The Great Recession, marketing to women, and economic realities

Three things crossed my virtual desk today that are all related – in spite of what their authors might tell you.  First came a piece in Salon about the numbers of people living in or near government poverty levels;  then a WaPo story analyzing where the economic impacts of tax expenditures (i.e. tax breaks) are concentrated in terms of wage earners;  and finally an unusually cogent column for right of center Jennifer Rubin about how the Republican Party is missing out on woman’s issues in a major way.  To Quote Rubin:

The message that too many women heard from the GOP (and that Democrats exploited) was negative – finger-wagging at contraception and demeaning women in the military (as Rick Santorum did), commenting in outlandish ways about rape and decrying gay marriage. For those women not already in sync with Republicans, it came across as harsh, off-putting and mean spirited. They concluded that the GOP had nothing for them and, if they were single mothers, that Republicans didn’t really approve of them.

The message that focused on entrepreneurs, tax cuts and repealing Obamacare was not that attractive either. Most women don’t own or start businesses. If women were bewildered by Obamacare, they didn’t hear anything meaningful from Republicans about what they could do to reduce health-care costs (of which they, in many cases, were the primary purchaser) or protect them if they changed or lost their job. Considering how rotten the message and the tone, it’s remarkable that Romney won as many single women (31 percent) as he did.

Rubin then goes on to show how many economic issues – which, as the people who are now 40% of the heads of household women tend to pay attention to - Republicans COULD provide leadership on. 

Put it this way: The image of the fiery, ferocious conservative warrior that the right-wing media applauds is precisely the type that turns off women voters who aren’t already die-hard Republicans.

But it’s the substance that matters most of all. Here Republicans would do well to redirect much of their energy aware from a presently insoluble stand-off on taxes and the budget. There is no grand deal in sight, so why belabor the point?

Sounds great right?  There are some Conservative economic policies even I’d get behind, and lest we forget, most of what’s in the Affordable Care Act (Obamacare) is policy proscriptions lifted from publications of the Heritage Foundation – not Think Progress.  Yet, to many of these women, the Republican Party is still a Party of cronyism, designed to aggrandize and protect benefits to those at the top of the economic ladder.

What sort of benefits?  Consider (From the Post’s Tax breaks analysis):

The 10 largest breaks in the U.S. tax code will save taxpayers more than $900 billion this year, with a little more than half the benefits flowing to the richest 20 percent of households, congressional budget analysts said Wednesday.

And the richest 1 percent of households, those with at least $327,000 in annual income, get an especially big haul — about 17 percent of the total savings, according to the report by the Congressional Budget Office.

Stop and think about that for a second.  Ten things in the supposedly 6 foot tall tax code keep $900 Billion in the pockets of Americans that could (at least in theory) have gone to the federal government to fund all sorts of things.  Just doing away with the preferential rates for capital gains (which is where most hedge fund managers hide their incomes) gives you 4 times as much money as the Sequester will take out of federal budgets by 30 September.

According to the CBO, the biggest tax breaks by dollar value this fiscal year are the tax-free treatment of employer-provided health insurance (about $260 billion), preferential rates for dividends and capital gains ($160 billion) and tax-free contributions to retirement savings ($140 billion). Deductions for state and local taxes ($80 billion), mortgage interest ($70 billion) and contributions to charity ($40 billion) are also among the top 10, as is the tax-free treatment of capital gains on assets transferred at death ($50 billion).

All of those breaks primarily benefit wealthy households, according to the CBO. Rounding out the top 10 are three breaks that primarily benefit lower-income households: the tax-free treatment of most Social Security benefits ($35 billion), the child tax credit ($60 billion) and the earned-income tax credit ($60 billion).

Even if you back out the three bottom tier breaks that mostly impact low income wage earners, you are still left with $ 660 Billion.  

How does that stack up?  The current Congressional Budget Office estimate of the FY 2013 deficit is $642 Billion.  You read that right – the top seven tax breaks give back to Americans more money than we need to erase this year’s deficit.  Half of that amount - $330 Billion – go to the top 20% of wage earning households in the US.  And consider that the infamous 1% get $112.2 Billion of those 7 items (which is only slightly more than the total that the Justice Department will spend this year).   

