U.S. GDP Shrank in Q1 2015
blogs.wsj.com
blogs.wsj.com
1. High unemployment, preventing consumption
2. High debt load (student, home, credit card) for prime age consumers, preventing consumption
3. Low wages and stagnant wage growth for prime age consumers, preventing consumption
4. Low job stability, leading to cash-in-mattress, preventing consumption
5. Low worker actualization and agency, leading to more time and energy spent at work, preventing consumption
6. Long term poor access to wealth-building financial instruments for most people, reducing accumulated wealth over time, reducing consumption
So as you can see, my opinion is that consumption is weak because people don't have enough money. The WSJ article has a small paragraph about tepid consumer spending, so I guess we agree there.
Aside from these core issues, I'd also speculate that a tremendous quantity of money is trapped in financial instruments. If it's in a financial instrument, it isn't exactly employing people or building goods or creating demand for goods. The same could be said about the billions of dollars held close to the chest by the oligarchy.
There's a huge opportunity here to have a government public works program or some other major initiative to mobilize the underclasses, but it won't be taken.
None of these issues are specific to Q1 2015, and they won't be fixed in Q2, Q3, or Q4.
1. Get rid of the minimum wage. It makes as much sense as rent control... none.
2. Help out the needy by introducing a minimum income and/or an aggressive earned income tax credit.
3. Everyone knows kids are expensive. They shouldn't be. Scale 2 according to household size.
4. Set the levels of 2 high enough that citizens can pay their own taxes (both halves of the pension tax) and buy their own benefits (disability, health, life, 401k 'matching', etc.).
...watch the number of entry-level jobs explode and the demand for robotic work tank (like McD's filling sodas with robotics).
Side benefits:
A. Small companies will be better able to compete with big companies with employment lawyers and HR departments.
B. Bootstrapping and entrepreneurship becomes more viable.
C. Corporations lose some of their relative power due to A and B.
The problems with the suggestions here is #1 and #2 are both vigorously defended by different parties. So your proposal is a no-go politically. The Dems won't lower or get rid of minimum wage, and the earned income tax credit is already hated by the GOP (even though they proposed it). There is the additional problem of all the missing details as well.
Now before anyone trots out the whole "well if politics werent so stupid..." I have to stop you there. You reform with the politics you have, not the politics you want.
They hate writing checks just to write checks.
You can get it passed if you sell it as a progressive subsistence voucher that will replace the minimum wage, medicaid (we still have an insurance mandate), food stamps, etc.
In fact, use the word voucher. The GOP loves those.
...and the GOP is more complex than people understand. I voted for Romney and McCain and I'd go for an EITC if it came with the right reform package. All this "if it weren't for those guys..." is really counterproductive.
Over the last 30 years the GOP has raised government spending far more than the Dems. Consider the Medicare prescription drug plan without any negotiation for lower rates.
It's just redicusly over the top levels of corruption.
Can you name a political party, in any part of the world, in the last century that did follow through with their "great message"?
Politicians are PR / sales people. The product work is rarely actually done by them.
If mortgage interest rates on average went up, the politicians will blame the greed of banks, the international exchanges market, the gravity was higher than normal etc.
If mortgage interest rates on average went down, then that's a great reason to vote that politician in for another term!
People who had suffered through WW2 wanted to feel that there would be some benefit to the common people - 70 years later and the NHS is still one of the most loved institutions in the UK despite being avowedly a socialist endeavour.
NB I am not a supporter of the current Labour Party (AKA "New Labour") but they do deserve a lot of credit for what they did back then.
The nearest example I can see in recent history was the ANC in South Africa since 1994.
And by and large, much of what's "bought" with those fees and taxes just doesn't fucking work. Pension taxes can either go up for low-wage workers (precisely where they impact low-wage employers more) xor they can stop topping out for well-off professionals (and instead scale linearly or progressively with income). Health, life, and disability insurance should be consolidated into a more efficient public system. Company-provided 401k's are often basically just a handout to mutual-fund companies (that is, the fees take away from contributions but the investments don't perform better than a random walk). We can switch people over to firm-independent IRAs or some other supplementary pension system to increase efficiency, and give the gains back to workers as pay rises.
Also, getting rid of the minimum wage - or any other measure designed to decrease mechanization and increase the usage of low-wage, low-skill labor - is exactly the opposite of what should happen. Public policy should never be written to deliberately hamper productivity growth in the name of increasing human toil!
Depends on what you mean by productivity. Taken as a whole, people are working less and less.
> And by and large, much of what's "bought" with those fees and taxes just doesn't fucking work.
I disagree, but regardless, tying benefits to employment is silly and counterproductive. How many people make major employment decisions based on availability of benefits. I think there's common ground in thinking that employer-provided benefits is a broken idea.
