The Washington Post that one important feature of the current weakness in the economy is an increase in the number of long-term unemployed. The economy as an issue is normally seen as competing with the war for attention, but I can't help but wonder if economy wouldn't be stronger if all this money that's been squandered in Iraq over the years had been invested (by public or private actors) in productive ways.
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Long-Term Unemployment
21 Jan 2008 04:03 pm
Comments (32)
What money in Iraq?
I just had talk radio on, and they were very clear that democrats are the party of "big government" and that republicans are the party of "small government."
Invading and occupying Iraq and the entire defense industry is, of course, unrelated to "small government."
That's wingnut double-think 101.
sure you can "help but wonder;" you can "know."
that is to say, if you simply said to brad delong or any number of economists with an interest in public policy like him "here's the annual sum the bush administration was prepared to spend on iraq; now design me highly stimulative policies employing this same amount of money," there's no doubt they could have done it in such a way as to provide much greater economic (and social) benefit.
if all this money that's been squandered in Iraq over the years had been invested ...in productive ways
Nope. They would have found another way to squander it.
However, the genesis of the economy's woes lies with the housing asset bubble. This was a known and acknowledged for the longest possible time. But no one did anything about it because of this absurd notion that the “market” is all-knowing and perfect, and somehow it would magically correct itself.
The magic is partly in words like "correct itself" Or "adjust" - I especially love the numerous articles about how the U.S. economy will have to go through a period of adjustment. It sounds like, you know, getting the seatbelt on. So comfy. Instead of saying things like, millions of people will have to be unemployed or experience severe cuts in wages, and the well being of those who are not in the top income twenty percentile will find less money to feed, clothe, shelter and educate themselves and their kids so that the top twenty percent can continue to take a grossly distended part of the national income. To say that would be mean! It is like proposing that the rich pay more taxes - suddenly, it all gets very personal and they have worked hard for every cent, even though in actuality, you could simply take half of most of their earnings and it would produce zero change in their lifestyles. The American republic's experiment with combining democracy with Brazil like inequality is bound to end badly.
A 2004 study found that workers who lost a job in 2001 to 2003 took an average pay cut of 17 percent in their new jobs, more than double the average cut of those displaced in the late 1990s.
The late 1990s, when the Clinton administration had the DOJ actually prosecuting businesses that hired illegal aliens, resulting in an unusually hot job market at the bottom....
I agree that without the Iraq war the government would have just found another way to squander the money, unless it all went into tax reduction. In that case, we probably really would be economically better off.
We were injecting money into the economy - just to the defense industry, rather than something more productive.
Ralph Phelan: shhhh. In MattY's magical universe there's no correllation between massive immigration of cheap labor and large numbers of long-term unemployed. Look, a jackalope!
TLB: shhhh. In the average Republican's magical universe, the article to which Matt links doesn't mention that "long-term unemployment is growing most rapidly among white-collar and college-educated workers with long work experience."
Sheesh ... do some of you guys even bother to read? Or would doing so make it harder for you to demonize brown people?
TLB:
http://www.washingtonpost.com/wp-dyn/content/article/2006/08/10/AR2006081001711.html
http://www.leftbusinessobserver.com/Immigration.html
When accusing others of magical thinking it's usually best to have the facts on your side, but if you prefer, feel free to respond with more argument by incredulity. We all know that's totally reliable, especially when it comes to deeply racialized issues.
And its not just the money squandered in Iraq, its also the artificially low interest rates, unsustainable borrowing against overvalued assets, and the government endorsed speculation all of which have stopped. Grab your hats, its going to be a wild few months.
30 and 40 years from today, the bush recovery will be considered to be the weakest of all recoveries since accurate measurement began.
We've squandered a fortune in Iraq, it could have been much better spent in basic research on alternative energy and upgrading our energy infrastructure. For example, one thing almost all forms of alternative energy have in common is distributed production. We need an energy infrastructure that can handle making small amounts of energy in many locations.
Note that it would have been better to simply save this money. The money has been spent by essentially burning 100 dollar bills, with a very marginal increase in security.
When discussing what else we might have done with the nearly one trillion dollars we have spent on "liberating" Iraq, we should keep in mind that there are only about 25 million Iraquis. We have spent about $40,000 PER IRAQUI. I know freedom is priceless, but "liberation" obviously costs money. Still, $40K per capita seems kind of high. Evidently, the Iraq War is no more efficient than any other government program.
On the flip side, given that there about 300 million Americans, the Iraq War represents an expenditure of about $3300 PER AMERICAN -- every man, woman, and child. (Since it was mostly borrowed money, the child part is not just rhetorical.) I wonder how many Americans would say they got their money's worth.
