Here we go again

NEW YORK—Claiming that enough time had surely passed since they last caused a global economic meltdown, top executives from the U.S. financial sector told reporters Monday that they are just about ready to completely destroy the world again.

Representatives from all major banking and investment institutions cited recent increases in consumer spending, rebounding home prices, and a stabilizing unemployment rate as confirmation that the time had once again come to inflict another round of catastrophic financial losses on individuals and businesses worldwide.

“It’s been about five or six years since we last crippled every major market on the planet, so it seems like the time is right for us to get back out there and start ruining the lives of billions of people again,” said Goldman Sachs CEO Lloyd Blankfein. “We gave it some time and let everyone get a little comfortable, and now we’re looking to get back on the old horse, shatter some consumer confidence, and flat-out kill any optimism for a stable global economy for years to come.”

“People are beginning to feel at ease spending money and investing in their futures again,” Blankfein continued. “That’s the perfect time to step in and do what we do best: rip the heart right out of the world’s economy.”

source

Mulligan stew

American hobos in the early 1900s made do with one or another variation of Mulligan stew. But there’s no reason we have make do with the economic stew dished up Casey Mulligan.

Mulligan attacks Jared Bernstein for emphasizing the role of consumption expenditures in creating and sustaining economic growth. For Mulligan, who surveys a few mainstream texts in growth theory, investment is the only thing that matters.

I can only conclude that Mulligan is either a dolt or he’s being disingenuous.

That’s because the kind of growth Bernstein is referring to, which comes out of Keynesian macroeconomics, is really about short-run changes in output that are part of business cycles. Mulligan, however, is talking about long-run growth that starts with a neoclassical production function and focuses on the role of capital accumulation, technology, and human capital in raising productivity and, over the long run, output per capita.

Either Mulligan doesn’t know the difference between those two areas of economics or he’s deliberately conflating the two and declaring neoclassical growth theory the only valid discussion of growth in economics.

And, in the process, he’s making the argument that almost everyone, except those at the very top, should be reduced to eating hobos’ stew.

Chart of the day

The United States is one of the richest nations in the world. But, on a number of social and economic measures, it is more typical of a Third World country. Compared with other advanced nations, it ranks consistently among the worst performers in matters of economic equality and child welfare.

Cartoon of the day

Special mention

Only in America

Precisely when the number of unemployed workers without unemployment benefits is rising, the U.S. Congress is considering legislation that, according to the Health Impact Project, would change the Supplemental Assistance Nutrition Program such that as many as 5.1 million people could lose eligibility for the program and many other households would receive reduced monthly benefits.

Only in America, in the midst of the Second Great Depression, would the “people’s representatives” decide to further impoverish people—including children, the elderly, and the disabled—who are already barely getting by.

Protest of the day

Fast food workers in seven cities (New York, Chicago, St. Louis, Detroit, Milwaukee, Kansas City, and Flint) went on strike yesterday, saying to all those who will listen they simply can’t survive on $7.25 an hour.

Chart of the day

This chart, by the Center on Budget and Policy Priorities, gets filed under the category “why is this anything other than the Second Great Depression?”

Sure, there are now fewer unemployed workers (11.9 million) than in 2009 (4.3 million), when the official unemployment rate peaked. But in 2009, 9.2 million unemployed workers received unemployment insurance benefits, which left 5.1 million jobless workers with no such benefits—as against today, when there are 6.7 million unemployed workers not receiving unemployment benefits.

As the folks at the CBPP explain,

A smaller share of unemployed workers now receive UI for several reasons.  One is the length and depth of the protracted jobs slump, which has left many workers unable to find work before their UI benefits run out.  In addition, a number of states have cut the number of weeks of regular, state-funded UI benefits in recent years; these changes also shorten the number of weeks of federal UI benefits a person can subsequently receive.

In addition, the duration of federal UI benefits (which go to long-term unemployed workers) has fallen.  This reflects several factors.  One is the decline in the official unemployment rate in many states, which itself leads to automatic reductions in the number of weeks of federal UI benefits available in those states.  Another factor is federal changes implemented in 2012 in the number of weeks of federal UI benefits provided irrespective of improvements in economic conditions.  A third factor is the disappearance from every state except Alaska of another source of long-term UI benefits, the federal Extended Benefits program (which is designed to “trigger on” automatically when a state’s unemployment rate is rising rapidly, but under the same formula, ceases to remain available once unemployment stops rising even if the state continues to experience a long period of severely elevated unemployment).

Thus, in the midst of the Second Great Depression, while the number of unemployed workers has fallen, the number receiving unemployment benefits has fallen faster, which means the number of unemployed workers without benefits has risen.

What about trickle-up?

Mainstream economists will do almost anything to avoid a serious discussion of the issue of inequality, even while discussing the issue of inequality.

Right now, we have two groups of mainstream economists: those who argue we need to stick with trickle-down economics (which is basically a neoclassical argument that the existing distribution of income represents “just deserts” and that, at some point in the future, everyone will benefit from the continued funneling of income to those at the very top) and those who argue we need to shift gears and grow from the middle-out (which is a more Keynesian argument that the expenditures of the middle-class can and should serve as the effective demand for consumer goods, which in turn will spur private investment and lead to more jobs). Mark Thoma argues it’s a false dichotomy, because the supply side and the demand side are dependent on one another, that there needs to be the appropriate balance between supply and demand.

That’s a nice way of seeming to resolve the problem on the terms of mainstream economics. But what mainstream economists simply don’t want to talk about is a third option: trickle-up economics. That’s the idea that those at the bottom, who produce all the goods and services consumed by themselves and everyone else, would have a say in deciding what and how much gets produced, where it gets produced, and once it’s produced how the proceeds will be distributed.

If that happened, the fundamental cause of inequality would finally be eliminated and we’d actually have a pattern of growth that trickled up—taking care of those at the bottom before everyone else.

Cartoon of the day

Special mention

Cartoon of the day

Special mention