Also: WSJ Journalistic Fraud Exposed As "Blaming Picky Workers For High Unemployment Meme" Is Blasted To Smithereens
It should be obvious to anyone who's ever worked anywhere in the private sector anytime in their life: The most important thing for a small business is CUSTOMERS, aka DEMAND for whatever it is that your company sells. If people don't have money to spend, there is no demand. Getting just a tad more complicated, if they do have money, but they're scared they won't have it for long, so they hold onto it rather than spending it, there is no demand. If everyone holds onto their money because times are tight, this only makes things tighter. Economists call this the "paradox of thrift." What makes sense for the invidiual spells ruin if everyone does it at once.
Small business owners know this, as do their employees in a truly small business. The paper I work for is a perfect example. We have fewer pages now than we did before the Wall Street collapse. That's because all our advertisers have fewer customers--except maybe a few who have to work harder to avoid that fate. It's a vicious cycle: less demand for one sort of goods or services means less demand for others as well. That's why you need government spending to fill the gap, to make up for the lack of private demand, and to help spur private spending to pick up again.
Small businessmen know this. Their employees know this, heck, even GOP senators and congressmembers know this when they're back home passing out the giant checks, taking credit for pumping money into the local economy. But back in DC there's this big charade, pretending that all these elementary facts of life simply aren't true.
Well, now, via Paul Krugman, comes the following splendiferous chart, from Catherine Rampell at the Times Economix blog, showing 24 years of data on what small business owners have to say about the biggest problems they face. And as you can see: (A) when recessions happen (early 1990s, early 2000s, the last two years) the percentage saying "poor sales" (aka "lack of demand") goes up significantly, (B) right now the percentage saying "poor sales" (aka "lack of demand") is far and away at its highest level ever, and (C) no other problem is particularly high by normal standards:
This should not come as a surprise to anyone living in the real world, which of course explains why it's totally unbelievable to everyone in Versailles. It's another one of those "No WMDs in Iraq" moments.
...there's only a big mystery here if you imagined that the Great Recession and its aftermath was going to look like a pre-1990 business cycle, rather than be another postmodern cycle like those of 1990 and 2001.
It's worth looking, in particular, at how productivity across the cycle has changed. I don't have time this morning for a proper treatment, but look at this figure:
If you squint a bit, you can see that before 1990, recessions were generally accompanied by a fall in productivity, mainly because businesses would hang on to workers, so as to be prepared to ramp up production quickly once recovery got underway. After 1990, this "labor hoarding" effect basically vanished; if anything, productivity growth seemed to accelerate in times of weak demand. Partly this may have reflected structural changes in the economy; it might also reflect the (correct) perception that recovery from financial-crisis-induced recessions is much slower than recovery from recessions created by tight money, imposed by the Fed to control inflation.
And of course, it could also reflect broader changes in class power relations, and changing attitudes of the business class. Any way you slice it, though, squeezing more out of workers during tough times has just got to bring joy to the Scrouge in every businessman. But I digress...
This gets at a broader point: as I see it, one of the problems with policy in the early months of the Obama administration was that top officials (to be fair, like many Wall Street economists) thought of the Great Recession as 1982 redux, rather than as a mega version of 2001.
Tax day has brought us a nice crop of correctives to rightwing tax delusions--at least in the blogosphere. But what about the deeper background assumption that regulation is bad and "free market" economics is not just good, but, natural and what God intended?
Well, God's already weighed in pretty clearly what with that whole camel & the eye of the needle thing, at least from where I sit. Get rich in this life, burn for eternity in the next. It's the ultimate short-term investment strategy, I guess.
But as for natural, well, there's nothing more natural for human beings than making stuff up that didn't exist in nature before. Markets are one such thing. And market regulations are another. And, historically, you can't really have one without the other. Markets are made by regulating behavior, starting with the creation of special times and places when people got together to barter and trade--and later, once money was created (another regulating activity) to buy and sell.
So that leaves us with good. And a quick look at the Wikipedia page listing US recessions makes it perfectly clear just how chaotic and uncertain our economy was before the New Deal financial regulations were put into place. I condensed Wikipedia's information, and did some sub-totalling to make things clearer. Wikipedia divides this history into three large time periods. Although the first was dominated by the Federalist's central bank, and the second was largely a private affair under relatively loose and diverse state regulation, recessions were quite commonplace in both of them, as can be seen by direct inspection or by looking at the summary figures showing that the US spent more than 40% of the time in recession during these idyllic pre-New Deal periods:
[Note: the times in this period are mostly approximate and the total months are about 10% to0 high as a result, but there's no reason to think that there's a bias in the figures. The figures are more exact in the next period--on the flip--and the percentage of time in recession is only slightly different, slightly higher in fact.]
The bottom three lines are the last three "recoveries" from recessions. Unlike the ones before them you'll note the stunning lack of jobs reflected in the continuing increase of the unemployment rate after the recovery begins. While some earlier recoveries experienced this as well, by five months after the recovery began, all previous recoveries had seen the unemployment rate start moving in the right direction within five months. In contrast, the 1990 recession's unemployment rate did not even pull even with where it was when the "recovery" began until 14 months later. The 2001 recesssion's "recovery" was even worse.
He is an extremely competent politician. He's our first black President for Christ's sake!
Well, this is what I'm talking about. Obama's grand accomplishment is not breaking a sweat while giving us a jobless recovery just like Bush Sr. and Bush Jr. His most-touted accomplishment is passing the REPUBLICAN alternative to HillaryCare from 15 years ago, but meanwhile tens of millions of people go without work, while homes continue being lost at an incredible rate, (The good news from USA Today: "Foreclosure rates up by smallest amount in 4 years".)
One could argue, "Well, he's a very good politician, you just don't like what his politics are." But a politician who undermines his party and his country cannot seriously be regarded as a competent politician. Presiding over the ongoing destruction of America's middle class with Bush-like cluelessness is not competence by any kind of remotely rational standard. And if the previous chart didn't quite get through to you, then consider the following one, which includes the 1980 "recovery" that lead directly into a "double dip" recession. The following chart shows every recession since 1980:
In fact, he's not even trying to be a competent politician.
If we continue seeing a "recovery" like we now have, Democrats may avoid a bloodbath in November. It's a good sign that we have significant job growth this past month, for the first time in years. But given how many workers have given up even trying, the immediate results of job growth should not be expected to reduce the unemployment rate, which reflects the rate for those actually looking for jobs. And even if the unemployment rate does start going down, that doesn't remove the very real threat of a double dip recession, especially in light of foreseeable bad news about the next wave of foreclosures, which could well hit just in time to sink Obama's chances of re-election.
In short, Obama's indifference to the suffering of tens of millions of Americans may or may not result in Democrats' loss of Congress in 2010 and/or his own loss of re-election in 2012. Because Republican victories would be utterly catastrophic, I have to hope that these losses don't come to pass. But Obama's governance so far has been disastrous for the middle class. Supporting disaster as opposed to catastrophe is not my idea of a good place to be politically. And a politician who gives us that choice is not remotely a competent one.
And that's not saying anything about his utter failure to even fight for a credible response to global warming, or his continued support for the Bush/Cheney "long war" approach to the "war on terror", the very existence of which is a victory for al Qaeda.
This is incompetence on a breathtaking scale. This is Nero fiddling while Rome burns. And the fact that Obama is a superb fiddle player (first black fiddle player evuh!) does not even come close to making any sort of difference at all.
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