Tuesday, July 27, 2010

When Will the Recession Recede?

I'll concede that Barack was given a full plate when he was elected. A Marlon Brando portion of things to digest. We were deep into two wars, with a crashing economy, and that's just the tip of the iceberg. Since his election, he's had to deal with things like one of the worst man-made disasters ever, the immigration issue, healthcare reform (although he started that fight), and the "stupidity" of the Cambridge Police.

That all being said, he made the big promises. He was Change personified. He was Hope incarnate. He'd fix the economy, extract us from wars while keeping our dignity, he'd reform healthcare, he'd save us from the apparent tailspin we've been sent on by George W. Bush.

Maybe it's just me and my gloomy pessimism. But not even Barack could bring our economy back to where it was, or where it's been since World War II. He can, however, make it worse. And that's what he's doing. Inadvertently, of course.

We've had a bubbilicious economy lately. Big ups, big downs, but with a generally upward trend. Like Oprah's weight. But it's all been part of a massive superbubble. The World War II Bubble. The War fueled unprecedented growth and prosperity for America. We built all the planes and tanks. We provided the gasoline. We sold the ships. We lent the money. The US produced 40% of the world's weapons during the War.

Then after the War, we didn't have to rebuild. We sold industrial machinery to Europe and Japan for them to restore their infrastructure. We also sold them the finished products. And again, we lent them the money.

But the world's caught up. And industrially speaking, the US has fallen behind. So now instead of steady growth with the occasional hiccup, our growth is rapid, followed by quick contractions, then fast growth, then fast retractions. Our economy has stretch marks and loose skin. We've morphed from the stable tortoise to the impetuous hare.

We want to get back to where we were. And the Liberals think they know how to do this: Socialism Lite.

The latest push has been to extend unemployment benefits. A lot of people who lost their jobs in the latest economic fracas are seeing their benefits expire. Those benefits had been extended once before. Back then, it was thought by Barack and his cadre of optimists that the unemployment rate would peak at slightly over 8%, then gradually reduce itself. Instead, it's been fairly steady, and over 9%.

This chart is an estimate from late '09.

Barack will publicly pat himself on the back for how many jobs he and his programs have saved. But I don't remember his "Institutional 9.5% Unemployment" speech on the campaign trail. He promised more.

The idea of unemployment benefits is not only to keep people alive, it's to stabilize the system, to keep the bad times from getting really horrid. It keeps people involved as participants in the economy: buying food and clothes, renting apartments, etc. So when things get better and jobs become available, they can rejoin the workforce without missing a beat.

Most of the time, unemployment is paid for by taxing employers, so it functions as insurance. The employees and employers regularly pay a small, manageable amount, and therefore protect themselves in case of disaster.

The only thing I don't like about unemployment benefits is that it's based on income. So a middle manager who made $100k a year will receive a bigger check than the janitor who made $20k when their company goes under. This capitalist-socialist mutant is an abomination, a sin against nature. Unemployment is to subsist people between jobs, and it costs the same for a janitor to feed himself as it does for a middle manager.

And in this current climate, the government is essentially subsidizing some people to NOT get jobs. It's that ex-middle manager with that $100k salary and the bigger unemployment check that will hold out for another $100k job, instead of taking one with a $40k salary. It's basic common sense that those $100k jobs are an endangered species in this contracting economy. So it follows that those $100k types will have to find jobs that pay less. If Mr. Executive were receiving the same meager unemployment benefits as Mr. Janitor, you can bet your ass he'd take a $40k job pushing paper.

But there's a problem. When does a temporary benefit to tide people over between jobs turn into a permanent government dole? And where does the money for extended benefits come from?

Having 9% of the country getting weekly government checks for doing nothing for an extended period of time is a destructive concept. Doesn't the government spend enough money paying its own employees to do nothing? The money has to come from somewhere. And it's coming from debt. "Treasury Bills" is the politically expedient way to phrase it, but "selling" treasury bills is a misleading way of saying "borrowing money."

I have no problem with extending benefits right here and right now. But this has got to be it. And there needs to be reform that forces middle and upper class people to take lower paying jobs when they can. To issue a $500 weekly check to someone who's been offered $900/week to work is utterly disgusting. They can take a step down and work while they try to find another lucrative job.

But we need to adjust here. We are not going to go back to the way things were. Not permanently, at least. Barack and the Liberals can distribute temporary relief. They can borrow from China and give everyone free healthcare. But that bubble will only burst with more explosiveness.

As we add more and more social programs, issue more and more benefits, we're jumping off a burning ship into shark infested waters. We're trading one problem for another. Instead, we should be trying to put the fire out, and limp along in our burnt out vessel. Our economy will never be the same. And the more Barack tries to bring us back to where we were, the more he hastens the ultimate destruction of the American economy.

Then again, I'm morbidly pessimistic. But just because you're paranoid doesn't mean they're not out to get you.