I also think there's way to provide for the needy while letting individuals make their own decisions. Health insurance is already regulated and individually mandated.
Productivity is well-defined: output per unit of input. Labor is only one input, but since it's the most common, productivity-per-hour is one of the most measured forms of productivity.
If we assume that wages and productivity are correlated, then while reducing wage floors sounds like a good idea, what actually happens is that we're encouraging employers to use low-skill, low-output-per-hour labor in place of machines that have a higher output-per-hour but a higher up-front cost and no ability to externalize maintenance expenses (ie: between the cost of keeping a machine repaired or a worker fed and housed, we currently allow employers to externalize the latter but not the former).
This is why low wages are a bad idea: they reduce the total output of the economy, but make up the loss by externalizing it onto workers (who then have to take Food Stamps to stay alive because their job isn't productive enough to provide them a living). It means we end up using losses to the total economy to subsidize exploitative and unpleasant working conditions, throwing good money after bad.
Humans aren't capital that is produced to industrial demand; if humans aren't employed productively, they still need to be fed and housed (or, alternatively, the externalities associated with their not being fed and housed must be accepted.)
So its somewhat inaccurate to say that we allow employers to externalize those costs, as they are cost that exist independent of the decision of employers to use labor, and which low wage payments, while not completely offsetting, mitigate somewhat.
If industrial machines were produced independently of industrial demand and produced negative externalities if they weren't maintained whether or not they were productively employed, then it would make sense address them differently with policy than we do now, too.
GDP is Gross Domestic Product, a measure of productivity. Every employed worker could be more productive while the U.S. loses productivity as a nation.
Finding ways to get more people producing useful things is what we need to think about. I was suggesting that we should reduce the cost of providing entry-level employment. This will make it cheaper for employers to hire the under-employed, under-educated, and mis-trained. At some point, the under-educated workers will become experienced workers, and likely more productive (in the individual sense) than the equivalent unemployed worker.
Product(ion) is not productivity. Productivity is product/(some input measure) -- laborers and laborer-hours are common input measures when measuring labor productivity, though there are other less common kinds of productivity one might measure.
I'd like to point out that my assertion that has been basically ignored in favor of less interesting semantic arguments.
Come on. You were wrong, the difference between production and productivity is very important. You can't just cop out and whine that 'definitions are pedantic'. No. Definitions are very important.
People have better things to do than repetitive, unfulfilling tasks (unless they enjoy it, of course). We need to get to the Star Trek utopia... what you're talking about sounds like halting progress.
Depends on what you mean by progress. Giving someone work experience is progress for her.
I'm not talking about halting progress. I'm talking dividing the employment and subsistence problems. There will still be demand for automation. It just won't be artificially inflated by making employment more expensive than it has to be.
> Giving someone work experience is progress for her.
Progress is getting to the point where people can have technology provide the essentials, so that these repetitive jobs are just for fun, rather than a means for survival. It's like in DS9 where Sisko's father runs a restaurant--for pleasure. If he'd been sick or no longer interested in working, he wouldn't have to worry about starving or finding a place to live.
They're mostly mutually exclusive, and we'll have to face up to that fact.
"Our infrastructure provides you with X to spend every time period. Spend on what you'd like. Earn more if you'd like with a job/tasks/work of your choosing."
So even if we live in crazy robot utopia world people will be creating things that will still exist in finite amounts that they will trade for other objects that exist in finite amounts. In fact we really already do live in crazy robot utopia world and this is already happening. Almost no one is starving in america and millions of people live primarily on the dole. Those people living on the dole are living better than like 90% of the human race that has ever existed, they are just living relatively worse than the people who are employed or making a living.
In project australia or whatever it sounded like there were easy ways to consolidate resources because people still owned things and could barter them and eventually they would have all the resources and the monthly credit allowance would once again be welfare. I'm not even really sure what is wrong with capitalism as a system because life is getting better for everyone over time, and as long as ownership/monopoly isn't taken to its extreme things continue to work out.
In 2013, 49.1 million Americans lived in food insecure households, including 33.3 million adults and 15.8 million children. [1]
> Those people living on the dole are living better than like 90% of the human race that has ever existed
How is this a metric we should be measuring on?
[1] http://www.feedingamerica.org/hunger-in-america/impact-of-hu...
What we currently have, though, is a poorly designed system which doesn't make this transition easy and doesn't reward actors properly. I'm talking about things like free training for programming and technical skills, conditional support for the unemployed so they can have time to re-train and re-insert in the job market (while maintaining their health and spending), and means to make income distribution little flatter (automation can concentrate income to a degree that gets counterproductive).
Is it, though? If you spent 8 hours a day pouring soda in to cups would that be progress? We have this absurd fetishization of "work" as though any task performed in exchanged for money is inherently virtuous. Imagine a world where that person is given their wage, but a robot does the job for them. Is that world any worse off?
