2016 Postmortem

applegrove

(118,683 posts) Sat Jul 7, 2012, 11:52 PM Jul 2012

"Weak jobs report will force the Fed to act, but Congress remains paralysed" by Justin Wolfers

Weak jobs report will force the Fed to act, but Congress remains paralysed

by Justin Wolfers at The Guardian

http://www.guardian.co.uk/commentisfree/2012/jul/06/weak-job-report-force-fed-act?CMP=twt_gu

"SNIP......................................

Next, Congress. With interest rates at zero, now is the ideal time for fiscal policy to provide some economic push. But the Republican-controlled Congress is doing nothing. Nada. Not a thing. They're running for re-election. Many congressional Republicans are worried that any sort of fiscal action will lead the Tea Party to target them. In any case, a strengthening economy would be good for a president they're determined to defeat.

I'm stunned to report that in both policy and political circles, most commentators take the fact that Congress will do nothing as simply a pre-ordained constraint. That's just not the right framing. In reality, it's an enormous dereliction of duty. Congressional leaders are important economic policy-makers, and they're turning their collective backs on conventional economics. It's cliched, but true: if you aren't outraged, you aren't paying attention.

And then, there's the White House. President Obama continues to propose policies that he hopes will yield bipartisan support. The most recent Jobs Act contains many proposals that were originally Republican ideas. Some of them are small ideas; others are bigger. But they languish, and can't get any traction in Congress. Economists estimate that the various programs that Congress has refused to pass would have led another 1m jobs to be created.

Of course, the Romney campaign has opportunistically jumped on these latest numbers as proof of Obama's lack of economic leadership. But look a little harder: what is Romney's policy for reducing unemployment? I spent a whole day on his website trying to find it. Glib talk about a love for free markets and promising ever-greater tax cuts for the rich do not qualify as a serious plan.

.......................................SNIP"

3 replies

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"Weak jobs report will force the Fed to act, but Congress remains paralysed" by Justin Wolfers (Original Post) applegrove Jul 2012 OP

When the Fed acts it doesnt really help the average person DJ13 Jul 2012 #1

There isn't much more the Federal Reserve can do. If the private sector doesn't loosen up and start 4lbs Jul 2012 #2

TARP was not meant for long term investments like infrastructure. Lucky Luciano Jul 2012 #3

DJ13

(23,671 posts)

1. When the Fed acts it doesnt really help the average person

Reply to applegrove (Original post)

Sun Jul 8, 2012, 12:37 AM

Jul 2012

In fact, pumping more money at financial institutions just gives them free reign to speculate, usually on commodities, which actually makes the economy worse for the 99%.

What is really needed is another direct stimulus to the lower classes in order to foster spending, which would increase economic activity and lower unemployment.

Yeah I know, the conservatives (in either party) would never go for it.

4lbs

(6,858 posts)

2. There isn't much more the Federal Reserve can do. If the private sector doesn't loosen up and start

Reply to applegrove (Original post)

Sun Jul 8, 2012, 05:09 AM

Jul 2012

spending the $1 trillion in money it has built up on actual jobs, it's up to the Federal Government to do it.

One thing I wish President Obama had done was use some of that $700 billion of TARP money, especially the large portion that was paid back, and use it to fund government projects directly on a national infrastructure program and to lend money directly to small businesses turned away by the big banks.

Declare the American Worker and the American Small Business "troubled assets", and bypass Congressional gridlock and stagnation.

Then, if and when, the Conservatives in Congress raised a big stink, dare them to pass a law not allowing that, knowing that oh... it would require a Presidential signing to pass. Then when President Obama vetoed it, they would need 2/3 in both houses to override him. Good luck with that.

Lucky Luciano

(11,257 posts)

3. TARP was not meant for long term investments like infrastructure.

Reply to 4lbs (Reply #2)

Sun Jul 8, 2012, 10:21 AM

Jul 2012

It was meant for terms of mostly 2 years or so. AIG has been almost 4 years so far, but that is more extreme. Ending the wars and cutting military spending, on the other hand, would be a great source of funds for infrastructure.

I like the idea of the government lending to small businesses during these exceptional circumstances, but logistically it could be very hard to do as a short term project - i.e. Could take a couple years to set up properly. We live in a huge country with millions of small businesses.

The $1T+ cash that corporations are not using to hire. After Lehman, the commercial paper market which was the blood that kept their businesses flowing seized up and only loosened because the Fed stood ready to buy the CP. markets were very strongly supported by that. The trauma of losing the short term funding can cause the corporations to want loads of cash for a rainy day. I know this feeling from my personal finances. Before the crisis, I would have been happy to buy a house with 5% down and expect my job to be the source of my short term funding. Now I would only buy with a 25% down payment and a 25% reserve of cash if I lose my short term funding (my job). The European crisis is very much a large threat like Lehman for all these multinationals sitting on piles of cash, so they keep that money for a rainy day. Greed plays a role too of course, but the threat of a severe double dip scares them away from investing.

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