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Creating jobs or laughs?

Terry Garlock's picture

All the presidential posturing about creating jobs is high comedy. Or tragedy. Or irony.

You probably know the president doesn’t create jobs. The business world creates jobs when a profit-seeking entrepreneur takes a risk on a new or expanded venture and needs new employees to get the job done. When entrepreneurs feel the threat of losses, they protect their capital with caution, contracting and laying off employees, destroying jobs.

Small business creates or destroys 80 percent of the jobs in the U.S., and the president has no control over that or big business jobs, either. Whether Democrat or Republican, all the presidential talk about creating jobs is political theater, played out to the public while the brain-dead media plays straight man. All presidents seem to go along with the fiction that they are in charge of the economy.

There are a few things a president actually can do, but those things have an indirect and much-delayed effect on job creation.

He can foster a climate of business-friendly taxation and regulation to boost the confidence of risk-takers, trying to induce them to put their capital on the line in pursuit of a handsome profit.

The lefties currently in charge spit out the word “profit” as if it were an epithet, but profit is the fuel of our capitalist engine.

A lot of capital has been sidelined by entrepreneurs worried about new regulations piling up, a future tax profile that has been highly uncertain and threatening, and White House rhetoric demonizing business, promoting anti-business sentiment in the news. How many jobs has that created?

The president can try to influence job creation with fiscal policy, like the stimulus program in which we borrowed a trillion dollars from our children to spend on dubious projects that, I fear, accomplished little other than funneling trainloads of money to friends of the Democrats. I would love to be proven wrong.

The president can “jawbone” the independent Federal Reserve on monetary policy, which is usually focused on controlling the money supply to keep the dollar strong, but the Fed has been creating money like crazy, helping make dollars cheap. I can almost see hoards of entrepreneurs drawing their capital to ever-tighter protection.

In any macro-economics 101 class, students soon learn that political talk about job creation is mostly balloon juice – hot air – because presidents can talk about it but cannot control it.

Furthermore, the effects of fiscal or monetary policy might be felt years later, and while the numbskulls on TV news seem not to realize that simple fact, news reports continue to give the president credit for economic good news and blame him for economic bad news when actually he is mostly along for the ride.

Whether Barack Obama, George W. Bush, Bill Clinton, George H.W. Bush, Ronald Reagan or Jimmy Carter, the president often deals with the economic effects of presidential decisions made years before they took office.

Defenders of President Obama might find great comfort in that as ammo to blame George W. Bush for ... whatever. If you ask me, Bush gets credit for tax cuts and a pro-business climate, but needed a major trip to the woodshed over creating an avalanche of spending in new entitlement to Medicare drug benefits, never mind wars without paying for them.

If Democrats want to talk about who is responsible for the economic crisis in recent years, well, don’t get me started until you put on your asbestos suit and have a lot of time.

The past notwithstanding, President Obama lecturing the business world about creating jobs is pretty funny. This is the same man who raised deficit spending to soaring record heights and then appointed a “deficit commission” to advise on how to reduce deficits. I know the public is gullible, but please.

This is the same man who is in the process of creating hundreds of new bureaucratic offices and many thousand pages of as-yet unwritten regulations in Obamacare and the Financial Reform Bill.

In the middle of that, with a straight face President Obama is ordering a review of government regulations, ostensibly to reduce the regulatory burden on business. You can’t make this stuff up.

If President Obama wants to relieve the regulatory burden and create jobs, he might want to consider the most immediately obvious – since the heavy hand of Obamacare starts with businesses of 50 or more employees, small businesses just under the limit are loathe to hire new employees and thereby pull the trigger. Can you say job-killer?

Is there no limit to how much of this absurdity the media will leave unchallenged? Are Democrat supporters really this gullible?

Now the talking heads on TV news are talking about the president “moving to the center,” and some said in a serious tone that he is no longer a leftist, as if his fundamental principles can be shape-shifted to present any desired political image.

But, these are the same people who used to ask each other when discussing President Clinton’s transgressions, “Does character really matter?”

I never thought I would miss Bill Clinton.

When President Obama preaches job creation, and lectures nervous entrepreneurs about sitting on a trillion in capital, I feel like I’m sitting on the front row watching a magician preparing to make cards disappear in a complex trick.

I can almost see him showing the audience there is nothing up his sleeves while mesmerizing them in his confident baritone voice, “Watch carefully. At no time will my fingers leave my hands!”

[Terry Garlock lives in Peachtree City. His email is tgarlock@mindspring.com.]

Comments

Terry Garlock repeats a favorite talking point of the right, about 80% of job-creation/destruction is done by "small business".

Where did that 80% number come from? The small business administration, which has research showing that "small businesses" in a given year account for between 60 to 80% of jobs. There are large variances there, nonetheless, the Glenn Becks and Terry Garlocks of the world have decided to focus on the upper range of 80%. And so it goes.