Republicans have been hard at work the last several election cycles to keep these tax breaks – and the historically low rates that go with them – in place no matter what.  Those actions, which can’t be hidden no matter how hard Republicans spin it, are at the heart of why women don’t want to vote for Republicans.  In addition, they are why a whole lot of other Americans don’t want to vote for Republicans, since the outcomes of preserving this structure is a huge increase in people with significantly declining (or never rising) economic status.

Put another way, if you have advocated for policies that support these breaks, you have preserved an economic system that:

• Leaves ½ of American with NO net assets
• Drove UP the decline in wage income in the US (which has been going down for approximately 30 years)
• Created a median income in the U.S. of $34,000 (which is $4000) above the federal poverty standard for a family of 4
• Gave the top 20 wage earners in the US the same amount of income it takes to deliver the entire federal food assistance program (SNAP)

Harsh, I know, but this is where our country is.  This is what Republicans have fought to protect – and this is what Democrats ARE NOW JOINING IN TO KEEP ALIVE.

The Great Recession and Corporate Boldness: Why no American company will sacrifice profit for employees

Robert Samuelson comes so close today to understanding the paradox that is the modern economy(Emphasis mine):

So it’s a Catch-22: You can’t get hired unless you have experience; but you can’t get experience unless you’re hired. With technology changing rapidly, workers need to know more, even as their skills-support systems weaken. There is no instant cure for today’s job mismatch, but it might ease if America’s largest companies were a little bolder. Surely many of them — enjoying strong profits — could make a small gamble that, by providing more training for workers, they might actually do themselves and the country some good.

Yet, like every good "The Free Market Will Solve all ills" fiscal conservative, he fails to take in two important truths. First, private companies have NO responsibility to do the country any good, especially if it conflicts with their fiduciary responsibility to turn a profit for their owners. Quite the contrary, as we saw in the 2000's, companies need and want to maximize profits in the short term no matter the long-term sector damage. That way, the bosses can justify their big bonuses, which Ezra Klein points out are derived from part of our normal human psychology:

Study after study shows that people would prefer a medium-sized house in a neighborhood of small houses to a big house in a neighborhood of much bigger houses. What people really want isn't to have a big house, in other words, but to have a bigger house than their peers. Economists call products driven by this sort of status competition "positional goods." The less-technical term for this sort of behavior is "keeping up with the Joneses," and we all do it.

When you're talking about changes in CEO pay, you're not talking about changes in the money CEOs use to make ends meet. You're talking about changes in a compensation package that has long since become totally abstract. Making $50 million is nicer than making $40 million, but the things it's buying, and the things it's saying about you, are, at that point, positional: it's a display of worth, not the way you put food on the table. People sometimes ask what CEOs need with all this money. The answer is they don't need it. But they need to not be making less money than other CEOs. If they are making less, then what does that say about them?

Thus, nothing in these companies structure or economic function drives them to make the nation better by improving employment through training, hiring or anything else.

The second point Mr. Samuelson misses is that one key function of government is to overcome this mismatch between what a business needs to do to profit, and what society needs businesses to do to keep the economy flowing. One of the reason we have massive systems of public education (from pre-K to Graduate School through community colleges) is to train a workforce that can evolve to the needs of the changing economy. One of the reasons we have the Small Business Administration, and environmental regulations, and laws requiring the protection of jobs for military reservists is that history has shown that if companies are left truly unregulated, they will do things that physically harm their workers and our environment, and financially harm just about everyone, all in the name of profits.

So while I agree that it would be nice if those companies were a "little bit bolder." But they won't be, and nothing in our economy right now incentivizes them to be. And against that backdrop many conservatives, Mr. Samuelson included, want to continue to cut and eliminate those government functions that could actually remedy this situation.

UPDATE:

This editorial in the Wall Street Journal emphasizes my point - Boeing wants to move plants, presumably to save costs. But as the writer notes, it sends a signal that the kind of complicated machining and engineering needed to keep our aviation industry ahead of the pack is not highly economically valued.

Most depressing of all, Boeing's move would send a market signal to those considering a career in engineering or high-skilled manufacturing. It is a message that corporate America has delivered over and over: Don't go to engineering school, don't bother with fancy apprenticeships, don't invest in skills. No rational person wants to take on college or even community college debt to come out and work on the Dreamliner —which should be the country's finest product—for a miserable $14 an hour. If a single story in the news can sum up the reasons for America's global decline, it's the decision to build a Dreamliner that will gut the American dream.