It's not exciting, but proving you can show up on time every day isn't nothing. There are plenty of great jobs that mostly involve being professional, congenial, and available. It's the work history equivalent of building a good credit rating.
And that's going to happen sadly before we reach Star Trek utopia, and there will be large-scale civil unrest, even in the US, within the next 30 years, I'm betting on it.
And let's not even talk about impoverished countries with exploding populations that are already struggling to provide jobs - an endless cycle of regional warfare, an endless Arab Spring.
Something that seems to get missed a bunch when talking about the upcoming lack of work for humans is that a job category doesn't need to be fully automated to cause widespread lack of employment.
Simply automating a job enough to allow 2 people to do the work 3 used to do puts 33% of those doing that job out of work. 33% unemployment is already an economic nightmare and the actual ratios of "X people to do the work Y used to do" will quickly become much more severe than 2 to 3.
Some people will inevitably say "this has happened before", but this time a lot of the automation is going to be purely software. You are not going to have enough new jobs for people "maintaining the robots" at anywhere near the scale required to make up for the lost jobs like you did with the previous more mechanical style of automation.
Your mistake is assuming that a sizable portion of the work these jobs involve can't be replaced by "dumb AI", which is what ML is all about, and that they require a fully general AGI.
If the proposition is that this would lead to fewer humans being needed for these jobs, I suppose that could be the case. In my own field, my criticism of automating, say, legal research and writing, is that the time it would take for me to check the work would be nearly the same as doing it myself. I don't see much efficiency gain, which is why I think the only thing that would truly be better than a human would be an AGI.
Also, if you look at most of what's been automated away, there's very little what we would consider (and even what people 40 years ago would have considered) artificial intelligence involved.
If you look at the legal field, what's changed is the means of gathering and disseminating information. Legal researchers can be much more productive with computer searches, and consumers can get access to advice and forms in some cases without the need of direct face time with a lawyer.
Some of the changes weren't even primarily driven by technology at all, but by new ideas for business models. I think that something like legalzoom could have been done with the technology available decades ago (phones, mail, and catalogs).
Work is almost over. Good riddance to it. Why shouldn't everyone benefit from the fruits of full automation?
> We are going to have ... the super low wage unskilled laborers in a race to the bottom, trying to compete with machines, and a huge, empty nothing in the middle between those groups... and there will be large-scale civil unrest, even in the US, within the next 30 years, I'm betting on it.
That is largely up to the people who now have all the money and power. If they are shortsighted enough to take entirely for themselves the wealth the machines create - rather than using it to guarantee basic security for everyone - then we're in for rough times. I'm betting with you on that one.
They should, but:
>That is largely up to the people who now have all the money and power.
And that's why they won't. At least not until their poverty destabilizes the economy. It's expensive and reduces profits for the people making the decisions, at least in the short run.
Disclaimer: I live in one of these neighborhoods. While I, personally, think we're closer to a post-scarcity society than we realize, I'm still surrounded by those who lack the privilege to think about such things. As such, they're kept awake at 2 AM because their neighbor is having a physiological reaction to whatever drugs he took that day and is storming around his complex, screaming and destroying things. Meanwhile, I'm a straight white male privileged enough to be living in a co-op, where we maintain a better standard of living and don't worry about such things on our property (at least, to some extent.)
It's pretty funny how sentiment is completely opposite in Europe, and how heavily invested most European governments are in promoting procreation.
This would only work if we got rid of welfare. Otherwise we are just going to create more government subsidized jobs.
> 4. Set the levels of 2 high enough that citizens can pay their own taxes (both halves of the pension tax) and buy their own benefits (disability, health, life, 401k 'matching', etc.). ...watch the number of entry-level jobs explode and the demand for robotic work tank (like McD's filling sodas with robotics).
I wouldn't call those entry level jobs. There is very little opportunity to grow beyond the entranceway. Why would we want to waste human minds on things robots can do. Robots are our friends. If we had enough in your #2 and taxes covered taking care of people's basic needs, selling of people's precious life wouldn't make the robotics takeover of the menial (and beyond) all that scary.
Basic income is usually suggested as a replacement for most current welfare programs.
> There is very little opportunity to grow beyond the entranceway.
That was just an example. Nobody would show up to flip burgers for $0.25 an hour unless they saw a longer-term payoff down the road.
They might take a job doing menial work for little-to-nothing while they learn the ins and outs of a business and eventually apply for a more substantive role. We could call them 'apprentices'.
I feel like your view is the sort of a "paying your dues" view, but the people I know that take off quick find something substantive to do, learn a lot very quickly, and are off doing something better in rapid iterative succession. The strategy you're advocating sounds like a very long runway before takeoff.
