results from a deflation--people and businesses will put off buying when they think prices will be lower in the future. Only when spending is again rising will monetary policy become effective; until then it is like pushing on a string to get money circulating and prices rising again.

In the 1930s, there were a number of economists who argued strenuously for a do-nothing policy. But as the Great Depression dragged on and collapsed in 1937--when conservatives were successful in having the federal government slash the budget deficit (it fell from 5.5% of GDP in 1936 to 0% in 1938)--they lost credibility. Economists today generally believe that it was the unprecedented deficits resulting from World War II that actually ended the Great Depression.

Economist Dean Baker on stimulus job "creation"-- Dumb and Dumber on Stimulus Jobs

There is a cottage industry developing among political reporters trying to investigate whether the Obama administration’s claims on jobs created or “saved” by the stimulus are true. For example, ABC’s intrepid White House reporter Jack Tapper said on his blog:

“DeSeve and Bernstein [Obama administration spokespeople] were not able to say how many of the 640,329 jobs were saved and how many were created. How do they know that government officials asking for stimulus funds to help prevent layoffs were legitimate?”

The Washington Post also got into the act with its own piece commenting on the administration's jobs figures that: "Republicans and government watchdogs questioned the reliability of the figures."

This is an exercise in extreme silliness. It will be almost impossible to identify the vast majority of jobs that are created or saved by the stimulus because this would require a full knowledge of the flow of spending from tens of thousands of governmental units and the consumption decisions of 150 million households. However, there are fairly well-recognized economic relationships (outside of the University of Chicago) that allow the administration to produce reasonably good estimates of the number of jobs created or saved by the stimulus.

The administration is not using any hocus pocus in producing these job numbers. It is simply applying rules of thumbs that have been used by both Democratic and Republican administrations as well as impartial bodies like the Congressional Budget Office. If these reporters want to investigate the Obama administration's actions, their time would be much better spent looking at its ties to the financial industry where they could well be some substantive issues.

btw, any reporter who puts the word "saved" in quotes should be fired immediately. It reflects either ungodly stupidity or pathetic partisanship. Every month, 2 million workers are dismissed by their employer. If this number can be reduced by just one-tenth, then net job creation will be increased by 200,000 a month or 2.4 million a year. Anyone who implies that there is something peculiar about efforts to reduce the numbers of jobs lost by "saving" jobs is badly misleading readers.

Economist Menzie Chinn The 2009 Q3 Advance GDP Release and Stimulus Measures

The 3.5% growth rate was, in my view, in large part attributable to direct measures to stimulate the economy, including direct spending on goods and services by the government (Federal, state and local), as well as tax measures.

...Government spending on goods and services (not overall government expenditures) accounted for 0.48 percentage points (ppts). Federal nondefense expenditures accounted for 0.17 ppts, while defense accounted for 0.45 ppts. State and local spending accounted for negative 0.14 ppts. At this juncture, one could leap to the conclusion that the stimulus package, and other measures, had no effect on output. And I'm sure many will. But I think it pays to be a bit circumspect in this regard.

First, it's always helpful to recall that the advance estimate incorporates lots of estimates, and is subject to revisions (see this post).

Second, some individuals have argued that since a portion of the government component comes in the defense category, that should not be construed as being attributable to the stimulus package. But in point of fact, according to CRS ARRA does have some defense expenditures (mostly energy efficiency upgrading). One can see what contracts have been let by going to the http://www.Recovery.gov website (noncompetitive contracts here). As an open question, I'm not sure where Army Corps of Engineers expenditures fall in the categories (I think it's under defense as well, in which case the defense category would incorporate even more of the stimulus spending).

Third, the decline in state and local government spending's contribution is notable. Given the big budget shortfalls in state budgets [1], what this outcome tells me is in the absence of the transfers from the Federal government, the negative contribution would have been even larger.

 Economist Robert Reich Health Care Reform is Critically Important, But Getting Americans Back to Work is More So

The current rate of unemployment would have been even higher were it not for the federal stimulus package, but the stimulus should have been much larger. Especially with the states still cutting back on spending and raising taxes, the federal stimulus will be barely enough to keep unemployment from hitting 11 percent by the middle of 2010. Yet as the rate of unemployment continued to rise faster and higher than the White House anticipated, Obama could not return to Congress to seek a larger stimulus. He was spending political capital on health care.

