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Tilting at Windmills

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November 24, 2010

PROJECTIONS IN NEED OF A RESPONSE.... About six months ago, the Fed made economic projections for the next couple of years. The Fed's board of governors and its regional bank presidents now have new projections, and they're slightly worse.

Unemployment is set to remain higher for longer than previously thought, according to new projections from the Federal Reserve that would mean more than 10 million Americans remain jobless through the 2012 elections - even as a separate report shows corporate profits reaching their highest levels ever.

Top Federal Reserve officials project that the unemployment rate, now 9.6 percent, will fall only to about 9 percent at the end of 2011 and about 8 percent when the next presidential election arrives, in late 2012. The central bankers had envisioned a more rapid decline in joblessness in their previous forecasts, prepared in June.

Economic news isn't all bad. Third quarter GDP was revised upwards; corporate profits certainly aren't a problem; and Neil Irwin's report added that there have been "solid readings in recent weeks on job creation, manufacturing and retail."

But the Fed's top policymakers nevertheless expect economic growth next year in the 3% to 3.6% range, which would relatively acceptable under normal circumstances, but which is wholly inadequate when trying to bounce back from a brutal recession. If these projections prove to be accurate, unemployment will be in the 8.9% to 9.1% by the end of 2011, and in the 7.7% to 8.2% range at the end of 2012.

And if the Fed's projections turn out to be a little too optimistic, as they were in June, these figures will end up being worse.

That said, it's the political response to all of this that leaves me shaking my head -- which is to say, there isn't a political response.

A discouraging report like this should, one would like to think, encourage policymakers in Washington to take steps to improve economic conditions. The Fed is effectively letting D.C. know that if Congress does nothing, we can expect tepid growth and painfully slow job growth for quite a long while.

But at this point, we'd actually be lucky if "nothing" is the worst response from Congress. Remember, congressional Republicans, by their own admission, have no plan to expand economic growth. They don't even intend to try. Their stated goals in this area include taking money out of the economy through spending cuts, focusing on deficit reduction, cutting off stimulative unemployment benefits, fighting for the same tax rates we already have, and weighing the possibly of sending the United States into default.

Ideally, policymakers would see bleak economic projections and want to try to do something. But we're so far from the ideal, we can't see it from here.

Steve Benen 8:00 AM Permalink | Trackbacks | Comments (12)

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Here's a number I'd like to see: how many jobs are companies adding that are never touching this country, but going directly overseas.

We all think of outsourcing as people get laid off and lose their jobs when a company outsources them overseas, but now, how many jobs are really being added that Americans don't even know about and have no chance at getting?

Posted by: SaintZak on November 24, 2010 at 8:12 AM | PERMALINK

The state of war between the skins and the shirts has devolved . One side hollers and the other whimpers . Obama has tried to replace a sure thing to the pig trough with cooperation and work . Fat Chance that ever had with randy school boys waiting for the oracle of a sad sack twit from Alaska .
Perhaps an idol to worship less complicated than the wealthy , who are always wonderfully perfect . A state of perpetual adoration becomes so tiring .

Posted by: FRP on November 24, 2010 at 8:13 AM | PERMALINK

Why mess with success?
Corporate earnings are at near record levels with unemployment near 10% (probably closer to 20% in reality), so, what's their incentive?

Posted by: c u n d gulag on November 24, 2010 at 8:26 AM | PERMALINK

Seems like all good news to me!

Corporate profits are up and I am richer.

Unemployment is high and will stay that way and will help us diselect Obama.

We do not want the government to mess with success.

Just remember that for my class...
- More is never enough
- I've got mine, f*ck you

Posted by: RepublicanPointOfView on November 24, 2010 at 8:30 AM | PERMALINK

Aggregate demand may be down, down, down, but after all those spending cuts, cuts in unemployment benefits, and deficit reduction measures, aggregate virtue will be up, up, up.

As soon as we're good enough, as soon as the moral tone of the nation has been restored, corporate America wil climb down off its mountain of retained earnings and create some jobs.

What have you done to be more virtuous today?

Posted by: Davis X. Machina on November 24, 2010 at 8:34 AM | PERMALINK

Fred Smith (FedX) was speaking at the Republican governor's association earlier this week. Many of those overseas jobs, he said, are building products for overseas customers; "making baby food in China for the Chinese."

Multinationals know no boundaries, have no loyalties- except to their stockholders.

