Rather than post a reaction of my own to the lousy jobs number I’ll just direct you to Barry Ritholtz’s excellent piece. Read the whole thing—it’s terse. Here’s a snippet that may sound a bit familiar to you:
President Obama: Needs to figure out what his economic plan is, how to interact with the GOP, and whether he will abandon his base. His hands — and brain — seem to be completely tied when it comes to anything involving jobs.
I am increasingly beginning to think that President Obama has no policy, no vision on the economy. Let me suggest a reason that his entire team of senior economics advisors (other than Tim Geithner) has jumped ship: they’re frustrated with him and he’s frustrated with them. All of the other excuses are just window dressing. It may be that they were frustrated with Tim Geithner. I do believe that he has the best resume with so little competence that I’ve ever heard of.
IMO the public would forgive President Obama’s bold mistakes WRT to the economy but they won’t forgive inaction. As me auld mither used to say “It’s easier to ask for forgiveness than for permission”. That his actions may do little or that he was dealt a bad hand are beside the point. The problem I’m afraid he has is that the present situation is beyond the experience of his economic advisors and beyond the experience of his political advisors. Either he should round up some 90 year old economic and political advisors or just trust to his instincts and do the right thing. Pecca fortiter, as Martin Luther said.
As I recall, there was a point in the last Presidential debates where both candidates were asked if the recent economic crisis changed any of their plans. Both said nope. I think we got what we elected, someone not particularly interested or prepared for the great recession; at most just interested minimizing the impact on his pre-existing plans.
Of course, the game was fixed, heads you win, tails I lose.
Oh yeah, because President’s have so much influence over the economy and labor markets.
Sorry Dave, that part is just vapid.
Would it help if he did? Roosevelt had a plan and the economy was performing well below potential for years.
There are multiple, frequently conflicting planes of activity. These particular remarks are not directed to the economic plane but to the political one. I don’t think that Obama can survive politically without resolute action even if the action is wrong, ineffective, futile, or counter-productive.
You could argue that Presidents can’t create movements, they can only get in front and try to lead.
So, when the movement is to unwind stimulus and spending, how do you get in front and make that into a jobs movement? It’s hard. And it’s certainly less hard to get in front of that crowd an just talk about unwinding stimulus and spending.
People often ask politicians, presidents especially, to get out there and make everyone change their mind. Give a good speech, get everyone on board to go create jobs.
I doubt that ever really happens.
Oh yeah, because President’s have so much influence over the economy and labor markets.
I know what you’re trying to say but you’re wrong in the technical sense. Presidents have a lot of influence on the economy and the labor markets in that they can severely dampen the growth process by implementing policies and enforcing them. If President Obama had the ability to implement France style labor laws that would show us clearly that he had a lot of influence to depress the economy and labor markets.
I know that your point is that the President doesn’t have the tools to actually initiate economic and labor market growth above the “natural” rate, which is in response to broad factors and signals in the economy and I agree with you on this issue, but politicians have it in their power to depress these factors.
So it is really all about looking good over actually creating jobs. A great big popularity contest. Are we back in high school now? Oh and lets not forget all the resources we’ll be wasting in pursuit of the Obama Popularity Campaign.
Sure, it is vastly easier to destroy than create.
I think one of Obama’s problems is he didn’t change anything when the magnitude of this crisis became apparent. He stuck to is policy promises no matter how ill thought out. In fact, he and his team probably realized the crisis was a golden opportunity: we can get through policies that absent the crisis would have been nearly impossible (e.g. health care reform).
Problem is do these policies help, hurt, or are they neutral. Given that employers are sitting there wondering what the impact on the health care portion of their labor costs it could be argued the ACA actually increased uncertainty…at a time precisely when the President should be seeking to decrease it.
Was the stimulus going to hurt, help or be neutral? It increases our debt levels to levels not seen since a world war and at a time when other programs are set to pose significant fiscal challenges. This raises the specter of higher taxes and thus possibly lower growth. And when interest rates finally go back up, all that debt will eat up much more of the government’s budget as interest payments go up.