The Wall Street bailout, meanwhile, has saved Wall Street but left most regional banks in deep distress. Almost nothing has trickled down. Small businesses still can't get loans. Foreclosures continue to mount largely because jobs continue to vanish and homeowners can't pay their mortgages. Yet at this point, on the eve of a health care bill, it would be difficult for Obama to return to Congress seeking billions more to aid distressed homeowners and small businesses.

Economist Brad Delong on doing the stimulus math:

-$92,000 Direct federal cost
+$27,000 Extra federal and state revenue
$0 Extra costs of debt financing
$110,000 Value of goods and services produced
-$18,000 Discount because we are buying different goods and services than we would ideally, or buying them at a different time
$50,000 Value of having a job to the person who gets one--these aren't people who are indifferent between going to work and getting their head together, after all
   
+$77,000 Net Benefit to Economy

It's OK to talk about the federal budgetary impact of the stimulus program per job as a "cost" when you are talking to economists who understand the issues.

It is not OK when you are talking to Jake Tapper, who is playing a game of "gotcha."

The right way to do it is, as the table above suggests:

  1. The federal government spends $92,000 and increases its deficit by that much--that's a cost.
  2. Federal, state, and local governments collect an extra $27,000 in taxes--that's a benefit.
  3. There are--given that we are in a liquidity trap--no additional costs of financing the rest of the government's debt imposed by this increase. Investors are not skittish and do not need to be bribed to hold extra government debt in their portfolios by the government offering to pay them higher interest rates. Instead, investors are desperate right now for more Treasury bonds to hold in their portfolios.
  4. The extra people put to work produce $110,000 of useful stuff--that's a benefit.
  5. However, because we are pulling forward spending from the future into the present--spending the $92,000 now rather than in the future--we are buying stuff too soon, and because the government is all thumbs we are to some degree buying less valuable stuff than we woul ordinarily by buying. Figure a 20% discount--that's an $18,000 cost.
  6. The people who get the jobs are really happy--it's not as though they are indifferent between working this year and taking time off to get their head together, after all. Not having a job this year greatly harms their quality of life.

Net impact: +$77,000 for each employment-year rescued.

We should be doing more of this right now.

Why shouldn't we be doing more deficit spending all the time? Usually because of (6): when the economy is in its normal state, the marginal worker is somebody who doesn't value having a job all that much--the (6) number is usually on the order of $10,000 rather than $50,000, and so isn't worth the -$18,000 cost of having the government actually do the buying. Plus there is (3): (3)--the crowding-out term--can be quite substantial.

But it isn't now.

The former Chief Economist for the International Monetary Fund, Simon Johnson Why the Stimulus Worked:

The fiscal stimulus played a decisive role in reducing the depth and pain of the recession and is now helping to get a recovery under way.

The stimulus plan enabled Obama to push for a global response to the crisis.

 

Much of the debate about the stimulus misses the critical global context — remember that our fiscal stimulus enabled President Obama to play a decisive leadership role at the G20 summit in April, bringing along both appropriate stimulus in other countries and timely support for the International Monetary Fund.

Most other industrialized countries have substantially stronger “automatic stabilizers” than does the United States so that, when they slip into recession, tax revenues fall and government spending rises (e.g., on unemployment benefits) without any need for special legislation.

In the U.S., the standard automatic response to severe recession exists but is weaker and an act of Congress is needed if we want to support total spending and maintain confidence.

Critics of the stimulus are right to point out that much of the stimulus was not spent quickly — and only now coming on line. This is part of the reason why discretionary fiscal stimulus generally has little effect and is not encouraged for most situations by the I.M.F., among others: it doesn’t act quickly, and it’s hard to calibrate the effects exactly.

But the Great Recession of 2008-09 was not like “most situations.” It was a generalized collapse in production and employment brought on by a financial panic. Maintaining confidence in the future is essential in such situations, otherwise businesses refuse to invest and consumers stop spending.

The I.M.F. saw at least part of this coming — and this is why it started to call for pre-emptive and precautionary fiscal action in January 2008. The initial push back from both the Bush administration and almost all European governments was intense, and, in retrospect, completely inappropriate. Fortunately, the top leadership of the fund persevered and increased the urgency of its call for fiscal stimulus into late 2008.