The devil, as often is the case, is in the details.

How is "small business" defined? The SBA defines a "small business" as a business with fewer than FIVE THOUSAND employees. You heard that right. You can have 4999 employees and the government considers you "small".

Does "small business" really generate/destroy those jobs? Yes, but put a big ole asterisk beside it:

The amount of new jobs created in firms with fewer than 20 employees is negligible. It's only slightly better for firms between 21 and 49 employees.

The REAL growth occurs right around the 5000 employee mark, and even then it's qualified.

Want to know a dirty little secret? Say you have a firm with 5200 employees. You lay off 250 employees due to poor economic conditions. That means a big business has lost 250 employees, right? WRONG...as far as the government is concerned, that's a NET INCREASE of 4950 "small business jobs". The SBA statistics are weighted like this to favor "small business".

The biggest gains in "small business" jobs over the last 30 or so years has come from "big businesses" downsizing to less than the magic 5000 employee threshold.

The second biggest gains in "small business" jobs is from outsourcing. Say you work for a fortune 500 company as a graphics artist. They decided to outsource their product packaging to improve the bottom line. You and 200 of your co-workers still design graphics arts for the same company but get paid by the newly created outsourced firm. The net job growth is zero, but it still shows up as a gain of 201 new "small business" jobs for goverment accounting purposes.

Yeah, well even the republicans now admit we have about 20% unemployment if you count everything, which they don't now. Of course Obama is responsible for everyone of them! Along with all the debt we have--even that created since he took the oath that was created by Bush's actions.

Republicans have no use for retail private stores and their hires. They own nearly all of the 5000 employment companies and above---if not the company, the stock.

I am itching to see what the republican house wants to do to resolve the unemployment problem immediately! Will really want to see their new health plan!

Observerofu's picture

Who reported this?

"Successive interest rate cuts by the Federal Reserve and the stimulus package the President has signed into law may help our ailing economy in the short run. But the roots of the problem go much deeper. Our homes are losing value, access to credit is drying up, the stock market is volatile and food and fuel prices are skyrocketing - all signs that consumer spending will continue to shrink."

" The best way to get people spending again is to create good jobs at good wages. Over the past 15 years, small businesses created over 93% of all net new jobs. That is almost 22 million new jobs. In fact, during the first four years of this century, large businesses have already shed over 3.6 million jobs. Today, small businesses make up 99.7 percent of all employer firms. The best engine for job growth and the economy continues to be small business."

The answer is?

The Huffington Post, oh then however, it was about Bush dismissing Small businesses over large corporations.

Liberals say the darnedest things don't they. So just who is telling the truth. The Progressive Liberal above or the Progressive Liberal Website of record?

http://www.huffingtonpost.com/fred-hochberg/small-businesses-create-j_b_...

The Small Business Act states that a small business concern is "one that is independently owned and operated and which is not dominant in its field of operation."

"SBA has a section called Office of Size Standards that defines the appropriate size for a small business. The size standards are broken by NAICS industry classification and are based on two things (a) size standards in millions of dollars; and (b) by number of employee. In most industries, 500 is the maximum for small businesses, though there are industries where a business can have 1000-1500 employees yet still considered "small business"

Here is the size standard table by NAICS code breakdown
Follow Link:

http://www.sba.gov/content/table-small-business-size-standards

Bottom of page you can download the table either as a .pdf or excel spreadsheet. Note the total number of MAXIMUM employees.

<strong>1500 is NOT 5000
Some "misinformation" (lie?) is just too easy to refute.</strong>

As someone said above "The Devil is in the details" indeed.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

You are correct 1500 is the upper limit on "small" businesses. The 5000 number was from the Bailey study about job growth percentage in companies. One of the perils of responding from memory. I was mistaken.

Unlike you, however, I readily admit when I make an error. I attribute this to having parents who taught me to own up to my errors.

Contrast my response to how you reacted when your falsehoods regarding the New York Times and Reuters were discovered.

Observerofu's picture

since you so obviously were (sic) mistaken. I guess your analogy was from memory as well huh? I suppose taking 10 seconds to bing it would be a little hard for you. You know to just confirm that (sic) memory.

Opinions are not lies bacon but when you make categorical points as facts and then compound that with examples, analogies, then you compound those points into continuing falsehoods.

In other words Bacon ole boy you were caught in a lie. Plain and simple.

I didn't have to infer, imply or divine some hidden meaning as you did. I just presented the facts.

You lied.

At least you did fess up and for that I give you kudos although you had to qualify it by trying to transfer guilt as you usually do.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Observerofu, you're missing a point here.

You falsely attributed your own opinion to the New York Times, and when called on it, you offered all sorts of excuse and misdirections to avoid taking responsibility for your error.