Now maybe the views above are ridiculous and both policies helped, but I will point out that investment is not looking all that great right now. While PCE has returned to its level prior to the recession, investment has not. Investment also fell much more than PCE. PCE declined to 97.6% of its pre-recession high. Investment in software and equipment fell to 79.7% of its pre-recession high. This to me indicates that businesses see the future as still uncertain and are reluctant to invest. I think that, more than anything is why growth has been so low.
So here has been the plan so far. We borrow vast sums of money from our future income. We give it to people to spend, we give it state and local governments so they can keep spending the same as they would have spent without the grants, we give it to zombie banks, and we prop up 2 out of 3 firms in an industry that is probably going to be in permanent decline in this country from now on. And all the while firms are piling up large amounts of cash and are not investing and expanding. Which if they were to invest and expand that too would spur demand as well.
Does this not look…well…odd to anyone here? Anyone at all?
I stubbornly think that the movement is the story.
That is, the consensus that spending needs to be cut more than jobs need to be created.
Of course, there is some bad economics coming out of the right, “jobs destroying spending” and such. And it seems to work, politically speaking.
Steve, do you remember when Dave did the story on concerns, and the #1 concern sat at “slow sales” or some such.
If I remember correctly, you and Dave were animated that “uncertainty” had risen to #2 or something.
It is still not #1
Related:
How the bubble destroyed the middle class
“Commentary: Sluggish growth is no mystery: No one has any money”
I think there are things that the government could have done, such as reducing the cost of labor to employers: cut the employer’s share of payroll taxes, hold business harmless from the unemployment insurance program and it’s extensions, and exempt stimulas spending from prevailing wage law. It’s rather too late for all that. Employers have hunkered down.
Since Joyner called me “Drew” today, I will express my inner-Drew. I talk with small business, including left-leaning charities, primarily in my state, but all over the country as a part of my job. They don’t understand Obama and his many contradictions; some of what they theorize is probably not true, but people fill silence with their own concerns. I don’t think anybody was uncertain about Reagan’s core convictions, or that FDR would try whatever it took to get Americans back to work. Since the war against Libya and the extension of the Bush tax cuts, I’ve begun to think that Obama’s core motivation is not to appear to screw things up.
I personally would go the route of regulatory and tax reform at this point, but I don’t think that would be the Obama I thought I knew.
You mean this one JP?
I don’t see that as being a problem really. I’m not saying that lack of demand (i.e. the recession) is not a problem, but there is no magic cure for that. However, not increasing uncertainty is something the President can do. Is it the magic cure? No, but it certainly might help. Improvement in invest strikes me as a good thing. Why are you seemingly so opposed?
“it could be argued the ACA actually increased uncertainty…at a time precisely when the President should be seeking to decrease it.”
If you run a small business, uncertainty about health care costs has been the norm for decades. Being able to buy from an exchange would reduce that.
Otherwise, I think you are correct about the President. There is little they can do in the short term to create jobs. Long term effects like education, trade agreements or regulations take, yes, a long time.
“Investment also fell much more than PCE. PCE declined to 97.6% of its pre-recession high. Investment in software and equipment fell to 79.7% of its pre-recession high. This to me indicates that businesses see the future as still uncertain and are reluctant to invest.”
Yes, they are uncertain if there is any demand.
Steve
I don’t think there’s any mystery about Obama. He is, and has been from the start, a moderate. He buys into the notion that government doesn’t create jobs. That’s why the stimulus was a half-assed effort.
I think the “uncertainty over health care” excuse is pure bullshit. Suddenly businessmen demand certainty? Excuse me? Capitalists and entrepreneurs demand certainty? Nonsense. That’s nothing but the fashionable excuse.
If health care reform affects all businesses then there is no competitive disadvantage for Business X vs. Business Y. Right? So Washing Machine Company X has no reason to fear a loss to Washing Machine Company Y because of health care.