-- TP
""long-term unemployment is growing most rapidly among white-collar and college-educated workers with long work experience." "
If long-term unemployment went from 30% to 31% among unskilled workers, and went from 2% to 4% among white-collar workers, the above quote would be true. And unimportant.
Without actual numbers I have no idea what that quote means. Given journalists' tendency to try to state things in the most sansational manner rather than the most informative, until I actually see numbers I'll assume "not much."
The low unemployment rates of the Bush presidency were due to people dropping out of the work force (if you stop looking for work, your not registered as unemployed). The "economic boom" was felt entirely at the top and was the result of the housing boom and low interest rates that resulted in home-equity loan-fueled consumption. Meanwhile, wages and benefits, in real terms, have stagnated or declined since 2001.
People who think the government would have wasted the money anyhow are so deluded.
The money for Iraq was never budgeted ahead of time. It was certainly not funded through taxation. It was funded through government borrowing, which, one way or another, is a big part of why we find ourselves in the current mess. If that money has simply not been spent by the gov, which is what would have happened, everyone who is not a defense contractor would be a lot better off.
Kalkin will note, of course, that the WaPo was at least semi-honest enough to get input from two people who cast doubt on the Pew study. And, the unemployment rate doesn't count those who've stopped looking. Feel free to look through these.
The reason why the housing bubble burst is because no downpayment loans at below market interest rates (adjustable rate mortgages) were made on the assumption that housing prices would continue to rise forever. When that didn't happen, coupled with adjustable mortgage rates taking a substantial uptick after the first year, not surprisingly, an individual who couldn't meet the increased payment and who was now upside down in that he/she now owed more money then the house was worth, found it to his/her advantage to default on the payments, rather then taking a hit by trying to sell it for less then the mortgage and coming up with the difference.
Yeah, there's some doubt about the Pew study, and others like it. There are, however, no serious studies even claiming to show that immigration increases overall unemployment, and only some really damn thin ones showing it's even bad for the people at the bottom.
What drives employment is the economy, which immigration boosts. What drives wages is the relative power of labor versus capital, which immigration restrictions and clampdowns decrease by creating a pool of deportable and exploitable labor.
As for Black unemployment specifically, I'll give you some candidate causes: disproportionate arrests, charges, convictions, and sentencing in the country with the highest incarceration rate in the world. Employers who decide whether to give a callback on a resume depending on the blackness of the applicant's name. Inner-city schools that get half the funding of suburbs, and are back to being as de facto segregated today as they were in 1960.
If anti-immigrant activists were serious about fighting job loss, they'd be picketing the CEOs who get millions in bonuses for driving their companies into the ground, not powerless Latin Americans looking for day jobs in Walmart parking lots. But instead we get this shit: http://www.signonsandiego.com/uniontrib/20060521/news_1mi21workers.html
... and we get people like you showing up in the comments on posts looking at the economic effects of wasting billions to kill Iraqis, and trying to change the subject to immigration.
Re: The low unemployment rates of the Bush presidency were due to people dropping out of the work force
I disagree: how many people have the option of dropping out of the work force? People old enough for Social Security and people with spouses who earn enough to support them. Otherwise dropping out is not possible. However, it is true that more and more people were shifted from full-time, permanent jobs into temp or part-time jobs, and that in turn helps drive the other matter you note: that wages have stagnated and benefits have grown rather stingey.
Re: Meanwhile, wages and benefits, in real terms, have stagnated or declined since 2001.
A bit more than that: people with college educations and good job skills also did well after the lean years at the beginning of the decade. I'm a case in point. Two years ago the company I worked for went belly up; my phone rang off the hook almost as soon as I posted my resume online. I had no trouble whatsoever landing a new job and the phone calls continued for almost a year. I am now making more than I never made before. Seems obvious to me that there is a skill shortage in some areas of our economy (and some regions of the country) and people with the right background (not necessarily rich people) can cash in on that. As to where all of this will go as the housing mess continues to unwind, I can't say. But I don't think the job market was anywhere near as bad as the pessimists portray it, at least not during the middle Bush period.
Obviously this is unfortunate for anyone in the event, but why are we supposed to take this a meaningful statistic? If unemployment averages 4.5% under the next president, but half of that is long-term, is that good or bad?
Ralph, did you live through a different late 1990s than I did? I don't remember the immmigration crackdowns of the late 90s.
ben, get the talking point right: you're on the left, so only talk about wages (try to describe them as stagnant), not benefits. Total compensation has increased faster than inflation, but the balance has shifted to benefits--a difference from what we saw during the Clinton years, when HMOs helped shift compensation gains to wages.
thomas, if you insist upon bringing up crap like "benefits have increased," then you're going to get called on it.
what has actually happened is that the cost of health-insurance has gone up, which has resulted in two results: companies do pay more, to be sure. but what they also do is increase out-of-pockets and they cut back the number of people getting health care coverage, which has fallen every year under bush.
jeez, imaginee that: the benefits story is a crock. who wudda thunk that a right-wing talking point on the economy is bu(sh)it?
