Michael Maiello's picture

    The Austerity Blunder?

    It's non-farm payroll Friday, where we celebrate the work of everyone who isn't a farmer.  The unemployment rate stayed unchanged at 9.6% with government employment falling by 159,000 and private sector employment (mostly in health care, hospitality and mining) rising by 64,000.  Barry Ritholtz has the no-nonsense quick-take here.

    I wonder if we're not going to look back on this a year from now and see a colossal blunder.  Why is the government firing people in the middle of a crisis?  We know part of the story.  77,000 of the government lay-offs are related to the census.  The census jobs were temporary by design.  The rest of the government layoffs probably have to do with other temporary jobs and with state and municipal workers losing their jobs as local governments struggle with falling tax revenues and immediate debt obligations.

    The job losses in this months report are, in effect, the result of an unplanned and unfocused austerity.  The federal government is letting temporary assignments expire while local governments are cutting back.  It all amounts to an ad hoc total belt tightening that doesn't have many of the negative politcal consequences.

    It's a damned shame and it's damned foolish.  The government should offer its census workers some other assignment rather than let them go.  I don't really care what but I think a pretty good argument could be made that the census work gave some of them pretty unique qualifications.  They dealt with people from all walks of life.  They got to know their communities.  Many of them could move seemlessly into social work at some level.  Heck, they could simply go out into the world with the mission of documenting the aftermath of the Great Recession much the same way that artists and writers in Roosevelt's time documented the Depression.  The point is that the Federal government, with its unlimited checking account, should not send workers out into the world until the world has jobs for them.  It's time to get creative.

    That also means it's time to bail out the states and cities.  If the idea of outright paying their debts or guaranteeing their bonds disturbs you (and it does me) the Feds could step in with more targeted help aimed at funding programs that keep and create jobs.  When a municipal agency announces layoffs, the Feds could step in with money to stop them.  If the governor of New Jersey unilaterally halts construction on a badly needed $9 billion tunnel under the Hudson River, the Feds should show up and build it instead.  I know this would give local governments a perverse incentive to throw up their hands and cancel projects to get them off the state balance sheet and onto the Federal one but the Feds could always bill the states later, when times are better.

    My solutions here are imperfect but I think we need to realize that now, of all times, the government should absolutely not be firing people.  It's entirely counter productive.  By destroying the demand base, the government is destroying the tax base and making its problems that much worse.   

    Comments

    You aint go no argument from me. If they are working they are contributing to SS and Medicare and our income tax fund. They are purchasing milk from the grocery mart, underwear from K-Mart, silly things from Wall Mart and recreational beverages from the liquor mart. Unemployment will not even cover their mortgages. Oh well.

    Who’s to blame?

     Larry Summers?

    Summers the same person whose ideology despises Socialism; so of course the people weren't the first thing on his mind

     

    I guess, the Left has their own "heck of a job Brownie"? 

    K.I.S.S  

     Help the homeowners first.

     With help from the government, in the form of housing assistance, 80/20 or /70/30 faster recovery 50/50?  The homeowners could purchase needed products, such as carpeting, paint, appliances, roofing  home improvement, etc.  Creating manufacturing jobs to meet the demands .

    When these items are purchased the States would collect sales taxes.

     Don’t the States need money?   

    Any other solution is wasting time and money  

    'Putting the cart before the horse'

    Meaning: Do things in the correct order.  

    “Don't kill the goose that lays the golden egg”.

    The people pay the taxes. Corporations beat you out of them

    Government needs tax revenue, or the government is useless.

    Is the plan to destroy the government for the people? 

    So the government better figure out whom they need to serve 

     

    “Don't bite the hand that feeds you.”

    Either the government directly helps the people or the people will bite back. 

    Maybe the best Government money can buy is about to be drowned in the bathtub.  

    The government will run out of money and then what?   

    Corporations will be all right; the people are expendable, because they have become a burden, nothing but a pain, to the corporate interest.

     

     

     

     

     

     

    Frown


    I agree wholeheartedly that we need to focus on the mortgage crisis; on the original "toxic asset" that served as the justification for the "Troubled Asset Relief Program (TARP)."

    I can't remember the nomenclature, but NPR had a program today talking about the Fed's option of buying back gov't bonds from the bank as a means of printing money and getting it into circulation. Perhaps, the reasoning goes, the banks will THEN use that money to make loans rather than play the carry trade. (Although, when you think about it, the withdrawal of these bonds would limit their availability, thus driving up the price, no? Wouldn't it actually make the carry trade more attractive, not less? But I digress...)

    If you're going to print money anyway, why not use it as an instrument to buy the toxic assets, or at least render them non-toxic. Use these funds - not to buy back bonds - but instead to get homeowners right-side-up on their mortgages, whereupon they once again owe less for their house than it's reasoned valuation?

    Top-down solutions ain't working. It's definitely about time to get some of that money directed to those who are hurting in this economy instead. You don't cure cancer by going to the beautician for a new 'do. And you ain't going to cure this cancerous economy by making Wall Street shine. Instead, you gotta' direct the effort at excising the tumor and blasting it out of existence. You gotta get rid of all this unsupported debt that is a consequence of the collapse of the housing bubble. Only then can we expect a healthy recovery.


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