It's on-the-job training. Whether it happens quickly depends on the industry.
And the current employment problem doesn't revolve about well spoken people who regularly read tech blogs. The unemployed are disproportionately young, make, and under-educated. I'm saying a feasible way to get the retrained is to make it easier for them to find an occupation in booming industries.
We need to get the point where employers can think, "Why not? Let's give him a shot and ramp up his salary if he's any good." when an unproven young guy applies for a job. Right now, that doesn't make any sense because hiring him is too expensive. So you get situations where they give fewer hours to avoid providing expensive benefits, etc.
Longer-term payoff is meaningless when you can't meet your short-term goal of eating.
Are you serious? You could find more money on the floor than work at a job like that.
Of course we call places that pay like that sweatshops.
Let's just start paying people in company scrip.
Because it doesn't matter? All of the data from minimum wage increases indicates that employers are not employee constrained, they are demand constrained.
So, minimum wages increases bump demand significantly while hurting employment weakly (if it all).
Suuuuuuuuure.
And H1B's don't represent more people hired. The data shows that companies use H1B's to replace existing employees.
So, you don't improve employment but you do reduce the demand. Congratulations, welcome to a downward spiral.
Instead of giving people money, you give them non-wage compensation (e.g., health care benefits rather than wages, and similar things). That's exactly what happened, in fact - wages are "stagnant", but compensation per hour is not.
Housing vs wages: https://makewealthhistory.files.wordpress.com/2011/05/wages-...
Back when they gave the stimulus to the banks, it almost would have been better to get money/stimulus to the people to use strictly to pay down debt (credit card, home, student loans). Even if it was only a chunk, not only would this have helped free up debt load, it would also go directly back to the banks that had been lending to the lower 90% all along.
Instead they gave money to banks to help with loans/lending, overlooking the fact that it does nothing to help consumers. They gave it to groups that weren't really lending to the 90% of consumers.
Trickle up is not just trickle up, it is trickle up and down. When you give money to the lower 90%, most of them give it right back. When you give it only to banks and upper 10%, it typically stays locked up in that 10%.
Anybody surprised by this consumer economy sputtering hasn't been looking at it and doesn't get that you need to get money to the lower classes to prop up the upper classes and banks.
Wages have stagnated this entire century so far, when people were surprised in 2008 when it came crashing down, it wasn't housing alone, it was that people had no money, less raises, while costs rose immensely.
I won't go into the trillions on war spent on credit by the country as well that further harmed the downturn. We financed the wars with China's credit, it is almost as if China wants to break us with debt and ongoing, un-winnable wars. We aren't playing the game very smart and the greed is thick.
In the future, stimulus should mean lowering debt loads of personal and state debt from the bottom up. Again, rich people mad by this aren't thinking it through, it is a two step hop and it is right back to them. But you'd have the lower classes now with more debt room and or room to spend. This is the only fix.
If you were playing a simulation to create a good economy in a game, you'd probably do something like this instead of enrich modern day kings to hold onto, hoard and lock up more money in the upper 10% backdrift that does not make it's way to the lower 90% with enough force.
Do banks assume that bailout + people making payments on underwater mortgages is, in the end, more profitable than bailout + lower debt loads and increased spending? An awful lot of people just walked away from their homes and mortgages.
1. http://www.bloomberg.com/news/articles/2013-11-06/blackstone...
Either way, a lassez faire market naturally forces this type of evolution without proper controls by a governing body. It makes complete sense that profits can be maximized if "consumers" (what the rest of us call people /s) have to continuously pay to use things that they depend on.
We should have said, listen you fucks, collectively, across the board, you are writing off a massive amount of debt owed. They get money at 0 to negative rates and screw over the public at the same time.
Short answer: when you print money, borrowers and non investors lose money, while lenders and investors gain more. It creates more imbalance.
Printing money does not get to consumers to spend, the 90% we are talking about, not the upper class which already knows how to make money when more money is being printed.
Our economy is heavily consumer focused, there aren't enough wealthy people to spend needed amounts to account for the whole populace/economy. Wealth by nature is hoarding/saving and only investing for returns.
If you look at it like a distributed system, giving money to lower class to improve the economy is to bittorrent/distributed decentralization where giving money to banks and the wealthy only is more like a centralized single point of failure that leaves many out.
When you do a stimulus for the lower 90% you will have guaranteed spend and increased buying from all areas of the economy, when you do a stimulus for banks and wealthy you only fund endpoints (wealth centers/investment/loans) throughout that have too much demand on each endpoint. The lower will spend at any time, even in down turns, the wealthy only spend in booms or extreme busts due to the nature of investing. If we looked at stimulus more like a distributed system, we might be better off.