Global crises need global responses. The Obama administration and current Congress recognized the challenge and stepped up in a sensible and responsible manner. Now they, and the rest of the G20, need to tackle the still urgent problem in our financial system, including the “too big to fail” banks. If this is not addressed — and progress so far is very limited and the prospects do not look good — we remain vulnerable to another debilitating crisis. And next time, we may lack the political will or credibility or luck to pull off another appropriate set of fiscal countermeasures.

Economist Paul Krugman Too little of a good thing

The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would. But that’s also the bad news — because the same textbook analysis says that the stimulus was far too small given the scale of our economic problems. Unless something changes drastically, we’re looking at many years of high unemployment.

And the really bad news is that “centrists” in Congress aren’t able or willing to draw the obvious conclusion, which is that we need a lot more federal spending on job creation.

About that good news: not that long ago the U.S. economy was in free fall. ... The stimulus ... was enough to break the vicious circle of economic decline. ... And the free fall has ended. Last week’s G.D.P. report showed the economy growing again, at a better-than-expected annual rate of 3.5 percent. ... But it’s not ... enough.

Suppose that the economy were to keep growing at 3.5 percent. The experience of the Clinton era, when the economy grew at an average rate of 3.7 percent for eight years ... suggests ... we’d be lucky to see the unemployment rate fall by half a percentage point per year, meaning that it would take a decade to return to something like full employment.

Worse yet, it’s far from clear that growth will continue at this rate. The effects of the stimulus will build over time..., but its peak impact ... is already behind us. Solid growth will continue only if private spending takes up the baton as the effect of the stimulus fades. And so far there’s no sign that this is happening.

So the government needs to do much more. Unfortunately, the political prospects for further action aren’t good.

What I keep hearing from Washington is ... either (1) the stimulus has failed, unemployment is still rising, so we shouldn’t do any more, or (2) the stimulus has succeeded, G.D.P. is growing, so we don’t need to do any more. The truth, which is that the stimulus ... helped, but it wasn’t big enough — seems to be too complicated for an era of sound-bite politics.

But can we afford to do more? We can’t afford not to.

High unemployment doesn’t just punish the economy today; it punishes the future, too. In the face of a depressed economy, businesses have slashed investment spending... This will hurt the economy’s potential for years to come.

Deficit hawks like to complain that today’s young people will end up having to pay higher taxes to service the debt we’re running up... But anyone who really cared about the prospects of young Americans would be pushing for much more job creation, since the burden of high unemployment falls disproportionately on young workers...

Even the claim that we’ll have to pay for stimulus ... with higher taxes later is mostly wrong. Spending more on recovery will lead to a stronger economy,... and a stronger economy means more government revenue. Stimulus spending probably doesn’t pay for itself, but its true cost ... is only a fraction of the headline number.

MarketWatch: Washington cooking up third stimulus

Many economists have come to think that a third stimulus makes good sense. "I think the economy needs more help and they should provide it," said Mark Zandi, chief economist at Moody's Economy.com.

This by itself would never be enough to get a package through Congress. But analysts say that Democrats are likely to need a new initiative to show voters they are trying to create more jobs.

The first stimulus package of $152 billion came in early 2008, mostly in the form of tax-rebate checks. The second stimulus of $787 billion was passed in February 2009, and included reduced tax withholding for most working Americans, aid to states, and spending on infrastructure projects.

Washington had been hostile environment for another stimulus proposal all summer. Even the word "stimulus" has become political dynamite.

The public has come to equate the word with the deeply unpopular $700 billion bank rescue package rushed through Congress in the fall of 2008, said Ethan Siegel, an analyst with The Washington Exchange, a firm that monitors Congress for institutional investors.

Independent voters "look at the [bank bailout] with horror," agreed political analyst Charles Cook, at a conference earlier this week. The measure is viewed as a grab for more control over the economy by big government, Cook said.

Republicans have been quick to capitalize on the anti-government mood, successfully tying the programs to Democrats, even though it was initially proposed by two Republican appointees: Henry Paulson and Ben Bernanke.

"Republicans have successfully raised the deficit in the public consciousness. Any stimulus will be judged not just on whether it stimulates the economy but what it would do to the deficit," said Stan Collender, a budget analyst.

Given the political reality, the Obama administration pulled back, hoping the economic recovery would be strong enough to avoid the need for more government assistance.

"The dominant view of policy people was 'we're going to ride this out,'" said Dean Baker, co-director of the Washington-based Center for Economic and Policy Research.

Posted via web from Jim Nichols for GA State House