A few days later, you did the same thing, attributing a prediction as "fact". When Nuk_1 and I called you on your second falsehood, you again offered all sorts of excuses and misdirections.

I made an error of recollection which I immediately admitted when it was brought to my attention.

That's what separates me from you....the men from the boys, so to speak.

Your kind will always have an excuse or an explanation....you'll say or do anything to avoid having to take responsibility for your mistakes.

Observerofu's picture

deeper.

You see this is not the first time you pulled stats or stories out of your butt. Here you created an entire scenario and story. Your whole entire point was that small business yes creates jobs but not really. That is why you pulled the 5000 stat out. Without it your little story falls flat.

If you had of just used that number as part of a wider point then a "bad" memory might hold water. But your entire post was on that "factoid". Here is where your ship starts taking on water.

Now as to your redirection of telling tales. This is all that is needed:

http://www.thecitizen.com/node/5259#comment-20587
See comment #12

You see I unlike you, I didn't have to makeup what you said. I didn't have to infer, imply or any way assign meaning to a post that was not even said.

You see also unlike you I don't think peoples opinions are lies. You actually have to say it for it to be a lie right bacon. I mean you wouldn't
take someones post twist it around to mean anything other than what was intended right. I am sure Hutch agrees with me on that. You just wouldn't do it.

So if you want to take someones post twist the meaning out of context then call them a liar then so be it. We all know what you are.

In one weeks time you have insulted Cancer survivors, insulted Christianity, insulted the Mentally Handicapped and now made up stats.

Wow I think this is even a record for you.

btw- on that man/boy thing. One question. When challenged to defend ones reputation and an offer to do so in person is offered, if you don't have the stones to meet does that make you the boy? I mean after all you offered to meet me, Lindsey, Dubious and most likely others so why not meet Hutch. Your a man after all right?

You know Bacon I could accept your "excuse" or "explanation" as to why you used an incorrect stat, but as YOU said:

[quote=Chris P. Bacon]
Your kind will always have an excuse or an explanation....you'll say or do anything to avoid having to take responsibility for your mistakes.[/quote]

<strong>btw #2</strong>- Doesn't feel so good to be called a liar does it? Actually bacon you get a pass. I couldn't care less rather your lapse of memory was accidental or intentional. Just making a point.

You see insults and innuendos claiming ones post mean something other than what was said is wrong bacon.

You need to stop being a uhmmm butt and rejoin the discussions not just argue we are all wrong.

Stop with the insults it only makes you look small and unintelligent. Argue your positions. Argue your point of view, but just arguing someone is wrong is not good conversational debate and isn't that the reason we are here?

Bacon we started off ok, but somewhere along the line it has got way out of control. I am not saying it was you.
I am saying however, that I for one would love to debate you and prowl around in your beliefs and explore common ground. I am a naturally curious sort and ponder at times how certain people came to believe what they believe.

Now if we can re-set I would be happy to do so. It's up to you.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

<a href="http://www.youtube.com/watch?v=tACjxpxhW2Q">You like to sing when you reply to my posts</a>

Keep that patented glibertarian hate comin'!

Observerofu's picture

that was actually funny right there. Finding common ground already. What will others think? Dohhhhhh

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Sounds like 2 teenagers arguing to me.

Observerofu's picture

but sometimes it's the same thing.

But an olive branch is being extended. Hopefully it will be accepted.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Do you have any idea how many times many of us out here have read the same old BS in your article today?
If the President can't create jobs, then why do you in the next sentence start on him about what he can do to create jobs!

The damn jobs were destroyed by Bush's eight years of lack of diligence, crooked wall streeters, shameful conduct of Madison Avenue, and of course banks and insurance companies seeing just how far they could go since no one in the administration cared as long as the economy was growing----on credit!

Thy knew it was a false economy and hoped to get out before getting caught. Many did.

It will happen again since no one went to jail for this one!

I know you do well with your sthick, just as does Limbaugh and the rest of the entertainers, but you should be absolutely ashamed!

Lets just keep printing dollars and then everyone will get to make a million a year! 2000 per hour minimum wage law! But of course gas might be 2000 per gallon. The first large country to establish a currency backed by Gold/Silver will get OPEC's attention, and then all bet's are off, the dollar will collapse. Looks like China might be getting close to tying the Yuan to gold http://www.commodityonline.com/news/China-to-dominate-world-with-Yuan-ba... -GP

PTC Observer's picture

That's the whole concept concerning minimum wage, you mandate it. If this logic was right, why don't we simply make the minimum wage $1000 per hour? Then everyone would have more money. In the socialist's mind that would solve everything. It has nothing to do with creating wealth. A clear misunderstanding with how the real world works. The sad part is that all the citizens are buying this trash.