As long as American companies are willing to undercut their own workforces in pursuit of ever greater profits, Mr. Samuelson's ideal will never be considered, much less fulfilled.

Framing the story to shape reality - how Republicans are telling economic lies to the Nation

I was planning to start the week with a lambaste at the Right side of the aisle for(at best) dissembling on a number of important issues - and doing some pattern analysis when doing that.

But then I read this, and it just makes my blood boil:

The key problem is that journalists are assuming that statements by Gov. Scott Walker have basis in fact. Journalists should never accept the premise of a political statement, but often they do, which explains why so much of our public policy is at odds with well-established principles.

The question journalists should be asking is "who contributes" to the state of Wisconsin' s pension and health care plans.

The fact is that all of the money going into these plans belongs to the workers because it is part of the compensation of the state workers. The fact is that the state workers negotiate their total compensation, which they then divvy up between cash wages, paid vacations, health insurance and, yes, pensions. Since the Wisconsin government workers collectively bargained for their compensation, all of the compensation they have bargained for is part of their pay and thus only the workers contribute to the pension plan. This is an indisputable fact.

So, once again, we see a compliant press willing to take a politician at his word, even when the political speaks half-truths in support of a radical and potentially economically damaging agenda. Fourth estate my a$$. Door mats more like.

Come to think of it, this actually fits in rather nicely with my original idea. Especially when you read this:

By falsely describing the situation the governor has sought to create the issue as one of the workers getting a favor. The Club for Growth, in broadcast ads, blatantly lies by saying "state workers haven't had to sacrifice. They pay next to nothing for their pensions."

And then there's this, echoing something I have written about before:

Simplistic coverage has also resulted in numerous reports that Wisconsin state workers make more than workers in Wisconsin' s private business sector. This is true only if you compare walnuts to tuna fish.

America has roughly the same number of food preparers, who can be high school dropouts, as registered nurses, who require a college education. But the nurses make on average $66,500, compared to just $18,100 for the food service workers. The food service workers collectively made less than $50 billion, while the registered nurses made almost $172 billion in 2009, my analysis of the official data shows.

Business and government hire both food service workers and registered nurses, but you are much more likely to work for the government as a registered nurse than as a food preparation worker.

When you control for the education required to be a prosecutor or nurse, government workers get total compensation that is less than those in the corporate sector. This may reflect the fact that fewer and fewer private sector workers are in unions, about 7 percent at last count. As economic theory predicts, as fewer workers can bargain collectively the overall wage level falls. Effectively wiping out public employee unions would only add to downward pressure on wages, standard economic theory shows.

Yep, when you compare wages for Wal-Mart employees (I used to be one part-time) and NASA Satellite construction program managers, those NASA boys sure are overpaid!

When you add it to this from the Washington Post, it becomes clear the that Party of Jobs (as some Republicans have cast them selves) is NOT into anything resembling employment in the public sector:

Zandi, an architect of the 2009 stimulus package who has advised both political parties, predicts that the GOP package would reduce economic growth by 0.5 percentage points this year, and by 0.2 percentage points in 2012, resulting in 700,000 fewer jobs by the end of next year.

Zandi also had bad news for liberal Democrats who are resisting sharp spending cuts: Bringing deficits down to sustainable levels will require more than a growing economy. Even if the economy recovers as expected, he writes, lawmakers will have to cut about $400 billion a year through the rest of this decade to narrow the gap between spending and revenue, and stop adding significantly to the national debt.

"Significant government spending restraint is vital, but given the still halting economic recovery, it would be counterproductive for that restraint to begin until the economy is creating enough jobs to bring down the still very high unemployment rate," Zandi writes. "Shutting the government down for any length of time would also be taking a big chance with the recovery, not only because of the disruption to government services, but also due to the potential hit to the fragile collective psyche."

Now I know that political rhetoric is just that, and usually carries no intellectual weight. But at the statehouse, and the U.S. House, politicians are putting forward proposals that will eliminate government jobs at a time when the national unemployment rate continues to flirt back and forth across 10%. In order to fulfill campaign promises, and make a point about "how big government should be" they are willing to threaten the size and stability of the economic recovery. The same politicians do not have any idea if or whether these folks will ever by re-employed, nor (if you read the recent remarks of Mr. Speaker Boehner) do they care. They are also seeking to break the last of the powerful unions, who presumably stand in the way of further privatization of government services. In short, a semi-manufactured financial crisis (caused at its heart by lax financial regulation at the federal level) is being leveraged to dismantle the last vestiges of worker protection in our economy, and to convulsively and without thought destroy much of the social service infrastructure of the nation.