Side note: The Iraq war cost for instance 1.7 trillion and will go up to 6 trillion:
The U.S. war in Iraq has cost $1.7 trillion with an additional $490 billion in benefits owed to war veterans, expenses that could grow to more than $6 trillion over the next four decades counting interest, a study released on Thursday said [1]
There is 1.2 trillion in student debt. What was a better purchase? Iraq war or paying off student loans here that will turn into a huge lower end stimulus? It isn't just an offset either, the country has 1.2 trillion in student loan debt and upwards of 6 trillion in Iraq only war debt. So really we have 7-8 trillion in debt out there between just those two things, because we aren't making good choices.
[1] http://www.reuters.com/article/2013/03/14/us-iraq-war-annive...
It is more complicated than that. If you print money, borrowers (e.g. 30 year mortgage) can win, because they get to pay back their debt with cheaper dollars. If you have credit card debt, you are probably in trouble. People who have saved, and invested (e.g. bonds) can lose, because their investments are devalued.
http://www.nytimes.com/2014/04/23/upshot/the-american-middle...
Wasn't one of the lessons of the downturn that companies weren't keeping enough cash on hand to meet the demands of their financial shenanigans? Isn't that the point of the stress tests? Everyone can't just hedge ad infinitum. At some point, someone has to have the cash to pay the bills.
Sure, there's more cash on hand than in 2007, but how is that not healthy? What is a healthy level of cash?
It's hard to think clearly against the blizzard of noise which says savings are bad, consumer spending is good and economies only grow when everyone is in debt. But the opposite of all these things is true, you've just got to ignore all the talking heads that want you out of your house and wasting your saving on consumer trash.
We can further unpack the huge amounts of money trapped in financial instruments. There are really two functions for financial instruments: investment in productivity growth, and rent extraction. The pool of capital for private-sector productivity growth is glutted; in fact, it's being held back by stagnant consumer demand and high rents.
So beyond stagnant consumer demand, we've got a lot of rent-extraction (asset and real-estate bubbles being created to extract resource, information, and land rents as debt-service or legal expenses) and a major dearth of productive public-goods investment (public health (ie: vaccination and disease prevention), infrastructure, education, etc.) loading down the economy with dead-weight losses.
(We can also simplify our model by construing capital/labor bargaining as capital owners extracting a rent from laborers for usage of their capital, ie: money, machines, land, etc.)
>There's a huge opportunity here to have a government public works program or some other major initiative to mobilize the underclasses, but it won't be taken.
The basic problem is that many, possibly even most, of the rent-extractors adding dead weight to the economy are using their wealth to buy themselves government policies favorable to rent extraction rather than wealth creation and distribution, ie: further neoliberalism.
Let's be frank: an economy in which the workers are healthier and more educated, the work is more mechanized, and collective problems (like transit, urban development, and disease control) are handled collectively is more productive! It outputs more stuff! So you don't have to be a socialist like me to realize that reducing the net output of the economy to enrich a few people at the top is a bad idea!
You just have to use accounting metrics that don't count increased rents as growth.
Or I can buy solar panels for the elementary school down the street and have them pay me 90% of their prior electric bill. The elementary school has a lower electric bill every month and I have a steady income stream and no one does any work.
And by the way, when you buy your bar of gold you pay some guys to dig some gold out of the earth and melt it into a nice bar. However I am not sure how the value and the price of a bar of gold compare.
George Reisman has developed a brilliant, modern presentation that dismantles the problems with the labor theory of value, and the related exploitation theories. [1]
[1] https://mises.org/library/classical-economics-vs-exploitatio...
Picking winners and loser successfully is as valuable as appraising houses. Without people investing, growth will only follow established wealth (you have to save up to start a business or buy a house). We would be moving from a crowd-sourced pricing model to an "expert" (assuming people with disposable wealth are experts) pricing model.
But if I go a step further I would also argue that investments as we know them are not sustainable. There is a risk that an investment fails and therefore interests are chosen such that they yield a profit at least in the long run and this also doubles as incentive to invest in the first place.
I now argue that this setup will run away. Having money to invest now allows to gain more money and then even more money by reinvesting again and again. But because investing is a non-productive activity not creating value the returns must be paid by taking an ever increasing share of the value produced by the workers.
The problem is that the value produced by work at best increases linearly with time (assuming a constant workforce) while the returns from investments increases exponentially. And no matter how close to zero the gains of an investment are, sooner or later it will blow up.
Well, that's true in a sense, but discovering new information is valuable. I'm just saying that figuring out which work to support or enable is itself valuable.
I agree, though, that the U.S. undervalues making actual stuff with long term benefits. Ask kids what they want to be when they grow up. How many list jobs in manufacturing, inventing, research, mining, engineering, energy, etc.? Mostly they pick fine careers, but mainly service-heavy careers with low multipliers: teachers, fire fighters, police officers, athletes, entertainers, doctors, etc.