Ut-oh, Problems in the ranks. Democratic Party is ‘effectively a vehicle for redistribution and for policies that benefit targeted constituencies rather than the broad mass of Americans. I find that very sad and disappointing.” – Democrat Doug Schoen. The party turned into ‘a Chicago political machine, what can we hand out, what can we give our friends and how do we most of all take care of the interests of the elites who wish to dictate to the common man rather than to be their voice.’ -Democrat Pat Caddell. JFK cut personal and business taxes to stimulate the economy and told people NOT to ask what the government could do for them.
-GP

JeffC's picture

The basic thrust of the Keynesian argument followed by Bush and Obama with their massive stimulus programs is that when asset values collapse, companies are under pressure to pay down bank loans instead of expanding, an act that severely contracts growth (GDP). Since business abdicates its normal function of providing spending for new jobs, products, etc., the government must step in and spend in their stead.

Since 2009, the US has embarked on large government spending plans while the UK and other European countries were sharply cutting back their own government spending in an effort to convince the world and their constituents that fiscal responsibility meant sacrificing for the greater good. The goal of both sides was obviously to bring their respective economies back to growth.

The comparison set up a very interesting and rare economic experiment with diametrically opposed strategies under the same circumstances at the same time

US GDP rose at an annual rate of 3.2% in the forth quarter while the United Kingdom, (which most closely followed the economic theories of those in the US who opposed the stimulus package) grew at a meager 0.7%. Western Europe as a whole, after implementing only small stimulus programs, most of which were focused on preventing a collapse of the banking system, is expected to have the slowest GDP growth of all regions worldwide.

Paul Krugman and Obama's monetary policies have proven demonstrably better than Europe's policies which are now advocated by the Tea Party.

<a href="http://blog.euromonitor.com/2010/05/special-report-shortterm-forecast-of... forecast of global real GDP growth</a>

Cyclist's picture

we could be at a point very soon where our debt becomes greater than the GDP.

Caution - The Surgeon General has determined that constant blogging is an addiction that can cause a sedentary life style.

Observerofu's picture

This says about all you need to know about Keynes and Obama.

http://www.youtube.com/watch?v=VoxDyC7y7PM

Another "Fun" watch:

Keynesian Economics vs. Austrian Economics

http://www.youtube.com/watch?v=MnekzRuu8wo&feature=related

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

JeffC's picture

The GDP of Austria grew at 1.5% in 2010, a little less that one half of the growth in the United States.

The Wedge's picture

But I do not think that even Austria follows the Austrian school of economics. Nice comparison to show, but a bit of dissembling.

Observerofu's picture

but what the heck. Most would never know the difference.

Notice how Jeff didn't comment on the vids?

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Observerofu, we understand that people enamored of so-called "classical" economic theory often exhibit almost Pavlovian reactions when the name John Maynard Keynes is raised.

Nevertheless, Keynesian economic theory is a valid economic theory, despite well-intentioned protests of you and Garlock. There are reams of research both pro- and anti-Keynesian.

I seriously doubt the rather simplistic Cato institute propaganda or Garlock's puerile revisionism will sway Keynesian adherents.

To address your video link specifically, the video finds fault with the basic Keynesian model. This is not earth-shaking news, economists have made the same criticisms for several decades. It's worth noting, however, that the Keynesian model has advanced significantly over the years to address those criticisms, particularly the IS/MP Keynesian model.

No model is perfect, not even the so-called "classical" economic model. For instance, in the "classic" economic model, a business owner routinely cuts employee salaries during business downturns. That's not "real world", is it?

I've noticed that the anti-Keynesian folks here tend to denigrate the Keynesian model rather than promote an alternative viewpoint.

The Austrian school (and its bastard son, the Chicago school) of "rugged individualism" has its share of detractors as well. It's hard to find scientific fault with the Austrian school as there are no real models to critique, it has a foundation built on sand, or in this case "everyone knows..."

Many so-called libertarians are enamored of the Austrian fixation on the gold standard, but quite frankly, that's simply not going to happen in today's society. It's a relic of another age, in my opinion.

Observerofu's picture

economics is it seems the sole concept of Keynesian Economics is that it is trying to micro-manage the economy through central-planning.

Roger Garrison noted the differences of the Keynesian and the Hayekian models in that both models can adapt and adjust to pressures on wages and interest rates precipitating the drop of businesses willingness to invest.

Do interest rates and wage adjust quickly enough to a drop in investment spending to maintain equilibrium, or do they not?
If so, how fast can they?

Keynesian polices have introduced a Government Bond Bubble. The printing presses are going full time. The Fed has already increased our Monetary base by 140% in just the last three years.

Once the banks start lending these funds, currently held in reserve, prices of goods and services could and should increase by that very same percentage.
Our bonds would be open to a one-time price jump while leaving nominal bonds unchanged, but would reduce the purchasing power of those bonds by about 58%. Keynesian polices would therefore be taxed to effectively respond to the failing bond bubble fast enough.