Yes, howard, health insurance costs have gone up. Health care spending is up. We consume more health care, as a nation. Much of that consumption isn't financed through wages, but is financed through benefits. The fact remains that it is compensation, and that total compensation has outpaced inflation.
The number of people with health insurance is up. The number of people without health insurance is also up. You don't know the difference, so I'm not sure why I'm bothering.
oh poor thomas, equipped with the right-wing talking points but not the understanding. let us wander through your misunderstandings, shall we?
first, distribution matters. if a company has 999 employees for whom it pays $1/year in insurance, and then hires a new CEO with a preexisting condition for whom the insurance company wants $1,000/year, and then chooses to afford that cost by eliminating health care for everyone else, you'd like to call that extra $1/year an "increase in compensation." sadly, 999 people will disagree with you.
second, since we can know the rate of increase of health insurance costs in general, we need to apply an appropriate real deflator to that "increase," and when we do, we discover it all to be nominal, not real at all. this shouldn't be surprising, since there is no "increase" in compensation, just an increase in the cost of the benefit: workers are getting better coverage.
third, out-of-pockets have doubled since 2000 for workers: that, while a true cost (since prices have not doubled in that interim) and one that is not debited against the compensation column on the national accounts, so to speak, but is nonetheless real.
as, fourth, is the suggestive data that kaiser has assembled (because, thomas, there actually is a gold standard source of information about employer health-care coverage, and that is the annual kaiser survey) that workers have been moved onto higher deductible plans, which again results in a real cost to the worked undebited against the compensation account.
and finally, thanks to kaiser, i can tell you that it is a simple fact that 69% of employers offered health-care benefits in 2000 and we're down to 60% now, with commensurate impact on percentage of workers covered. this is the relevant metric when you want to discuss health insurance as part of compensation (as distinct from health costs as part of the eocnomy, and that you confused the two was the "tell" that you really don't know what you're talking about, you're just equipped with things to say).
so, bottom line, it is entirely spurious to use the inflation of the cost of the health-care benefit as a reason to say that households in aggregate are doing better than the household income numbers alone would suggest.
if you would like to educate yourself a little on the realities of health-care costs within the context of a fringe benefit, you can stir yourself to read the 2007 kaiser report here:
http://www.kff.org/insurance/7672/upload/76723.pdf
er, last line of the third graf: workers are NOT getting better coverage.
The warm afterglow of the G-Men's victory wore off and howard is mean to helpless Thomas. Thomas fell asleep before he got to graph 3 so he did not add that everyone gets free health-care at the emergency room.
"Ralph, did you live through a different late 1990s than I did? I don't remember the immmigration crackdowns of the late 90s. "
I wouldn't call it a crackdown, but it was a heck of a lot better than Bush's limp-noodle impression.
And no, allowing in illegal immigrants does not improve labor's bargaining position. Sending them home so employers have to find replacements improves labor's bargaining position.
howard, familiarize yourself with ERISA before spouting off with an unlikely hypothetical. The rest is simply confused. Compensation is wage plus benefits. Compensation has shown real growth, contrary to your original assertion. Distribution matters, but that's what the median shows, so this is mostly new hand-waving from you. The idea that health care inflation needs to be used as a deflator is just bizarre and confused. And finally there's talk about percentage of employees offered coverage, which isn't what you'd referred to before, so again is mostly hand-waving. Ignorant and dishonest.
Ralph--ah, I see. Nevermind.
Thomas, i have no idea what drivel you are talking about, probably because you have no idea what you are talking about. your reference to ERISA is completely inane - i used my hypothetical to point out that costs increasing over fewer employees is not anything that should be called a "real increase." of course it wasn't a "real" example, and i didn't claim it was. sheesh.
as for the rest: since you acknowledge that distribution matters, you need to deal with the fact that we have seen a drop in the percentage of employees covered even as the cost has gone up (this is exactly what i said both times, and the fact that you can't understand that is your problem, not mine: how is it possible that "companies...cut back the number of people getting health care coverage" doesn't mean to you what it says?)
i did not discuss "health care inflation" (another example of your inability to comprehend what you think you are talking about): i specifically said "the rate of increase of health insurance costs," which is a distinct subset of health insurance.to be precise, health insurance premiums were up 6.1% (see kaiser) for employers; since there is no hedonic adjustment to be made here, that means that if the "benefits" category derived from health-insurance coverage must, to be described in "real" terms, deflated not by cpi but by that very same 6.1%. i can't help it if you can't understand this.
