Robert Reich on the Jobs Stall in the U.S.

The Obama administration is no doubt telling itself that there are five months still to go before the presidential election. In 2011 there was also a mid year slump but then later a recovery.

However Reich points out that the most recent statistics are not at all encouraging and show how fragile and weak the recovery is. For the first time in nearly a year unemployment has risen, from 8.1 to 8.2 per cent. While not large it is still in the wrong direction.

Even worse only 69,000 jobs were created when many more were expected. From December to February of this year an average of 252,000 jobs were added each month. Just to keep up with labor force growth 125,000 jobs are needed each month.

The problem claims Reich is that Europe is facing a debt crisis and the big Asian economies are experiencing slower growth.BRIC nations are also feeling the effect of the global slowdown. As a result U.S. exports are not growing quickly..

However Reich also blames U.S. corporations for sitting on trillions in cash as they refuse to invest because of economic uncertainty..They are not sure either that American consumers would purchase goods if they increased production. Further investment is just not worth the risk..

Cutbacks and attacks on labor means that many consumers do not have the means to increase consumption. Median wages continue to decline.While in May wages were up 2 cents from last year adjusted for inflation this is actually a decline.

While overall corporate profits are healthy in many cases it is because of keeping costs down often by cutting the number of employees. This however decreases customer base for other companies.

Complicating the problems further Federal stimulus spending has run out.Even worse state and local governments shed workers to reduce their deficits.

Reich does not prescribe a solution to the situation but notes that Romney and Republicans will crow that the numbers show that what is needed is Republican measures such as more austerity policies and tax cuts.. This is a recipe for making the situation much worse as Reich sees it...For more see this article.

Robert Reich on how Romney made himself rich

Robert Reich has an article plus a video demonstrating how Romney made his money at Bain capital. Reich is Professor of Public Policy at the Goldman School of Public Policy, part of the University of California. Reich served under three administrations Ford, Carter and Clinton.

Romney borrows money and uses it to buy a majority stake in a company. After taking over the board he votes his company Bain a large management fee. He borrows from the company's bank to pay back those who loaned him money. The money also pays bonuses for Bain managers.

The Bain managers cut the number of employees, benefits, and much else to help pay back the bank loan. For much more see this article and the appended video.

Robert Reich: Manufacturing Illusions

Although there has been some improvement in the U.S. manufacturing sector lately Reich points out that for the most part workers are not sharing in those gains.

Republican presidential candidates have been pushing their recipes for advancing U.S. manufacturing. Obama too pushes a manufacturing agenda.

Obama has moved to remove tax incentives for companies to move overseas and create incentives to keep jobs in the U.S. Obama said:"Our goal,, is to create opportunities for hard-working Americans to start making stuff again".

U.S. consumers pent-up demand for goods has created a mini boom in manufacturing. Since January 2010, 404,000 manufacturing jobs have been added. Even with this addition there are 5.5 million less factory jobs now than in July of 2000 and a whopping 12 million less than in 1990. Even if production creeps up there are fewer and fewer factory jobs.

The new assembly line has robots where before there were well paid workers. Jobs for Americans who lack college degrees are less and less available and when they are they are usually non-union and poorly paid.

Even the strongest unions are negotiating contracts for new workers at about half of what workers received just a decade ago. The UAW has agreed to starting pay of 14 dollars per hour for new hires.

The Employee Free Choice Act would make it easier for workers to organize. Obama supported it in his first election campaign but did not move to make it law. This time he has not even promised to promote the bill if elected. Of course the unions have nowhere to go but Obama.

Obama has not spoken out vigorously against the anti-union and right to work campaigns in Wisconsin and Indiana. Corporations are doing well in manufacturing and services. Third quarter profits were 2 trillion a full 19 per cent higher than five years ago in the pre-recession peaks.

Wages however are declining in inflation adjusted terms. Wages as a share of income are at the smallest share since records have been kept in 1949, just 44 cents on every dollar of income.

As Reich sees it the problem in the U.S. is not just the recovery of manufacturing but the declining power of workers to share in economic growth. For capital this is not a problem but an ideal situation in which capital receives a larger slice of the economic pie. For more see this article.

Robert Reich on Sheldon Adelson and Newt Gingrich

Robert Reich is Professor of Public Poicy at the University of California Berkeley. He was secretary of Labor under Bill Clinton but served in three administrations. On his blog he has an entry titled: ""Who is Sheldon Adelson and What Has Newt Promised Him?""

Sheldon Adelson is a rabidly pro-Israeli casino owner. When Gingrich said that Palestinians were an invented people in an interview, the comment was almost universally condemned. However Adelson defended and approved the remark. See this article in the Huffington Post.

Actually the Huffington Post article has much more informatioon on Adelson and his Israeli connectionsl than does the Reich article. Reich does point out though that in defending Gingrich Adelson puts his wallet where his mouth is.

Adelson wrote a check for 5 million dollars to finance a pro-Gingrich Super Pac Winning Our Future. Reich sees this donation as part of what is wrong with U.S. campaigns. They are funded by the rich who no doubt expect to have influence on policies in return.

The decision of the Supreme Court that ruled that corporations are persons and have the right of free speech have opened the way for campaigns to be even more influenced by corporate donations.

The donation to Winning our Future was immediately used to produce an expensive anti big business ad against Mitt Romney. Billionaire Adelson helped fund the ad. A friend of Adelson noted in the Daily Beast:"Sheldon has always loved Newt," "He stuck with him when he stumbled. Newt, I think, is very reflective of Sheldon's mindset. Particularly with Israel." Gingrich obviously will have the support of some in the Israel lobby. For more see Reich's blog entry.

Robert Reich on the Recovery

Given that consumers are in no position to resume the breakneck spending pace that fuelled the long economic growth in the earlier bull market the present profit growth in some companies is simply a result of cost savings. Perhaps the stimulus package has helped as well. But as Reich points out unemployment is still rising and those without jobs are not big spenders. Those with jobs are often up to their ears in debt and their first priority will be to pay that off. There is no sign of conditions that would lead to a big increase in spending. Any recover will probably be slow and painful...


http://www.salon.com/opinion/feature/2009/07/24/wall_street_rally/print.html

The Wall Street rally: Watch your wallets
The profits aren't real. Keep your eye on the real economy, where unemployment and underemployment keep rising

By Robert Reich
Jul. 24, 2009

"Been Down So Long It Seems Like Up To Me," the precocious 1966 novel by the late Richard Farina, defined the late 1960s counterculture. The stock market rally that's pushed the Dow Jones Industrial Average back above 9000 for the first time since early January could be given the same title, and it might well come to define the much-wished-for financial recovery.

What's pushing the stock market upward? Mainly, unexpectedly positive second-quarter corporate profits. But those profits aren't being powered by consumers who have suddenly found themselves with a lot more money in their pockets. The profits are coming from dramatic cost-cutting -- including, most notably, payroll cuts. If a firm cuts its costs enough, it can show a profit even if its sales are still in the basement.

The problem here is twofold. First, such profits can't be maintained. There's a limit to how much can be cut without a business eventually disappearing -- becoming, in effect, a balance sheet in space. Secondly, when businesses slash payrolls to show profits, consumers end up with even less money in their pockets to buy the things businesses produce. Even if they hold on to their jobs, they're likely to fear that they won't have the jobs for long, which causes them to retreat even further from the malls.

Most companies that have reported earnings so far have surpassed analyst's estimates, but that only means that earnings have been less bad than analysts had feared. According to the chief investment officer at BNY Mellon Wealth Management, if the companies that haven't yet reported earnings show the same pattern as the companies that have reported so far, overall corporate earnings will have dropped 25 percent over the past year. That may not be as much of a drop as analysts had expected, but it's still awful. Operating income for companies in the S&P 500 that have reported so far has been almost 29 percent lower than last year, more than 80 percent lower than 2007, according to Standard and Poors. Ouch.

"Better-than-expected" is Wall Street's euphemism these days for "we're happier than we thought we'd be." But Wall Street is in the business of cheerleading, even when there's really nothing to cheer about. It wants investors to think positively, on the assumption that positive thinking can be a self-fulfilling prophesy: If investors begin putting more money into the market, then the market will automatically rise, leading more investors to put in more money -- until, that is, the rally ends because nothing has fundamentally changed in the real economy.

Keep your eye on the real economy, where unemployment and underemployment keep rising. It's not as much fun as cheering and investing right now, but it's far safer.

Robert Reich: Totally Spent

Reich has an interesting analysis of the present recession and its causes. However, his idea that the way out is to increase wages and the power of unions seems out of whack with present power relationships within US capitalism. Labor is weak and because of global competition capital is quite strong. The buyouts by General Motors are a good example. New workers are hired at very much lower wages than former workers. Wages are likely to fall as cheap labor in developing economies attract capital.

http://www.nytimes.com/2008/02/13/opinion/13reich.html?_r=1&th&emc=th&oref=sloginFebruary 13, 2008Op-Ed ContributorTotally SpentBy ROBERT B. REICHBerkeley, Calif.WE’RE sliding into recession, or worse, and Washingtonis turning to the normal remedies for economicdownturns. But the normal remedies are not likely towork this time, because this isn’t a normal downturn.The problem lies deeper. It is the culmination ofthree decades during which American consumers havespent beyond their means. That era is now coming to anend. Consumers have run out of ways to keep thespending binge going.The only lasting remedy, other than for Americans toaccept a lower standard of living and for businessesto adjust to a smaller economy, is to give middle- andlower-income Americans more buying power — and notjust temporarily.Much of the current debate is irrelevant. Even withmore tax breaks for business like accelerateddepreciation, companies won’t invest in more factoriesor equipment when demand is dropping for products andservices across the board, as it is now. And temporaryfixes like a stimulus package that would givehouseholds a one-time cash infusion won’t getconsumers back to the malls, because consumers knowthe assistance is temporary. The problems mostconsumers face are permanent, so they are likely topocket the extra money instead of spending it.Another Fed rate cut might unfreeze credit markets andgive consumers access to somewhat cheaper loans, butthere’s no going back to the easy money of a few yearsago. Lenders and borrowers have been badly burned, andthe values of houses and other assets are droppingfaster than interest rates can be lowered.The underlying problem has been building for decades.America’s median hourly wage is barely higher than itwas 35 years ago, adjusted for inflation. The incomeof a man in his 30s is now 12 percent below that of aman his age three decades ago. Most of what’s beenearned in America since then has gone to the richest 5percent.Yet the rich devote a smaller percentage of theirearnings to buying things than the rest of us because,after all, they’re rich. They already have most ofwhat they want. Instead of buying, and thusstimulating the American economy, the rich are morelikely to invest their earnings wherever around theworld they can get the highest return.The problem has been masked for years as middle- andlower-income Americans found ways to live beyond theirpaychecks. But now they have run out of ways.The first way was to send more women into paid work.Most women streamed into the work force in the 1970sless because new professional opportunities opened upto them than because they had to prop up familyincomes. The percentage of American working motherswith school-age children has almost doubled since 1970— to more than 70 percent. But there’s a limit to howmany mothers can maintain paying jobs.So Americans turned to a second way of spending beyondtheir hourly wages. They worked more hours. Thetypical American now works more each year than he orshe did three decades ago. Americans became veritableworkaholics, putting in 350 more hours a year than theaverage European, more even than the notoriouslyindustrious Japanese.But there’s also a limit to how many hours Americanscan put into work, so Americans turned to a third wayof spending beyond their wages. They began to borrow.With housing prices rising briskly through the 1990sand even faster from 2002 to 2006, they turned theirhomes into piggy banks by refinancing home mortgagesand taking out home-equity loans. But this thirdstrategy also had a built-in limit. With the burstingof the housing bubble, the piggy banks are closing.The binge seems to be over. We’re finally reaping thewhirlwind of widening inequality and ever moreconcentrated wealth.The only way to keep the economy going over the longrun is to increase the wages of the bottom two-thirdsof Americans. The answer is not to protect jobsthrough trade protection. That would only drive up theprices of everything purchased from abroad. Mostroutine jobs are being automated anyway.A larger earned-income tax credit, financed by ahigher marginal income tax on top earners, isrequired. The tax credit functions like a reverseincome tax. Enlarging it would mean giving workers atthe bottom a bigger wage supplement, as well asphasing it out at a higher wage. The currentsupplement for a worker with two children who earns upto $16,000 a year is about $5,000. That amountdeclines as earnings increase and is eliminated atabout $38,000. It should be increased to, say, $8,000at the low end and phased out at an income of $46,000.We also need stronger unions, especially in the localservice sector that’s sheltered from globalcompetition. Employees should be able to form a unionwithout the current protracted certification processthat gives employers too much opportunity tointimidate or coerce them. Workers should be able todecide whether to form a union with a simple majorityvote.And employers who fire workers for trying to organizeshould have to pay substantial fines. Right now, thetypical penalty is back pay for the worker, plusinterest — a slap on the wrist.Over the longer term, inequality can be reversed onlythrough better schools for children in lower- andmoderate-income communities. This will require, at theleast, good preschools, fewer students per classroomand better pay for teachers in such schools, in orderto attract the teaching talent these students need.These measures are necessary to give Americans enoughbuying power to keep the American economy going. Theyare also needed to overcome widening inequality, andthereby keep America in one piece.Robert B. Reich, a professor of public policy at theUniversity of California, Berkeley, is the author,most recently, of “Supercapitalism.”___________________________________