Austrian polices recognizes the fundamental role that individuals play in economics and economies, and they realize from common sense – that top down, central planning is the wrong place to start when devising economic policy.

One of the main problems with centrally planned economic polices i.e. Keynesian policies is it's kinship and/or origins is Socialism:

"Socialism—defined as a centrally planned economy in which the government controls all means of production—was the tragic failure of the twentieth century. Born of a commitment to remedy the economic and moral defects of capitalism, it has far surpassed capitalism in both economic malfunction and moral cruelty. Yet the idea and the ideal of socialism linger on. Whether socialism in some form will eventually return as a major organizing force in human affairs is unknown, but no one can accurately appraise its prospects who has not taken into account the dramatic story of its rise and fall." http://www.econlib.org/library/Enc1/Socialism.html

Keynesian polices relies to much on centralized Government control and the forcing of monetary policies.

Austrian polices relies on the individual market forces for a coherent economy.

Both can be right at times, but the "proof" in the pudding is which one can work in a non-centralized environment without the artificial forcing of the market.
In other words which can naturally adapt and allows the market to adapt as well.
Simply put Keynesian economic polices can not.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

[quote=Observerofu]the problem with Keynesian economics is it seems the sole concept of Keynesian Economics is that it is trying to micro-manage the economy through central-planning.[/quote]
Keynesian policy does no "micro management" at all. It does no "central planning", either. Keynesian economics is reactive in nature, reacting to market forces. Central planning is a core tenet of communism.

[quote=Observerofu]Roger Garrison noted the differences of the Keynesian and the Hayekian models in that both models can adapt and adjust to pressures on wages and interest rates precipitating the drop of businesses willingness to invest.

Do interest rates and wage adjust quickly enough to a drop in investment spending to maintain equilibrium, or do they not?
If so, how fast can they?[/quote]

Good question. It's a difference of opinion on who reacts faster and/or more effectively.

[quote=Observerofu]Keynesian polices have introduced a Government Bond Bubble. The printing presses are going full time. The Fed has already increased our Monetary base by 140% in just the last three years.

Once the banks start lending these funds, currently held in reserve, prices of goods and services could and should increase by that very same percentage.
Our bonds would be open to a one-time price jump while leaving nominal bonds unchanged, but would reduce the purchasing power of those bonds by about 58%. Keynesian polices would therefore be taxed to effectively respond to the failing bond bubble fast enough.[/quote]

Non-sequitur. Attempting to blame the so-called "Government Bond Bubble" on Keynesian economics would be akin to me blaming the rise of Hitler on Prescott Bush (Dubya's war profiteer granddaddy). There might be a slight relationship, but other factors had much more significant impact.

I'm not sure how you arrived at your 58% figure. I know you're paraphrasing Kotlikoff, but he doesn't explain it either.

[quote=Observerofu]Austrian polices recognizes the fundamental role that individuals play in economics and economies, and they realize from common sense – that top down, central planning is the wrong place to start when devising economic policy.[/quote]

It's worth noting that the "common sense" approach failed miserably when the credit markets froze in 2007. McDonalds couldn't finalize funding to put the new high-end coffee machines in their stores. Laissez-faire economics resulted in a herd mentality, a hunker-in-the-bunker groupthink. With the benefit of hindsight, it's amazing to recall that not a single bank in America would loan money to McDonalds, one of the premier American corporations, at any price.

[quote=Observerofu]One of the main problems with centrally planned economic polices i.e. Keynesian policies is it's kinship and/or origins is Socialism:

"Socialism—defined as a centrally planned economy in which the government controls all means of production—was the tragic failure of the twentieth century. Born of a commitment to remedy the economic and moral defects of capitalism, it has far surpassed capitalism in both economic malfunction and moral cruelty. Yet the idea and the ideal of socialism linger on. Whether socialism in some form will eventually return as a major organizing force in human affairs is unknown, but no one can accurately appraise its prospects who has not taken into account the dramatic story of its rise and fall." http://www.econlib.org/library/Enc1/Socialism.html[/quote]

Another non-sequitur. You don't like Keynes, you don't like Socialism. I get it. How is this germane to the discussion?

[quote=Observerofu]Keynesian polices relies to much on centralized Government control and the forcing of monetary policies.[/quote]

Governments can and do direct monetary policy via a central bank. That's a whole different ball of was from "central planning".

[quote=Observerofu]Austrian polices relies on the individual market forces for a coherent economy.

Both can be right at times, but the "proof" in the pudding is which one can work in a non-centralized environment without the artificial forcing of the market.
In other words which can naturally adapt and allows the market to adapt as well.
Simply put Keynesian economic polices can not.[/quote]

Laissez-faire economics had it's moment on the American stage in fall 2007 and its shortcomings were exposed for all to see. The utter failure of Laissez-faire economics in that episode has led to a rebirth of interest in long-dormant Keynesian policies.