so let's review your argument: because health insurance costs have inflated, you believe that total real compensation has increased even though fewer workers are covered and their out-of-pockets are higher. This is typical right-wing blather, cherrypicking a number and rejecting all of its context. i believe the appropriate words are ignorant and dishonest.
howard, you said "what has actually happened is that the cost of health-insurance has gone up, which has resulted in two results: companies do pay more, to be sure. but what they also do is increase out-of-pockets and they cut back the number of people getting health care coverage, which has fallen every year under bush." I took the last bit--the "which has fallen every year under bush" bit--to be a claim that the number of insured has fallen every year under Bush. That isn't true, of course. You say that it is instead a reference to the number of people who are offered employment-based insurance each year, which is different, and if that's the case, I misunderstood you. However, that claim isn't true either, according to the Census. Whether it's true as to the percentage of people offered is another thing entirely.
You repeat your insistence that health insurance costs borne by employers need to be deflated by the health insurance inflation rate. That's very strange. If we had a system in which everything else was the same, except that insurance wasn't generally employer based but was instead directly purchased, and if total compensation expenses increased at the rates that they have recently increased, with people using wage gains to directly purchase their insurance, how would you determine the real rate of change in total compensation? The same way should apply in the system we have, right? So why are you insisting on some different calculation?
thomas, you did misunderstand. that said, you'll have to show me the census data, because the kaiser study is regarded as the gold standard on what's actually going on in industry when we are looking at the fringe benefit. the kaiser study shows a consistent decline (although this year's was statistically minute) since 2000.
let us also be clear about "offered;" this is a measurement of companies that provide the benefit; the number of recipients roughly tracks. as a result, in absolute terms, fewer workers receive health-care benefit coverage today than did in 2000.
meanwhile, premiums have gone up an astonishing 78% in that interim (see the kaiser study), so the per cap has gone up considerably, but with two costs: one is that there are fewer people covered and the second is that out-of-pockets have doubled in that same span (for family coverage, that means an additional $138/month, and i'm not sure whether it's before or after taxes).
so that's the first part; now on to the second.
let's repeat the conceptual claim first: there is no hedonic adjustment necessary for health-care, because the quality of your coverage has not, as an employee, improved (indeed, it has worsened, in the sense that you are, in fact, paying more for it).
now, if we were simply talking about pure cash-flow, i'd be happy to say that "the cost of health-care benefit coverage is increasing more rapidly than inflation," because i'd be talking about "costs." but you want to talk in terms of "benefits."
and if we are discussing the "benefit" and whether it provides a "real" gain, than we ought to be able to see the "realness" of that gain, and we don't: the health insurance company or hmo or what have you issues a rate sheet, the company looks at the rate sheet and decides whether to even offer health insurance at all and then looks for ways to control the cost (by increasing the out-of-pocket assigned to the employee). in that context, it's perfectly legitimate to point out that using cpi and not "health insurance costs" as the deflator provides a misleading image that the benefit is "increasing" when, in fact, it is not.
because the essential point here remains as we started: you want to mechanistically claim that, "see here, comp equals wages and benefits, when i factor benefits in there's a real gain to households, so stfu about poor, struggling households and their stagnant income, it's just a revealed preference for better benefit packages."
and i'm saying stuff and nonsense, what's actually going on is that a cost is going up that companies can't control directly so they are controlling it indirectly through attrition and increased out-of-pockets that aren't being picked up and reflected in the total comp stats beloved of right-wingers, and that when we correct for that, we see that, yes, it's been a stagnant period (short and long term) for median households and there's not some miraculous improvement in their situation because of fringes....
howard,
See the Income, Poverty, and Health Insurance Coverage in the United States: 2006 report from the census. Table C-1 shows that the number of individuals with employment-based insuranced increased in 2004, 2005 and 2006.
On the rest, you're entirely confused. "Benefits" are noncash compensation. There have been real increases in total compensation, which is simply wages plus benefits. The change in out-of-pocket costs associated does not change the total compensation--if the out-of-pocket reduces the cash value of insurance, then it is a reduction in total compensation, not an increase. But we both agree--don't we?--that employers are spending more, not less.
So what's left? Your continued insistence that, even though (or is it because?) health insurance (and the underlying health care) costs are increasing, we should deflate those costs. The "realness" of the gain is clear enough: if one wants to directly purchase a substitute policy instead of taking the employer-provided policy, the cost of the substitute has also gone up. Again, the employer-provided versus directly purchased decision doesn't change the value of the total compensation--that's the crucial bit you keep missing.
Comments closed February 04, 2008.
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Heads in the Sand
I would love to see the government spend money on the national parks. They have a billion dollars worth of unfunded capital improvements that need doing. Another thing the government could have spent the money on is commercial solar generation plants like Spain has done. Just a couple of clean hippie ideas.
Posted by cheflovesbeer | January 21, 2008 4:17 PM