There’s plenty of capital out there. They have nothing to invest in because there’s no hot new thing. They chased the internet, then they chased housing, and now they don’t know what to chase. You know why? Because there’s no sexy new thing, and we’re all a little burned by previous infatuations, and this — the new reality — is actually kind of real and kind of boring.
The market may be the best of all available systems, but it’s still about fashion and trend and wild enthusiasms, don’t mistake it for a rational creature. If it were rational it wouldn’t have bought crap mortgages or pets.com. (Even I knew better than that.) It’s a fundamentally irrational creature, as irrational as all human projects, and it was raised on bubbles, so now it seeks a new bubble.
In my little enterprise we’re beating capitalists off with a stick. Why? Because “transmedia” is sexy. It’s the new hot thing. They have no idea what it is, or what it’s about, but it’s new and sounds cool and might be something, so they’ll invest. Not one has asked us about health care.
But at the other end of the capitalist spectrum, the meat-and-potatoes, washing machines and transmission parts end, no one is hiring people because we have all the washing machines we need, and making more washing machines is 100% about whether people will buy washing machines, and zero percent about health care reform.
I think I’d phrase this a bit differently. It’s part of what I mean when I say that there’s been a loss of entrepeneurship. They’re not just looking for the “new hot thing” they’re looking for the next risk-free thing that returns enormous rewards. Investors, particularly the sovereign wealth funds, are enormously risk averse and have been spoiled, first by the dot-com bubble, then by the housing bubble.
Dave:
I think that’s right. It grates when I hear people talking about business being risk-averse because we are forever being told that risk is a core element of capitalism, and we (at least we used to) get magazine profiles of this or that bold, fearless capitalist launching this or that enterprise.
To have the narrative shift so abruptly from bold, fearless, flinty-eyed, swashbuckling capitalist willing to risk everything on an inspiration, to “We don’t know what’s going to happen, waaaah,” is jarring.
I take more risk writing a book on spec. I may spend 6 months and many thousands of dollars and have no idea if at the end I’m going to get paid at all. On the transmedia thing we’re funded as minimally as we can be precisely so that we can keep control, take on the risk and hopefully reap the associated rewards if we succeed.
Isn’t being an entrepreneur supposed to be some combination of fun and scary? I see a bunch of MBA’s riding the merry-go-round and blustering like they’ve strapped into the Cyclone.
Michael –
In your hodgepodge of examples you are totally missing the point of a range of risks (and rewards). An early stage venture fund doesn’t look like an LBO portfolio doesn’t look like a bank loan portfolio doesn’t look like a potential reinvestet of cash in a project by a small business. By mixing them you completely drive off the rails to a coherent argument about what drives decisionmaking. It makes good snark, but its nonsense.
Separately, it also does not follow that dealing with a long term cost issue means that a new piece of legislation cannot induce uncertainty. And although ObamaCare gets the headlines, Dodd – Frank is turning into the new Sarbanes Oxley, and its a mess. You can deny all this, but it is affecting businesses everyday.
What I see Steve, is a huge aggregate demand problem, and businessmen talking about what really bugs them.
The two are not always the same 😉
There is a good pool of money looking for low-risk return. Actually that pool is so huge that the smaller pool, the one looking for high-risk return, is still pretty big in its own right.
If I’m remembering my tech feeds, the VCs had big cash inflows earlier this year.
Drew:
Or maybe a generation raised on bubbles lost its balls.
Drew:
In the past you’ve actually blamed poor economic performance in part on people saying mean things about businessmen. As though affection were required. Now in addition to love you want certainty. Oh, my goodness, what will the legislation do?
And how exactly do we see what the legislation does? Do businesses sit on the sidelines waiting until someone else goes first, then see how it affects their business 5 years down the road? 10 years? I mean, we want certainty, right?
Uncertainty is a bullshit excuse. It’s the excuse of a clueless and cowardly executive or investor looking for a sure thing. A sure thing like, oh, property.