The best epitaph for the tombstone of "classical"/laissez-faire market-based economics was this: <strong>Ayn Rand Never Met Gordon Gekko</strong>. Classical theory makes two huge assumptions: that the market is always self-correcting, and that managers work in the best interests in their firm. Unscrupulous Wall Street traders dumping toxic assets on "sophisticated" investors solely to boost their own year-end bonuses disproves the latter, and the derivatives debacle of the early 2000s, when private credit rating agencies were convinced to re-rate speculative mortgage investments as AAA prime disproves the former.

Final note: I'm not saying strict Keynesian is the way to go. Far from it, there are many positive things to be said about classical econ theory. My point is, it can and does have a role in a complex modern economy, and is useful in combatting the most extreme aspects of classical economic shortcomings (i.e. speculation, bubbles and one other thing that I'm drawing a blank on right now...)

Observerofu's picture

Great response and great discussion.

I suspect you and I could go on for awhile discussing the two.
I also suspect none of it is going to matter soon anyway. I fear that events in the Middle East will soon overtake us and oil is going to skyrocket causing both theories to deteriorate into chaos.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt"
-Samuel Adams
Illegitimi non carborundum

Mike King's picture

... For Keynes et al to be right means that someone, somewhere must produce something that someone else wants or has a need for. Please enlighten us as to what 'service' (now that the USA is no longer a manufaturing nation) those outside our borders require from us.

JeffC's picture

You have confused manufacturing employment with manufacturing output.

Manufacturing output has increased for the last 30 years except for 1987. The US now accounts for over 22% of the worlds total manufacturing output.

Exports have increased almost every year for more than 50 times as much as in 1960, from less than $20 billion to over a trillion dollars.

<a href="http://www.census.gov/foreign-trade/statistics/historical/goods.txt">U.S. Trade in Goods - Balance of Payments</a>

The problem here is that we automated many manufacturing jobs (and agriculture) to the point where less and less workers were needed to produce the same quantities.

In addition to that, the growth industries have been in professional services, health costs, and other non-factory goods and services that our work force isn't trained to perform.

We neglected to substitute whatever it would have taken to keep everyone working. In so doing that much has been lost to the rest of the world.

Also, we pay much more for all jobs in this country than most anywhere. That would include factory workers and professional people.

The biggest problem right now is that we have no jobs for 15% of the workforce at any price of wages.

Also, another factor of some significance is that we employ illegal immigrants who will work for $10-12 per hour for labor. Our unemployed can not and won't right now work for that as a bread winner. Especially when they can get $8-10 dollars an hour unemployment wages for a year or so.

Then we have other minority groups who are only qualified for part-time or low paying jobs with no insurance, etc., and they haven't been educated, for whatever reason, to do the type of work now available for the most part.

Much of our 20+% share of the world's output is serving one another!

You remind me of the guy from "Animal House" that is standing in the middle of the street during a riot screaming "All is well!" while mayhem ensues around him.

funny.

JeffC's picture

I am not saying that all is well by any means. I am recognizing the mayhem and advocating a course that will shorten it as soon as possible instead of pretending that the mayhem will quickly vanish by itself if it is not addressed.

Jeff - who stated the following?

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. government can't pay its own bills."

JeffC's picture

That would be your current President.

NUK_1's picture

You wouldn't know it from the media or all the whiners in this country, but the US is still the #1 manufacturing country in the world in terms of total output.

What people are griping about as far as "not making anything" is that technology allows a lot of the manufacturing processes to be done with a lot less people employed than in decades past.

tgarlock's picture

. . . to prosperity or borrow your way out of debt no matter what Keynes said. The simple fact is the entrepreneurial world was scared to death of Obama before he was elected and started a wait-and-see posture, keeping their economic powder dry - read that economic contraction. Obama's policies turned out worse than feared for the business world, and the powder is still dry. When entrepreneurs smell too much risk and not enough profit potential, they don't bet their capital. Watching Obama lecture them about sitting on a trillion in capital is ironic since he is the cause. Pouring hundreds of billions down the rathole called stimulus didn't gain their confidence either because they aren't stupid. The Democrats still seem to think they control jobs creation but the only things they can do right now are the two things they refuse to do - stop overspending (to restore sanity and reduce fear of future consequences) and get the hell out of the way (stop the new regulation machine). My guess is entrepreneurs generally won't get off the sidelines to fuel a recovery with jobs creation while Obama is in office.

Terry Garlock

was when O told Joe the plumber he wanted to "spread the wealth". What an anti-business sackful he has turned out to be. Come on 2012. Anyone here ever shared a beer with Billy C besides me? He was a good guy. -GP

You really did get agent orange, didn't you?