The difference between a human and a ~80kg pile of basic elements is their arrangement. So unless the two are equivalent to you, you can't claim the arrangement has no value.
So no, nobody is losing. On the contrary, individual profit is only a fraction of the added value to the economy, because the counterparty is doing the exact same thing. Every voluntary trade is done in expectation of profit by both sides. When on average that expectation is more right than wrong, economy grows.
What billions of dollars and what oligarchy?
[1] http://www.theatlantic.com/magazine/archive/2009/05/the-quie...
You promote investment by the government later in your post. Yet is it the case that all possible private investments will have low rates of return, and only government investment can possibly have a high rate of return? If so, why?
(Note that I have no particular objection whatsoever to having the government end welfare/unemployment/etc, and simply provide low wage employment for anyone who wants it building public works of various sorts. But my reasons for supporting this are simply because I favor creating disincentives for idleness, not because I think only the government can engage in productive investment.)
Surely if we tax the rich more, they'll have an incentive to work harder to make up the shortfall?
Similarly, if we reduce taxes on the poor, they'll be motivated to work more as they'll be keeping more of what they earn (especially when we consider the much greater marginal value that extra dollars have to them).
http://johnhcochrane.blogspot.co.uk/2012/11/taxes-and-cliffs...
Replacing welfare with work would increase this, since incomes would go down without work. In contrast, taxing anyone (rich or poor) would decrease dUtility/dWork. Unconditional wealth transfers also decrease dUtility/dWork due to diminishing marginal gains.
I think we argued about this before. Why do you hate people who choose to spend time as they wish instead of being coerced into unwanted employment? The only thing massive unwanted public infrastructure projects are good for is ruining the environment. Public works policy in Japan is a great example of top quality bridges to nowhere and concrete ditches that no one cares about that also happen to do nothing "for the economy": http://www.nytimes.com/2013/12/09/business/international/a-b...
Why not invest the money into things that actually produce results: education and fundamental research? Let's figure out how to get robots to meet our material needs so we can spend more time not working.
Why should money be taken from my paycheck to support idle people who could be working? In general it's none of my business how people choose to spend their time, but if they expect me to pay their expenses it becomes my business and I have to ask why they can't go to work like I do.
You mean like retired people drawing a pension?
The government take 8% or so of my paycheck every pay cycle, and when I retire I'll collect a pension because I paid for it.
That's a whole different world than paying someone because they don't want to work.
You are actually paying for the pensions of current retirees. The expectation for almost all pension schemes is that future taxes will fund your retirement. That's the issue behind the Social Security shortfall and the dramatic cuts in retirement benefits as part of austerity measures post-Great Recession in EU member countries.
> That's a whole different world than paying someone because they don't want to work.
By definition retirees are people who could still be working but choose not to. How about the disabled and the infirm? Those between jobs?
The real issue you seem to have is the "I paid for it" part. Where in the economic cycle is this money extracted? Would you feel better if it came from taxes on corporate revenue? Out of sales tax on luxury yachts?
The issue has been framed by trickle down ideologues as "this money comes from your paycheck!" What is the logic behind getting rid of anything that looks like income guarantees when it comes to you as a worker as opposed to an owner of a business?
Step 1: Eliminate minimum wage/welfare/unemployment/whatever
Step 2: ...
Step 3: Your salary goes up!
Had the funds been INVESTED and not STOLEN by our beloved congressweasels, soc security would be superstylin.
Yes, everyone understands that. But it incurs a debt I will expect to be repaid.
>By definition retirees are people who could still be working but choose not to.
Absolutely. If they paid into the pension system they should be getting a pension. If not they need to rely on their savings.
>How about the disabled and the infirm? Those between jobs?
You're changing the question a bit here. We were talking about people who can work but don't.
>The real issue you seem to have is the "I paid for it" part.
I don't see why you think this is an issue. The money comes out of my paycheck. It's money that I could certainly have saved or used for some other purpose.
I don't think it's unreasonable to expect people to provide for themselves and their families. And I don't mind helping people who can't do so for reasons beyond their control. But I have no interest in supporting people who don't want to work. I don't want to work either, but I drag my ass out of bed every morning, and I don't appreciate other people helping themselves to the fruits of my labor.
Step 1: Eliminate disincentives to work.
Step 2: More people produce things of value.
Step 3: We have more things of value that can be distributed.
Clearly we'd all increase our standard of living if folks created more. Its just an equation involving what people are willing to do vs what folks with money will pay. Labor-intensive things have pretty much been priced out of a market. And our service economy means everything involves labor.
Imagine McD's and friends automate the whole store. What do those millions working there for minimum wage do then? Gardening, daycare etc don't pay even that well.
It's basically a free lunch.