Maybe that’s the real problem: investors who don’t know anything other than a rigged system where they can buy bundles of worthless mortgages that have been highly rated by a corrupt crony system. In which case we’re not talking businessmen or investors but aspiring criminals. Maybe the uncertainty that concerns them is the chance that they may be arrested.
Michael, “investors” are not fungible.
Isn’t being an entrepreneur supposed to be some combination of fun and scary?
Sure. But there are risks and there are risks. Fighting for market share is one thing, worrying whether or not the government is going to bury you under regulations or taxes is another thing entirely. If the government comes down and bans the electronic distribution of books, for example, your little start-up is completely fucked.
Now that doesn’t seem likely, but my wife’s company has had the government step in and kill several projects they have been involved in. Reasons have been sometimes good, and sometimes bad. And sometimes the reasons have simply been that someone different got appointed or elected.
And what we have seen is that the ACA is not going to equally impact everyone. Politically connected companies have been getting exemptions left and right. (Well, mostly left. But that will change with time, too.) There’s supposed to be a time limit on that, IIRC, but what do you want to bet that new exemptions will be put in place for the well-connected? It’s in the interests of the pols to do that. Gotta keep the money flowing into their pockets somehow.
And if Dodd-Frank is a new SOX bill? Yikes, it almost makes me glad I’m unemployed.
C’mon, Michael. Please – Mommy, save me from the mean man’s words?? Me?? Really??
When I read your comments at first I simply sloughed it off as some snarky and satirical commentary and a cheapo opportunity to take a few pokes in the ribs of some MBA’s. I, ahem, have been known to take a few pokes.
But as I re-read your multiple commentary I realized that you really have – unless you are just lying in the weeds – no concept of beta, or the spectrum of risk and reward and how various participants in the capital markets evaluate that, make their investment decisions, or allocate capital based upon their particular circumstances. I have to be honest; its a profound ignorance, but I also have to say you are not alone, by any stretch.
If you care, I would be happy to elaborate. Its actually a very important topic, especially in today’s environment. If not – OK.
As for the balance of your post at 9:35 AM, that’s just pathetic nonsense. You might want to google, or buy a first text in things like “the risk free rate,” the term structure of interest rates, beta, alternative investments and so on. There was an extended thread about IQ recently. I actually believe you, but perhaps you could show us you weren’t just bullshitting.
There’s always an excuse for loss of nerve.
Maybe it’s people being mean to businessmen — and yes, Drew, you have said that, and repeatedly, because I’ve laughed at it before.
Maybe it’s this or that potential government action — because this is, what, the first time in history we’ve had a government? Oh no, uncertainty!
Maybe it’s that we’ve become addicted to bubbles and don’t really know how to do business, just how to inflate bubbles.
Maybe it’s that we’ve become addicted to criminal activity posing as business.
Maybe it’s that we’ve just become addicted to excuses. Waaah, they’re mean to us. Waaah, I don’t like the president. Waaah, I need a bubble because I don’t really know how to make anything or do anything. Waaah, all I know how to do is steal. Waaah, my so-called business is moving money from this pocket to that pocket and I’m really just a parasite.
If you have a good product, or you have a great idea, or you think you know a better way to do something, you do it. You do it, and it doesn’t matter who the hell gets in your way, you do it. If that’s not what business is in business for anymore then quite frankly we might as well tax away all your money because you’re of no value.
And yes, John, I get that there are people who only want risk-free investments. I have a message for them: go f–k yourselves. Life is risk.
The fact that Drew and John have this many excuses for failure is a sad commentary on the state of American business and explains a hell of a lot. Jesus Christ, it’s amazing to hear this much self-pity and excuse-mongering from the descendants of people who crossed the continent with nothing but and ox, a wagon and a rifle. The pioneers should have stayed home and said, “Look, I can move money from here to there and make some of it stick to my hands!”