The banks were saved and they have generally paid us back at a profit.
Same with the auto companies.
No corporation is sitting on tons of cash they could invest in jobs! They are paying dividends like crazy! Why do you think the stock market is holding up when everything else is down?

Another banking and corporate ponzi!

"Stop overspending," and solve the problem you say?
You must mean to lay-off millions of civil servants everywhere and run the unemployment figures up to 25%!!

I don't see us cutting veterans benefits, pensions, Social Security, Medicaid, and repealing all entitlement laws---do you?

Where are you going to stop it Terry? Your pension, maybe?

We need some more income to progress.

Want to invade Egypt? Put the costs "Off the books."

There is a new country every day we could invade and would have by now if Bush had been there!

You are 50 years behind today's world.

tgarlock's picture

I hope you learn the self-restraint of disagreeing with someone without resorting to insults. Here's why I would also advise being cautious about flip comments like the agent orange dig. My friend Nick D is a retired sheriff in upstate New York, retired early because of too much pain from bad wounds he had in his last firefight on the ground. He was hit in the face, the arm and so bad in one leg at the hip it folded back behind his head. Nick spent a year in a body cast. Nick is the last survivor of his infantry squad, they all died years later of exotic cancers. Nick knows in his bones those cancers came from agent orange. I'm not so sure. In fact, I believe the list of illnesses "presumed" to be caused from agent orange are more of a political decision than any medical decision on the unknowable. But you can't convince Nick, who struggles every day with debilitating pain. But I do know this. Nick, who was 18 at the time, and every one of those guys in his squad were there in VN getting through frequent firefights for only one reason - their country sent them. I know you probably didn't mean disrespect to those who serve in America's wars, even if you disagree with the war like I disagreed with the Iraq war. I would hope you think a little more before flip comments like that.

Terry Garlock

This is a bog where things are said straight out and in few words. It is not like a newspaper column or a book where one can take hundreds of words or even chapters to be nice!

By flippant I suppose you mean disrespect to you about your service. It was not, it was a simple metaphor saying you must be mentally disabled to think what you do about politics. A joke.

I don't like to do this but I must say to you, since you drifted into a friend who was badly injured but not from agent orange in your opinion, I didn't quite understand that comparison.
Also, I am familiar with dangers during war and members of my family made a collection of purple hearts, one of them with three.

I was lucky at 17-21 myself with no permanent injuries, but I didn't enjoy flying at 100 or less feet in a torpedo bomber hunting Chinese or Russian subs, at night! Some of my friends lost hands, arms, etc with crashes, I did not. Never saw some of them ever again--they are in the deep.

That is already too much about that (as Gump would say) and I did not mean to disrespect you or any other wounded or killed person in war.

I just think you are way too serious about many things.

[quote=tgarlock]Jeff, you can't spend your way to prosperity or borrow your way out of debt no matter what Keynes said.[/quote]

<strong><em>Keynes never said that!</em></strong>

Keynesian economic theory holds that government spending should run counter-cyclical to the ebb and flow of the business cycle: ramped up government spending during economic downturns and increased taxes during economic boomtimes. This, in theory, would lessen recession lengths and keep upturns from overheating.

This is in contrast to so-called "classic" economic theory which postulates that taxes should be cut in boom periods and government spending reduced in recessions.

Back to the Rep.vs Dem philosophy I see. In that division we all lose. Stimulus money was paid back but you continue the old lies it raised the debt. You seem smart enough to see through the opposition talking points that are stretching the truth. The Banks paid back the money and some. The Auto makers paid back the money and some. Let's move past the lies and ask "What can Congress and the President do to create jobs together?" If this were to happen then they again will be working for the American people.

JeffC's picture

I agree that "you can't spend your way to prosperity or borrow your way out of debt no matter what Keynes said". However I don't think that was what Keynes said. The purpose of the huge stimulus spending was not to spend our way to prosperity or borrow our way out of debt. It was to stop the collapse of the international banking system and to forestall the wreckage of the economy.

To paraphrase an obscure politician from long ago, "is the economy better off now than it was two years ago?" Undeniably the answer is yes and the US economy has rebounded better and faster under Obama's monetary policies than have virtually all of the countries of Europe; all affected by the same crisis at the same time.

Many here, with the Tea Party advocates being the most vocal, were clamoring for the bankruptcy of the banks and the automobile industries (among others) as supposed free market capitalism worked its magic. I have no doubt that their policies would have eventually worked; but after decades of recovery from the collapse of our economy and with the further sky rocketing of our already critical unemployment. Bush and Obama could not ignore that part of the equation in the real world.

I disagree with the current fad among conservatives who are shedding crocodile tears over regulations and attributing them as the cause of joblessness. There is probably some minuscule effect of regulations but growth in the economy is a result of demand. Entrepreneurs who sit on the sidelines not meeting the demands of the economy will be beaten by entrepreneurs who will. The complaints about regulations are just a thinly veiled attack on the health care law. The question is whether a recovery fueled by demand would have been faster under the stimulus or if the economy and monetary system had been allowed to collapse.