And lest anyone think my ire is directed completely at Republicans, let me be clear - Democrats are playing into their hands because they have no spine, no will, and no wish to upset the corporate donors who have captured them just as surely as they captured Republicans a political generation ago. If Democrats were really in opposition, they'd be fuming about bias in the Wisconsin coverage; they'd be willing to allow the government to shut down again to prove Republicans wrong, and they'd have a budget on the table that tackles entitlement and tax reform in a way that eliminates the deficit while dealing with the real culprits of significant government spending growth. That the President did none of those things is shameful, and as a Democrat, I am quickly loosing faith.

Increasing efficiency in transportation - good for the bottom line and the air!

Saturday's Question - What Recovery are you talking about?

Yesterday my federal colleagues released the monthly unemployment numbers for October 2009. Officially, the Nation now has 10.2% of its workforce unemployed. That means that 15.7 million people are now unable to work, whether they want to or not because there are no jobs for them to work at.

Yet, the economists and talking heads tell us, we should be HAPPY! Why? Because the rate at which we lost jobs in October was less the September! We shed jobs more slowly. Surely you know that this is a sign of recovery!

Um yeah, not so much. Americans are funny people - once they have lost a job, they don't see economic recovery until they have that job back. Period. So no, we're not rejoicing since the total - that 10.2% - is still climbing.

So, if you are in economics, or business, please consider this. The rate of loss means nothing outside of certain academic circles. The totals matter. And the more people loose jobs, the longer the recession will go on, no matter what the Stock Market does.

Nationalizing the banks - that horse has left the barn!

As we all wait anxiously for the "official" results of Treasury's Stress Tests of banks (!) - ponder this from Simon Johnson and James Kwak. It may take a few minutes, to read but they aregue (based on the actual evidence to date) that we are in effect slowly nationalizing banks without using the word, but on the banks' terms, not terms that benefit the U.S. taxpayer or economy in th elong run. They also prove, FWIW, that bloggers can indeed do real journalism.

News you can use - the economic value of our coasts

Every once in a while, I get asked why the federal government spends so much money doing "coastal restoration." I usually answer from the ecological perspective, but occasionally I manage to slip a dollar sign or two in there.

So today, when one of my professional colleagues sent me the stats below, I thought I might pass them on. This, in a non-scientific, non-ecological nutshell, is why coastal habitats, and their restoration and protection are so important:

• Coastal areas are tremendous economic resources, generating more than 28 million jobs in the United States. Commercial and recreational fishing alone employs 1.5 million people and contribute $111 billion to the nation's economy. (EPA. National Coastal Condition Report II (2005))


• U.S. estuaries produce more food per acre than the most productive farmland. Approximately 75 percent of commercial fish species depend on coastal areas for feeding, spawning grounds, and nursery areas. (Martin, D. M., T. Morton, T. Dobrzynski, & B. Valentine. (1996) Estuaries on the Edge: The Vital Link Between Land and Sea. A Report by American Oceans Campaign.)


• U.S. coastal wetlands reduce the damaging effects of hurricanes and other storms on coastal communities, providing more than $23 billion in annual storm protection services in areas most vulnerable to hurricane and tropical storm surges. (Costanza, R. et al. (2008). The Value of Coastal Wetlands for Hurricane Protection. Ambio.)

So, the next time you are down on the coast - be it beach, bayou, marsh or rocky shoreline, ponder how that slice of perfection before you is contributing to both the human economic endeavour, and the ecological machine that underpins it. Oh, and be sure to take some trash home with you for proper disposal.

This just in - Make sure you pay your taxes

If the AP report on MSNBC is correct, firms taking taxpayer funded TARP money owe the U.S. government 0.02% of that fund in back taxes. Yep, you heard that right, TARP recipients owe back taxes. And they all had to sign certifications saying they didn't in order to get their funds in the first place.

Two thoughts spring to mind. First, will the Republicans who have sunk so many Democratic nominees over tax issues holler as loudly about this? Me thinks not. And second, will this be the "smoking gun" that will finally open criminal investigations into the very companies who willfully and gleefully took our economy into the tank in the name of short term profits? After all, Al Capone got sent up for tax issues . . . .