Is what we're discussing, floating the jobless/low earner-producer, 'investment' at all?
I'd personally like to understand the doublethink and mental laziness that led sedachv to make that passive-aggressive rhetorical crack about yummyfajitas hating all the poor souls who choose not to work.
The hard questions regarding govt spending for me are:
* Is it healthy (societally, fiscally, spiritually) long term to consider government to be the charity that can only grow - the ultimate backstop for all bad things that can happen to its people? A charity with unquestionable power to implement its shifting, sometimes controversial/immoral/amoral, agenda?
* Is it okay for the government to prioritize everything and therefore have no priorities at all? Should infrastructure be prioritized over military? What's the proper role of federal involvement in local schools? Should we cap or continue the folly of "non-discretionary" funding of entitlements that dwarf and crowd out all other federal spending? Ultimately, our allowing perpetual deficit spending is what makes this priorities-free dream that we are all living in possible.
* how much of a service delivery role should government have given its track record? The perennial VA healthcare debacles spring to mind. And the raided soc security trust fund that should have been invested and grown, but has been busted since Johnson. Student loans and the skyrocketing college tuitions. Unintended consequences! At least [my favorite congresscritter] meant well.
It fascinates me how smart people whose arguments in favor of government as 'the answer' to X can instantly shift their argument for X from a learned basis like statistical evidence/quoting an expert to a faith-driven, eye-squinting, chasm-leaping abstraction, or worse, emotional outbursts (frequently rude) - and sometimes ALL IN THE SAME BREATH.
I find such people, like sedachv, troublesome and no fun at parties. We might be doomed.
I'm still trying to wrap my mind around logic that assumes people who don't work by choice are entitled to the results of my efforts and yet have the gall to paint me as selfish for protesting.
If you believe that there is no productive labor that the government can perform, that's fine - I guess you oppose all new spending?
Growth and employment comes with investment in increasing productivity, not from consumer spending.
I would read some books that take an opposite view to Keynes. Things will make more sense after absorbing the fact that consumption is not the source if economic growth, production and investment is.
agreed. but it won't happen. they clearly do not want to. you know what I mean when I say "they". I think what "they" are doing is instead now letting the USA enter a phase of milking and rundown. The truly rich, the truly powerful, already have homes anywhere they want to in the world. Whether that's in western/northern Europe, or modern Asia, or in a micro-nation. It is in those places and nations where they are ensuring they have the government investment and infrastructure to ensure a quality way of life. They -- you know who I mean -- have already marked USA as 'deprecated' and moved on, psychologically, at least medium/long term.
In fact, if the masses are poorer, then the rich are richer in both relative and absolute terms.
Sure, these things are related, but the article is correct to point out things like exports and capital investment.
If the US were producing more, even if all of the additional product were to be exported, GDP would be higher.
Any problem with GDP (or growth in GDP) is related to value-creating economic activity.
Yes, if the government were to spend (invest?) money in public works, GDP would rise, regardless of the output of the works. There would be secondary effects, too, as some of the money earned would be spent on locally-produced goods/services like lattes and haircuts.
Japan tried this: http://mobile.nytimes.com/2009/02/06/world/asia/06japan.html
It's interesting that Jean-Baptiste Say himself was willing to learn from history.
http://delong.typepad.com/sdj/2010/07/after-the-british-fina...
They also need to get companies to pay their share - letting Apple sit on an Uncle Scrooge stash of money is absurd.
Spending more on the government level, outside of the military, is also good as a smoothing factor for the economy.
http://i.imgur.com/AOKooQg.png
Paying down hundreds of billions in debt. Finally a good call by US households on debt. Most major economies are seeing household debt rapidly increase.
It was expected that the gasoline cost savings would bolster the US economy via consumer spending, as an off-set against industry job losses and loss of capital investment. That hasn't happened, instead consumers are saving that money (quarterly net savings jumped significantly). What you get from that combination is an economic contraction.
I just don't see what's wrong with not buying more crap. Our parents have giant houses, multiple cars, hot tubs, and all sorts of stuff, and that's great for them, but it gets old hearing that our lifestyle is bad for America.
Yes you can increase aggregate spending through consumer goods spending, but you can also increase spending and aggregate demand by having people buy more investments. You can spend and save at the same time. There are many ways to spend and save at the same time. You can buy something you are only going to need later, you can buy stocks in a business that will use the money to buy equipment and employ people, you can lend to a business that will buy equipment and employ people. This is all the economic equivalent of investing, the I in the GDP equation C+I+G+(X-M)
The only thing you need to prevent is people and organisations sitting on idle cash or cash like investments. That's what destroys the economy. Anyways fiat is a fictitious form of saving on the aggregate. It doesn't produce anything and people accumulating it doesn't increase the amount of stuff they will be able to buy in the future on the whole.