Your guess that entrepreneurs won't fuel a recovery while Obama is in office is somewhat depressing. Six more years is a long time to wait.

You are pretty much wasting your time with many of this bunch trying to explain what caused our Great Recession, (or who caused it) and why Bush's last gasp bailout and President Obama's addition to it salvaged catastrophe!

They also would like to ignore a past spiraling health care costs and blame President Obama for that occurrence before the next election.

Every time I try to provide the facts about our situation, it seems they have only one thing in mind: don't blame any republicans and defeat President Obama in 2012, even with the help of TEAS and Palin--which is going to be their downfall.

When did the citizens welfare in this country become second to party power and every bill in congress that might be helpful? It is unbelievable that they do not want to regulate that bunch of thieves in the banks and not even the regulation of foodstuffs!

JeffC's picture

My purpose in blogging here is not to pursue the lost cause of changing minds. I am engaging in this particular blog to sharpen my arguments in another very serious academic forum where I am supporting the theories Richard Koo expressed in his book "The Holy Grail of Macro-Economics".

I also enjoy the arguments and discussions here against many who can actually uphold their side in spite of being wrong (ahem). Otherwise, I would not open myself the tiny minority here who know that they cannot compete intellectually with anyone, myself included, and who therefore resort to juvenile insults hoping to change the subject to who can be the most classless; the only argument that they have a good chance of winning.

So Jeff, if I want to point a personal finger at some person or element of our govt or private industry for the fact that my health insurance premium rose by 32% for 2011 and co-pays for seeing specialists and prescription drugs rose also, in what direction do I do that pointing? I suspect private industry will say that new govt regulations were the culprit and govt minions will blame private industry and say they paid their ceo.s too much! Answer is : NO ANSWER.

Jeff's response is the type of statement one would expect from a psuedo-intellectual of the liberal elite class.

Unlike a genuine academic, a pseudo-intellectual’s main reason for being interested in politics is because it makes him feel intellectually superior to his peers. He usually despises main stream culture, accuses those who disagree with him as being ignorant, and when his ideas are challenged, he often retaliates with “That’s a straw man argument!”

They usually use flashy words and quotes from intellectuals to make them sound a bit more clever than they really are because they don't have an original thought of their own.

Jeff obviously gets his proverbial arse handed to him on the other "very serious academic forum" that he participates in and feels compelled to attempt to diminish others on this blog that he considers to be morally inferior.

SPQR's picture

So where does that put the Jeff wannabes and admirers?

[quote=grizz]Jeff's response is the type of statement one would expect from a psuedo-intellectual of the liberal elite class.

<strong>Unlike a genuine academic, a pseudo-intellectual’s main reason for being interested in politics is because it makes him feel intellectually superior to his peers. He usually despises main stream culture, accuses those who disagree with him as being ignorant, and when his ideas are challenged, he often retaliates with “That’s a straw man argument!”</strong>

<strong>They usually use flashy words and quotes from intellectuals to make them sound a bit more clever than they really are because they don't have an original thought of their own.</strong>

Jeff obviously gets his proverbial arse handed to him on the other "very serious academic forum" that he participates in and feels compelled to attempt to diminish others on this blog that he considers to be morally inferior.[/quote]

Another sign of pseudo-intellectualism is passing off someone else's words as your own. <a href="http://www.urbandictionary.com/define.php?term=pseudo-intellectuals&defi... like you did.</a>

JeffC's picture

Thanks!

I agree with this. If only I could be classified as a pseudo-anything, especially a pseudo-intellectual (whatever that is), but alas, I am at least two knotches below such high performance.
Althouigh many on here don't even make the knotching chart! (I'll bet that is supposed to be spelled notches?)

I just discovered what intellect is! It is things you really know rather than just feel are right or are quoted by conservatives! O'Reilly, for instance, or Beck.

Well none here, is there?

JeffC's picture

If you feel that my main reason for my being interested in politics is because it makes me feel intellectually superior to my peers, I'm afraid that you simply haven't been paying attention. As to whether or not I have original thoughts of my own, I humbly throw myself onto the collective judgments of the others here who read my responses, And as for using flashy words and quotes from intellectuals, I have not found that the brobdingnagian (it means huge) majority here have had any difficulty at all understanding me. My apologies to you though. However, as Jacob Bronowski said, "To me, being an intellectual doesn't mean knowing about intellectual issues; it means taking pleasure in them."

I assume that your assertion that I feel "compelled to attempt to diminish others on this blog" is a reaction to my comment about "the tiny minority here who know that they cannot compete intellectually with anyone". Sorry if you feel that it was your ox that was being gored.

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