An interesting book is Ian Bremmer's "The End of the Free Market". Many states are becoming major players in the Capitalism of the 21st C. (China being the most obvious one). They control their nation's national resources, with the companies (Russia's Gazprom, for example) having an effective monopoly on an industry (And, in the case of Russia's natural gas industry, control of other nation's access to a vital commodity. Of course, they serve not their stockholders, but their political masters. How would we feel if the political leaders of Canada and or Mexico suddenly refused to sell us oil, unless we bowed to their bidding?

Meanwhile, we argue about tax cuts, death panels, and birth certificates. . .

Posted by: DAY on November 24, 2010 at 8:37 AM | PERMALINK

Some random Republican from Texas was talking about cutting off Medicaid to state residents saying that Texans had compassion for their poor. I did not believe it then and I do not believe it now.

Odd, that Republicans seem to like the idea of a wasteful idle rich class and are committing a secular sin by wanting extending tax breaks worth millions of meals to the rich when almost 1/3 of Arizona kids live in poverty. Perhaps like West, they have eyes but do not see.

Extending these tax cuts shows a deep indifference to those whose shoulders the wealthy stand on when millions of people are unemployed and tens of millions do not have health insurance. Some see this, others are willfully blind. 

Without those millions of workers the über rich would be never have become rich. America's wealthy would never be that wealthy without our laws, educational system, infrastructure, and hard working, ill-paid people.  One cannot produce excess wealth stranded alone at the bottom of the Grand Canyon. 

As there are no second class souls in Heaven, so should there be no souls 'more equal than others' on earth. This means a more progressive income tax system and not only opposing the extension of the Bush tax cuts for the rich, but restoration of the top rates restored to the pre-Reagan level. It means a higher taxes on über rich. 

People who wear $1,000 shoes from Saks on the streets Scottsdale & carry $10,000 Hermes bag in Houston should be mortified to indulge in public displays of wasteful spending when 1/3 of kids in Arizona live in Poverty.  If they do not feel, then they are intentionally sightless. Tax the excess wealth of the über rich now.  

Posted by: KurtRex1453 on November 24, 2010 at 8:48 AM | PERMALINK

Their stated goals in this area include taking money out of the economy through spending cuts, focusing on deficit reduction, cutting off stimulative unemployment benefits, fighting for the same tax rates we already have, and weighing the possibly of sending the United States into default.

Don't worry. The markets will respond positively to the "stability" and "certainty" of this news.

Posted by: Tired of That on November 24, 2010 at 9:09 AM | PERMALINK

Interesting report on NPR today. Failure to act on global warming creating uncertainty in energy market place. Duke Energy's nuclear plant may not be cost competitive now. That and lack of investment by gov't into green energy is just handing those markets to the Chinese.

Our "free market" is completely screwed up-solely focused on short term gain. I have to disagree with DAY above-companies are not beholden to shareholders. The executive class and their pay packages have isolated themselves from shareholders too. Get while the getting is good...

Posted by: golack on November 24, 2010 at 10:17 AM | PERMALINK

"But at this point, we'd actually be lucky if "nothing" is the worst response from Congress. Remember, congressional Republicans, by their own admission, have no plan to expand economic growth. They don't even intend to try. Their stated goals in this area include taking money out of the economy through spending cuts, focusing on deficit reduction, cutting off stimulative unemployment benefits, fighting for the same tax rates we already have, and weighing the possibly of sending the United States into default."

In the meantime, the "beaten spouse" Democrats throw up their hands, bend over, and take it one more time up the backside, hoping for "compromise" and "bipartisanship."

Posted by: bdop4 on November 24, 2010 at 10:45 AM | PERMALINK

Well, considering that while the US forecasts are lowering expectations, the UK and Germany both keep raising their economic expectations. Both countries, of course, are famous for engaging right now in the sort of spending cuts that you say will cripple the economy.

So it's possible, just possible, that your preferred theory about the economy is wrong. It's certainly possible that Republicans believe differently. Economic scholarship based on actual outcomes does not support the notion that fiscal stimulus is the way to restore an economy, whatever your theories might say.

Posted by: John Thacker on November 24, 2010 at 12:04 PM | PERMALINK

Yeah, it's that trickle down thing Steve. Let the wealthy have all the money and they will create jobs and the rising tide will lift all boats!


Oh, wait. . .

Posted by: getaclue on November 24, 2010 at 6:17 PM | PERMALINK




 

 

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