The point is to move the economy away from idle fiat and into consumption or investment.
Not true. Cash kept in banks is reinvested in the economy. If companies like Apple keep billions in the bank, it has the effect of lowering interest rates and therefore encouraging investment.
Clarity in economic thought comes when this incorrect bit of Keynesian relic thinking is discarded.
>"it has the effect of lowering interest rates"
Not when we are already at the zero lower bound.
At the ZLB you need higher inflation targets for things to function properly.
EDIT: I'm also talkin about the extremely low interest rates or basically ZIRP. There's really not much more the FED can do. But if this means that the era of zero interest rates is here to stay for longer then the party in Silicon valley is about to get even wilder.
I'd like the opinion of some people more knowledgeable about economics as to why recovery is taking so long. It's already 7 years since the crash. How long could it potentially take ?
It's not like this state of affairs can last forever can it?
http://www.economist.com/blogs/buttonwood/2014/11/secular-st...
http://www.independent.co.uk/news/business/news/imf-fears-gl...
Who am I kidding, that'll never happen.
The problem is, to bring everyone up to the 2015 standard of the West's middle class requires a helluva alot of growth.
India’s Economic Growth Hits Four-Year High
http://www.wsj.com/articles/indias-economic-growth-hits-four...
"India’s output growth accelerated to 7.5% last quarter, putting it ahead of China as the world’s fastest-growing large economy."
To be fair, some of the data presented is faked, but it's in the ballpark. It'd be good if India and the developing world were all growing faster, but they're still coming along at a nice clip.
You need $30-$40k [depending on where you live in the US] per Adult to be middle class.
http://www.dailymail.co.uk/indiahome/indianews/article-24804...
Take that away and it's only a matter of time before things boil over.
Greece will be in a much better position as soon as it exits the Euro.
Growth helps a lot with that problem.
http://countryeconomy.com/gdp/greece
Of course the debt-to-GDP ratio went up accordingly.
That said, I don't want a steady-state economy - not in the long term anyway (i.e. thousands of years). We should not exhaust our resources on Earth, of course, and could do a much better job there, but eventually our species should come to harness the power of galaxies, and that will require economic expansion.
If political will stands in the way of getting out of the stagnation, it will be moved or removed.
If there will be any change at all, it will come about when corporate leaders put pressure on the government.
It is probably not a good example for how most of the West will deal with the same problem, though whether we do a better job of it remains to be seen.
Not the government-manipulated "consumer price index" numbers, but the actual, raw prices.
[1] https://ycharts.com/indicators/us_eggs_price_receivedyearly
Food (and energy) prices are well known to be very volatile due to yearly changing weather and whatnot, and that signifies very little for economic policy; that is why there's a "core inflation".
If you don't trust the obviously fake data the evil government publishes, why do you link to a data series sourced from the US Department of Agriculture?
There's the MIT's Billion Prices Project, which is generated in some way from prices in online shops (but MIT is a private university, so we can assume it's not part of the government conspiracy). It usually tracks the official CPI data fairly closely, but sometimes it shows a slightly higher or lower number.
http://blogs.wsj.com/economics/2014/05/01/why-weather-could-...
But anyway, if you look at how the Fed has expanded the monetary base by 300% since 2008, how come that all this "money printing" doesn't lead to much higher inflation? Isn't that quite amazing?
"Profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) decreased $125.5 billion in the first quarter, compared with a decrease of $30.4 billion in the fourth.
Profits of domestic financial corporations decreased $2.6 billion in the first quarter, compared with a decrease of $12.5 billion in the fourth. Profits of domestic nonfinancial corporations decreased $100.4 billion, in contrast to an increase of $18.1 billion. The rest-of-the-world component of profits decreased $22.4 billion, compared with a decrease of $36.1 billion. This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world. In the first quarter, receipts decreased $28.9 billion, and payments decreased $6.5 billion."
Or, in an actual graph:
From the WSJ article: "Profits [...] advanced 3.1% in the first quarter of 2015 from the fourth quarter of 2014, after falling 3% in the prior period. "
Still, I would much rather read conjecture here than in a business news article :)
http://i.imgur.com/hB90v62.png
And as well noted by this lady, we probably haven't seen the worst yet: https://twitter.com/auaurelija/status/604271796267937792/pho...
All the indicators point to NIRP coming to the US soon, as lately bad economic data (such as global trade) correlates almost perfectly with bond yields.
And as noted on ZH, the lower bond yields drop, the larger the secular decline in aggregate demand ("deflation"), the more businesses focus on investing in short-term capital gains instead of long-term growth projects (i.e. capex), the worse global trade will get, leading to even more debt monetization, even lower yields and even lower trade...
http://talkingpointsmemo.com/livewire/princeton-experts-say-...