Why Wall Street needs to be put in Time Out.

Say what you will about Wall Street types - at least they are committed to a battle to the end so that they remain "relevent" to modern economic policy. But look at this graph,and ask yourself - how much do we really need to pay attention to these guys?

See, the data (from the work of Robert Shiller who lets you copy his data sets and then do your own graphing) makes the case clearly that 1) we haven't fallen as far as we did before, and 2) once you take all the "noise out" stocks are still likley to see growth in the future. How did I arrive at this conclusion? I just fitted the blue trend line to the graph. And it's the trendline that we all need to keep in mind, not the bounciness around it.

Every time one of the Wall Street brokerages, or their friends in the MSM or cable, gets on TV and talks about the market, keep this in mind - PE ratios (one o fthe best measures of the stock market's soundness) have not yet fallen as low as they did in the 1980's rcession under Ronald Reagan. In fact, by the time the Great Depression started in 1929, they were on a substantial climb from their earlier collapse. PE also hasn't fallen that low yet, and the trend line tells us even if it does, the rebound is likely to keep us on a slow but steady upward climb.

given that, why don't we let a few banks go into receivership and start the auctions? If history is our guide, the stock market will do just fine, and so will the economy.

Let's get it over, already!

It probably somes as no surprise, but Paul Krugman is one of my favorite economists. His column today about the continued failure of the Obama Administration's financial rescue package is spot on.

See, being a mere oceanographer, I see it this way. the BUsh Administration started out to buy up the toxic derivative investment packages from the banks to free up the capitol markets and restart lending. then they realozed that meant something other thenthe market would be putting certain banks, investment banks and insurance companies out of business (plus it might well create a run on helathy banks). And they didn't want that. So they shifted to bank recapitolization. Mr. Obama hired Mr. Geithner to essentially continue that policy while they looked for something else that might work. After all, no one wants to bring down the economy and be blamed for a second Great Depression.

All that said, it's time to bring in the army of federal program analysts, budget formulators, and accountants, and take apart the banks books. We have to figure out who has what in order to sell it, and we have to sell it so banks will start lending to each other again (as well as to other business). Otherwise, AIG will still have to be on the public dole, GM won't be able to be liquidated in bankruptcy, and Cerebus won't put more money into Chrysler. Painful to watch - perhaps, but only if the government and media focus on the "losers" and not the healthy and solvent banks.

And yes Martha, there should be losers here - they mad bad, risky decisions driven by short term profit. they contributed to the downturn of the U.S. economy. They do not deserveto be rewarded fo rthose decisions by being allowed to continue to pretned they don't hold anything that's bad.

The Real Stimulus Package

Over at Think Progress, Matt Yglesias has a good piece on what the final stimulus actually looks like. While some commenters got the colors wrong - I think there could have been a yellow in there instead of two greys - the basic idea is this. For all the howling by Republicans about the stimulus, the single biggest piece at approximately 32% is made up of . . . wait for it . . . tax cuts! Yes Sir, step right up, because Democrats are actually adopting Republican economic ideas, even after those ideas have been debunked by history. So, when they whine as they will about eing shut out, send them this graph and ask them to have Michale Steele apologize for their hystrionics.

And while we're at it, ponder this from teh Center fro American Progress study Matt cites:

"While Keynesian hasn’t been disproven, supply-side economics has. President Bush’s economic advisors assured the American public in the early 2000s that the president’s massive tax cuts would generate economic growth and create jobs. This classic supply-side policy intervention did no such thing. The 2000s economic recovery was the weakest of all post-World War II recoveries in terms of growth in investment, GDP, and job creation."

As I've said before, supply side responses to demand side issues just don't work.

Taxation without . . .

I’m no tax scholar, but this graph certainly seems to contradict the notion that we have to cut taxes to get out of a recession. Taken from this web page, I’ve added black lines to form eight columns to show major recessions during the time the graph covers. The graph shows that only three times have top marginal taxes gone down during a recession. Otherwise they have either increased or remained stable (during the Great Depression, the top marginal tax rate went up to 80%). So if prosperity has followed the majority of recessions with tax increases or tax stability before, why shouldn’t it now? Because a Democrat is proposing the increases? Really??????

P.S. Click on the graph for a clearer view.