What do you make Drew? What do you build? What do you create? What do you invent? Why should civilization tolerate you?
You remember the history of Orange County, right? And why it declared bankruptcy?
FWIW, I did also notice that slight contradiction, that while Drew talks above about different classes of investors with different motivations, he does sometimes treat them as a block himself: a bunch of Obama-fearing kittens(*)
* – euphemism
Further on investor classes, there is a risk we all face. The mean peak of financial acumen is in the 50’s age group. But we have a life expectancy pushing 100.
f–k granny?
Where are the jobs? Evidently not where they used to be. And the problem dates back to the 80s.
New Firms Are Generating and Holding onto Substantially Fewer Jobs in the US:
Globalization, dude. Someone needs to plot world small-business creation on the same page as US small-business starts.
“all your start-ups are belong to us.”
@jp:
The dynamics of job creation is very different in other countries than it is here. Germany, for example, has an extremely low rate of new business formation, among the lowest in the OECD. Most job creation is by large, established companies, not new ones.
There’s no way of getting reliable information for China. Given the social and political structures there I would expect them to favor large businesses over small ones (as we’re increasingly doing here).
Watch “Chnia Blue,” the documentary.
Well, I guess I got my answer, Michael.
Sorry you spent so much time writing so many useless words. Alcohol induced??
“What do you make Drew? What do you build? What do you create? What do you invent?
You don’t want to compare value creations statistics, Michael, you really don’t, unless yours starts with a “$B.”
“Why should civilization tolerate you?”
Yes, a gin soaked post. But thanks for the kind words.
Drew:
A billion? Really? And how much when you subtract the effects of bubbles? How much of it was vapor? How much of it is still there in the real world?
Moving money from one pocket into the other. And then you want to be treated as some favored class of Ayn Randian gods carrying the rest of us and demanding we love you all the while, and whimpering lest we ask you to pony up a few miserable points.
Mommy, we want certainty, we have to have certainty.
Mommy, the poor people want my money.
I don’t think I’ve been responsible for much over 250 million total “value creation,” round numbers, but I’m not an economist so all I know to count is raw sales, I don’t know whether I should count the stock prices of companies I’ve helped keep afloat, or the secondary value of business I pulled into bookstores and restaurants and toy stores. I suspect you’d be able to inflate that 250 million substantially.
And you know what? I didn’t whine once about being unloved or taken advantage of. I never played the victim. I never blamed anyone else for my failures, and I didn’t imagine myself to be some superior being forced to carry the weight of the world on my shoulders. Unlike you, Drew, I don’t feel entitled and resentful, I feel lucky.
“A billion? Really?”
Yes.
” And how much when you subtract the effects of bubbles? How much of it was vapor? How much of it is still there in the real world?”
All of it. You see, I deal in the world you so simple mindedly dismissed as “washing machines and transmission parts.” No dot. com, no real estate. Smaller, everyday widget companies we can fundamentally and permanently improve and create value. Who knows, I guess we might know what we are doing!? As Robert De Niro might say: “a lill bit, just a lillbit.” Sorry to disappoint you.
But you know Michael, I am looking on the bright side…..and feeling lucky. You are not King, else it would apparently be off with my head. I’m placing my faith in the notion that in the absence of your ascendency to the throne “civilization” will tolerate me.
Hope springs eternal.
And then you want to be treated as some favored class of Ayn Randian gods carrying the rest of us and demanding we love you all the while, and whimpering lest we ask you to pony up a few miserable points.
-and-
… and I didn’t imagine myself to be some superior being forced to carry the weight of the world on my shoulders.
That’s rich. How many times have you topld me to grovel at your feet because you are rich and I am poor, Reynolds? How many times have you claimed that you are better than us regular mortals because not only are you rich, but that you are a Democrat and thus resposible for all that is good in the world? How many times have you told me specifically that I should thank you PERSONALLY because of things that happened before either of us were even born? Hellfire, even Annie Gottlieb got sick of you always flaunting the size of your bank account.