“I am concerned about the fact that the recovery that we’re on is not producing jobs as fast as I want it to happen,” President Obama said Tuesday, amid the flood of bad economic news, including last Friday’s alarming jobs report.There's more. Go read the whole post.
Does this mean we’re about to see a bold package of ideas from the White House for spurring growth of jobs and wages? Sadly, it doesn’t seem so.
Obama says he’s interested in exploring with Republicans extending some of the measures that were part of last year’s tax-cut package “to make sure that we get this recovery up and running in a robust way.”
Accordingly, the White House is mulling a temporary cut in the payroll taxes businesses pay on wages. White House advisors figure this may appeal to Republican lawmakers who have been discussing the same idea. It would, in essence, match the 2 percent reduction in employee contributions to payroll taxes this year, enacted as part of the deal to extend the Bush tax cuts.
Other ideas under consideration at the White House include a corporate tax cut, accompanied by the closing of some corporate tax loopholes.
Can we get real for a moment? Businesses don’t need more financial incentives. They’re already sitting on a vast cash hoard estimated to be upwards of $1.9 trillion. Besides, large and middle-sized companies are having no difficulty getting loans at bargain-basement rates, courtesy of the Fed.
In consequence, businesses are already spending as much as they can justify economically. Almost two-thirds of the measly growth in the economy so far this year has come from businesses rebuilding their inventories. But without more consumer spending, businesses won’t spend more. A robust economy can’t be built on inventory replacements.
The problem isn’t on the supply side. It’s on the demand side. Businesses are reluctant to spend more and create more jobs because there aren’t enough consumers out there able and willing to buy what businesses have to sell.
The reason consumers aren’t buying is consumers’ paychecks are dropping, adjusted for inflation. And job losses are mounting. The 83,000 new private-sector jobs created in May represent a net loss because 125,000 jobs are needed merely to keep up with an expanding labor force. The number of Americans filing new claims for unemployment benefits edged higher last week.
At the same time, many Americans are falling behind in their mortgage payments. And housing prices continue to drop – making homeowners feel even poorer.
Close to 60 percent of the half-trillion drop in household debt since the depth of recession has been defaults rather than repayments. This makes it harder for people who’d like to enter the housing market to get new mortgage loans, or for anyone to refinance. Other consumer debt burdens are rising. On Tuesday the Fed reported consumer credit outstanding rose in April – mostly from record-high levels of student-loan debt and an up-tick in credit-card borrowing due to food and gas price increases outpacing wage gains.
All this translates into a continuing crisis on the demand side. Consumers can’t and won’t buy more. Between January and March, sales grew just .15 percent around the country – perilously close to no growth at all. May sales look even worse. Chain stores are reporting weaker sales. Consumer confidence has dropped sharply.
I continue to be utterly amazed at how an intelligent man like Obama can be so stupid. My only explanation is the wisdom of Upton Sinclair who said "It is difficult to get a man to understand something when his salary depends upon his not understanding it". Obama's campaign was financed by Wall Street. So he is deaf to the voices of the unemployed, the under-employed, and the employed but going nowhere. He's attending to the voices of the ultra-rich, the get-rich-quick types of Wall Street who can seduce with big payola under the table.
On a slightly different front in the political war, here's Robert Reich pointing out that Obama needs to move right now and stop big corporations from using their money to buy & sell politicians: