Unexpectedly

I remember the widespread unexpectedness for the past couple of years. Haven't been paying close enough attention recently to know it was still going on.

I think it provides good context for this statement:

The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. from Nobel prize-winning economist Friedrich Hayek's appropriately titled book "The Fatal Conceit"

Yes. If only America had slashed its spending like Britain.

British economy shrinks unexpectedly.

British Chamber of Commerces cuts growth forecast unexpectedly.

And of course spending cuts are really going GREAT GUNS in Ireland, Greece and Portugal.

But, but, we can't give money to the freeloading poor who will immediately spend it all, thereby increasing demand and actually stimulating the economy! SUPPLY SIDE OR NO SIDE!

SUPPLY SIDE OR NO SIDE!

SUPPLY SIDE OR NO SIDE!

THANK YOU JESUS!

To bad we are involved in 3 wars now which we really do not need financially.Britain was never involved in 3 wars also. That is where this money is going. One billion dollars a month for a war in Afghanistan which is a complete waste!

That depends on what you mean by "giving" money to the poor. If you let the the poor, middle and upper classes keep more of their money, the economy does expand. This has been proven at least three times in the last 50 years. The complement to this is the supply-side component. Allowing business to expand leads to increased hiring, which positively affects economic growth.

Two points: 1) This is not surprising. A large cut in spending reduces money in the system, so short-term reductions in growth can be expected...especially in a deep recession. 2) What you're arguing is that government spending is the main factor in economic growth (right?). This is not true. What's happening is that the government is propping up a broken system with massive amounts of taxpayer dollars. The underlying problems are overspending and overtaxation. Short-term stimulus and long-term high spending only band-aid the problem while plunging nations into debt. (see: United States. We're experts at that).

To illustrate the above, consider this hypothetical: What would happen to economic growth if we had a tax rate of zero percent? Answer? Growth would explode, because people and businesses would buy and invest. Yes, yes...the deficit and debt would explode, which is why this scenario is impossible. But it illustrates how tax cuts affect economic behavior. It also illustrates the simple notion that letting people keep more of what they earn is good for the economy.

It's not where the money is going, though I agree it's expensive. Defense spending accounts for 20% of our budget. If we eliminated all defense spending, the deficit would go from 1.5 trillion to 900 billion. With the exception of the TARP-influenced deficit, that's twice as large as Bush's largest.

The problem is domestic spending in the form of entitlements, waste, federal agency expenses/size/scope, and low economic growth. The prescription is spending cuts and a new tax code...one that is simplified, fair, impossible to avoid, and lets people keep more of their own money.

Two quick and dirty examples, marv:

77,000 Fed employees earn more than governors:

http://ca.news.yahoo.com/nato-formal...100141091.html

Number of limos soars under Obama:

http://www.iwatchnews.org/2011/05/31...ed-under-obama

More unexpectedness: Private sector job growth slumps in May


Oops.

I guess we're back to net negative job growth (the economy needs to create about 150K-200K a month just to stay even).

I'm still on hiatus, but I can't not post this.

Unexpectedly (for supply-siders), cutting taxes did not magically increase revenue in every state that tried it.

Of course, for those of us who understand this aspect of economics, this result wasn't unexpected at all.

No, it doesn't.

The bigger (long-term) economic growth effect will come from tax cuts for the wealthier because they have the highest propensity to save.

Of course its better for everyone to keep more of their own money and do with it what they choose to do. I am just speaking of the relative overall economic impact.

Let's just print more money out of thin air.

That'll fix everything.

I'm waiting for the "unexpected*" rise in prices.


*This is already happening already of course but it's being hidden or masked in a variety of ways. But the man on the street knows its happening. Food is one area where there's already been a lot of price inflation. One simple example is OJ. In 2010 reduced its 64oz carton to 59oz but kept the same price level. That's about an 8% price increase. Just a tad more than the "official" rate of inflation (approx 1.5% to 3.0%.) Clothing is another. Energy costs also. Commodities tell the real story of course.

The evil businesses are raising their prices out of pure spite and greed. Didn't you know?

It has nothing to do with the government increasing the money supply by printing money out of thin air, which in turn devalues the dollar. Nothing at all.

Well I know. But I was trying to put out my best conservative, free-market "talking points" and hope no one noticed.

I would make the argument that what we need are jobs. I would also argue that America needs to make things once again. We need to make things.

Wealth redistribution is not a solve all for any economy here, in Europe or anywhere else.

We need to make things.

We have decided to allow ourselves to outsource far too much of who we are. Now we are much less than we were once. Ohh and there seems to be less income for the ever hungry to spend government.

Fellows

We do.

Ok, we need to make MORE things than we do now. Better to be an exporter than an importer.

Where do you live?

I have a reason for asking this.

Secondly I would suggest that yes when we build helicopters, tanks, ships, weapons systems, chemicals, aerospace etc. with very high price tags this is where we get the high figure of our "manufacturing" in this country. It is every other sector of manufacturing that is and has been in decline that we "the normal consumer" see in the marketplace and in terms of job outsourcing.

We don't really make a whole lot of things anymore.

But if you go to any retailer you will see where things are made.

Fellows

The U.S.



Yes, the U.S. has transitioned from manufacturing low-value goods to manufacturing high-value goods. Essentially the US has a comparative advantage in making high-value goods and other countries have a comparative advantage in making lower-value goods. The has a comparative advantage in other things too (e.g., product design and engineering, etc.)



Why does this matter?



I guess it depends on what you mean by a "whole lot of things"...but even if you're right, why does it matter?



Yes, most lower value items are made in other countries. This has a couple of benefits: 1) it makes the goods more affordable for more people (effectively increasing their wages), 2) enables these other countries to begin climbing the ladder out of poverty, and 3) it frees people in this country to work on other, higher value things.

Now wait just one second! Are you saying that Wall Street...to whom we're supposed to look at something like the DJIA increase over the past couple of years as a clear sign of the growing economy is baffled? This same group who didn't see the bad things coming on multiple occasions?

The US

I respect your opinion that it is no loss in fact a gain for other countries to continue to produce things which we used to partake in ourselves. I would ask when you will begin to be concerned as other countries erode the "higher value" items which you think is what does carry the water for us in the US now? Say in the next 10 - 15 - 20 years others in the world start producing the higher value items? Will you be concerned at that time?

I think that many can sense a decline in quality in items that used to last for 30 years like Coleman camp stoves made in the USA to cheap chinese made junk at wal-mart that lasts maybe one or two camping trips maybe a couple of years if you are lucky.

This is wonderful if you like buying junk and having fewer jobs because as you seem to see it there is no value to manufacture silly things like camping equipment only the high and lofty "high value" things that you mention are where the money is for the US at this point in time.

Again I think quality is in decline when we allow everything to become cheapened to where more people can afford a crappy / poorly constructed thing at wal-mart imported from slave labor that might last a year. Farther and fewer between are the finds of goods that last for generations or at least decades.

I would argue that the goods that we use on a household level could be made in the US. We have to choose to buy these goods. The toys our children play with could be made in the US like they were a a few decades ago. We could make furniture once again, we could make appliances in the US that are better in quality to the LG and the like that are imported. We could make things but instead we have many who just have given up and will work two jobs or flat out find a way to get government assistance instead.

Fellows

What?


I don't think it's an issue of opinion. It's really a fact.



Only if we're not producing even higher value goods and services.



Well there are other factors at play here than simply the fact they are made in China vs. the US. One major factor would be inflation.



First, I didn't say that there is no value in these other things, I'm simply pointing out that we're better off by making the goods and services that carry a higher economic value.



I agree that quality is in decline in some goods. There are other factors that contribute to that as I mentioned above.



They could, but why does it matter?

NOTE: Some of those things are still made in the US (furniture and appliances, and sure some toys also).

While you are glad we make the expensive stuff... For now anyway...

I would continue to hope that we make the expensive stuff as well as..

Make more consumer items that were once made in this country once again. There are countless items that could be made here and relieve pressure from the government paying endless unemployment benefits and at the same time provide jobs which in turn provide tax revenue to the government. Not to mention contributing to growing the economy.

So WHY does it matter?

More Jobs in the US. which could relieve our 10% unemployment number. Relieve the government of paying unemployment benefits. Create more jobs which in turn fuels tax revenue for the government as well as gives people without a job something to do with their lives.

So WHY does it matter? Quality of goods found in the marketplace could increase. We could actually as a consumer have an option to buy something that is a quality item as opposed to junky imported crap.



Jobs and quality. The two things that could stand to gain.

That is why it matters.

any other questions?

Fellows

More specifically I'm glad we're doing high value work vs. low value work.



Possibly. We'd have to find out how many of the currently unemployed who are receiving these benefits would actually be employed or employable making such things. I'm guessing very few.



Well you're assuming these would be valuable, high quality jobs. They aren't. You're also assuming that a) people want higher quality and b) that just making it in the US will make it higher quality. These are not necessarily true.

My guess is that most people in the US (and even those who are presently and mostly temporarily unemployed, want jobs making clothes, bobble heads or even snapping together cell phones and iPads.

I, for one, don't want my kids working in a factory and certainly not a lot of the stuff that is being made by our friends in foreign countries. I'd rather see them employed in a better way. I've worked hard to raise them, educate them and make sure they have the capacity to use their minds to do high value work.

In the end this is a concern that's greatly exaggerated.

Now, I will say that if the US were to relax some, many or all of its employment regulations that make employing people a more expensive proposition, then some of those jobs will return to the US. But many are gone forever.

Another thing is this...(I wish I had the link handy)...I read somewhere that the US has lost more manufacturing jobs to increased technological automation than it has to foreign cheap labor competition. Do you oppose this increasing automation also? How would you react if someone invented some new machine that enabled car companies in the US to make cars completely automated from bumper to bumper and then the 600K or so people currently employed to assemble these cars no longer needed to be employed making cars?

Or, let's consider the telecommunications industry. Currently there are about 20K people employed as "operators" of some kind. Of course they don't the same thing as operators of years past did. Automation has eliminated the need for them to switch, connect and route calls. If we didn't have this level of automation a) our phone calls would be orders of magnitude more expensive and there would be something like a million people employed doing this activity instead of doing something else.

Economically these are the same things.

Here's a book that you might be interested in.

So you don't believe there are many out there who would love to have employment even if they are not a doctor, lawyer, engineer, make helicopters or weapons. You don't think there are many people "qualified" who are actually employable...

I think this is more about your perception of your fellow members of society than truth. You don't have any confidence in those without work. I do actually think there are millions who would love to work. Keep in mind not all people are executives, bankers, lawyers, rocket scientists. Thank goodness for all of the careers that I just listed but I think a balanced outlook understands that not all of society are trained or employed by these fields. There are many jobs that are not fun jobs. I am sure meat packing jobs are awful. I am sure doing work with sewage etc. is not fun work. Mining coal may not be fun. But to think that all manufacturing jobs that don't make "high value" end products are horrible and awful jobs I think is wrong and inaccurate. Then to assume that very few of the millions who are seeking employment are not actually qualified or employable to do this awful work is just elitist arrogance. You are sitting in a high place looking down your nose at the world.




That is wonderful and I would never talk you out of it. But don't look at the rest of society as incapable or unwilling to be employed.


I understand that in America some want the education, the career, the lake house, the RV, the pool boy, the cleaning lady, the Hummer, the jet skies, the timeshare, the retirement funds, the pension, the best health care in the world, the college education for their kids, the expensive things in life like the good scotch, the good cigars, the nice car, the nice clothes, the expensive watch. This country provides opportunity for this.

Now some may just be modest people of modest means who just want a modest house not a $800,000 - $4 million luxury home in a gated community. Some may just want a means to raise a family. Not necessarliy go on Disney cruises but the local theme park or swimming pool. Not the fancy clothes but just closes to wear. Not the fancy restaurants but food on the table. These people if they have their own home clean it themselves, cut their own grass and are just normal people who may not be much in the way of yuppyland but they are content to their modest way of life.

I argue to you (you may be tone deaf to it) but none the less I argue to you that of this second class of people who are what I call "modest" There just might be a huge percentage of these kind's of people who would love to make things in america in a manufacturing job. I am not saying it would pay ton's of money. I am just saying that many would jump on this opportunity. I think it could add to our economy and reduce unemployment. I think it could actually translate to a better quality of life for the millions who are without work.

Fellows

I think you may have misunderstood what I'm saying. I'm saying that most people probably don't want to do the jobs that you're complaining about being in China, et al...and certainly not for the wages that are going to be paid to do those jobs. I'm saying that people want better jobs than that and, largely have those here. I actually wasn't claiming they were under qualified...but rather that they are over qualified.



You appear to be implying that I'm in that "the lake house, the RV, the pool boy, the cleaning lady, the Hummer, the jet skies, the timeshare" and $800K - $4M house category. I'm not. I'm solidly middle class.



Maybe.

I think the fetish about American manufacturing (along with the fetish about domestic oil) is an irrational and unnecessary concern.

domestic oil is a completely different subject.

As for it being a fetish I feel that our government has some issues to deal with. Issues like unemployment and a declining tax base. I don't think it is out of the norm nor do I believe it is irrational to suggest that Americans make things again.

This is not a liberal or a conservative issue. It is not "in my view" a free trade vs/ "protectionist" issue. It is simply recognition and hopefully action to expand the portfolio of work options for the people of this country. Not all of whome are rich or eliteist.

If employment was closer to full employment and our government had healthy tax revenues coming in I might grant to you that this issue would be closer to your description of being an "unnecessary concern".

However reality on the ground indiates that it is not off the wall to consider the benefits of manufacturing in America. I have complete confidence that Americans could make excellent products that both we here at home would purchase and those abroad would be willing to buy as well. I think we have excellent ideas, designs, and quality. No the products may not be the cheapest junk on the shelf at Wal-mart but they would be viable if only we gave it a shot.

Fellows

You're telling me about one geographic area? Did federal taxes change in that area? Please. Try a little harder, please.

I agree with you.

It's not "we" who have decided to outsource too much. It's the major corporations who have learned that they can still make an enormous profit even with their own company-wide austerity programs, slimming down so that existing employees have many more job duties for the same or fewer wages and benefits. And of course, since profit is the only thing that matters. these senior executives high-five themselves with huge bonuses for meeting the profit goals. Meanwhile, hiring has not resumed. Existing employees are worked to the bone. People are fearful to complain about the conditions lest others come in and take their jobs.

http://blogs.hbr.org/cs/2011/05/amer...wo%20Economies

The middle class is shrinking, thus shrinking demand. And it has nothing to do with taxes. Yet, senior executive salaries went up by 25% last year. Sure seems fair, doesn't it?

The solution is not to lower taxes. The solution is not to cut essential services. The solution demands a paradigm shift away from the idea that short-term profits are the end all and be all of corporate goals.

Corporate boards should be the checks and balances to the CEOs and senior management. They should NOT be the incestuous executive orgy they currently are.

We also must stop being the "no vacation" nation, but that's a whole other story for another day.

You might, but the facts don't.




From the CBO report on the stimulus last year. The corporate and wealthy tax breaks are the LEAST effective forms of economic stimulus.

I disagree. The fetish is, sometimes, for different reasons. But, ultimately, there are various strains of this "do it in the US" thing that is just stupid.



The government needs to get out of the way.



I'm not claiming that such a suggestion is irrational per se. But there is an obsession with this that's really unnecessary.



That's fine. But the focus on manufacturing is narrow and unnecessary. There is a wide range of productive economic activity. Some of it we call manufacturing, some of it we call services, some of we call financial services, etc. These are all valid and useful and productive forms of economic activity. There isn't one that is inherently more valuable or better than another and their importance changes over time and with the growing complexity and sophistication of the economy. There was a time in the US when 90% of the people were employed in agriculture. Now it's less than 10% (probably less than 5%). Manufacturing has and is going through the same transition.



I don't give a shit about government tax revenue. They're not getting enough? Cut spending. They need to get out of the way and economic activity will start to return to normal and new jobs of all kinds will be created.



Then go give it a shot.


Here's a blog post I happened across on this topic. It's about 9 months old but perfectly relevant. There's a great comment to it:

Love to know how you're going to do that.



Maybe some government minimum vacation mandates?

Yes, some Germany-style minimum vacation mandates would be the ultimate goal. There is more to life than work. They understand that.

Great idea. Making employees more expensive is a sure route to reducing unemployment.

What about the employees who would prefer a higher salary and less vacation?

But more to the point, why not leave it to employees and employers to negotiate the total work arrangement (i.e., vacation, salary, benefits, etc.) between themselves?