Economic Growth

In politics, we are often told, we should not let the perfect be the enemy of the good. That's why so much of what comes out of our policy-making process ends up as politically-driven compromise. In Washington, splitting the baby is often considered better than no baby at all. But, as the financial crisis brings the worlds of finance and politics into increasingly overlapping orbits, we need to take note that what may be acceptable compromise in politics can be dangerous ambiguity when applied to finance. Today, many banks are faced with openly ambiguous mandates that border on outright conflict.

On the one hand, these publicly-listed banks are expected to pursue their business models and to respect their fiduciary obligations to maximize return for their shareholders. These days any financial institution worth its salt is assessing how to take advantage of the opportunities presented by the current financial crisis - especially the hyper-generous financing being provided by the US Government...

In remarks on Friday following a meeting with Fed Chairman Ben Bernanke and Sheila Bair, Chair of the Federal Deposit Insurance Corporation, President Obama pointed to some "glimmers of hope" in the economy, and indeed a few green shoots-rising mortgage refinancings and a slight uptick in durable goods production-have appeared in recent weeks. But the economy is still in trouble, and it would be a mistake to bet what remains of your 401K on the White House's optimistic growth forecasts of the economy rebounding to 3.2 percent to 2010 and then improving to more than 4 percent on average for the next three years...

The number of workers who are part-time of economic necessity and would prefer to be full-time has risen dramatically, doubling in size over the past year. Another way to put this is that 4 million more people are working part-time but looking for full time employment.

Part-time workers for economic reasons have also risen as a share of the civilian workforce to nearly 6%.

There is a social cost to the increase in part-time employees. Workers in part-time jobs are not provided the health care or retirement benefits that are more standard with full-time employment. Therefore, not only are more people earning less because they cannot get a full time job, but they do not have an adequate safety net and are at risk of incurring huge costs for medical treatment...

One of the key components of Leo Hindery's and Donald Riegle's "Jobs Solution," as outlined in their April 20 article in The Nation, is a substantial, sustained upgrade of America's infrastructure. The authors advocate a "ten-year program of significant additional public investment to upgrade and rebuild our nation's infrastructure for the twenty-first century, which would create millions of jobs and make it easier for American-based companies to succeed in the global marketplace." Along with a big boost for K-12 education, infrastructure is the cornerstone of their call for "aggressive public-sector employment initiatives."

The argument in favor of infrastructure investment is that it creates many high-quality jobs in industries such as construction, which have been particularly hard-hit by the housing bust and subsequent recession. Moreover, renewing America's public assets--from roads and power lines to water systems and broadband--will set the table for future innovation and economic growth in the private sector. That's the hope, at least...

The U.S. Labor Department recently announced that the official unemployment rate has hit a startling 25-year high of 8.5%. Yet in an April 6th story, The New York Times' Louis Uchitelle reported that "15.6% of the labor force are either hunting for work or working fewer hours than they would like to work, or are too discouraged to seek work." That sure sounds a lot like unemployment--so why the different rates? And which one is right?

The bad news is that 15.6% is much closer to the real rate of unemployment than the Labor Department's official statistic of 8.5%, which only addresses jobless people who have actively searched for work within the past four weeks. As Leo Hindery Jr. and Don Riegle Jr. note in their recent cover story for The Nation, the official numbers miss a lot of the story because they exclude workers who are underemployed (e.g. are forced to work part-time for economic reasons or want work but haven't looked during the month before the unemployment survey) or people who have totally abandoned the job search...

One of the casualties of the economic crisis might be the consensus that the U.S. can shed all of its manufacturing industries and specialize as a post-industrial service economy where Americans will earn high wages as "symbolic analysts" (Robert Reich) or members of "the creative class" (Richard Florida). 

In his annual letter, Jeffrey Immelt, the CEO of General Electric, writes:

I have also learned something about my country. I run a global company, but I am a citizen of the U.S. I believe that a popular, thirty-year notion that the U.S. can evolve from being a technology and manufacturing leader to a service leader is just wrong. In the end, this philosophy transformed the financial services industry from one that supported commerce to a complex trading market that operated outside the economy. Real engineering was traded for financial engineering. In the end, our businesses, our government, and many local leaders lost sight of what makes a nation great: a passion for innovation...

This week, we will be focusing attention on several of the issues raised in this important article in The Nation by Leo Hindery, chair of New America's Smart Globalization Initiative, and former Michigan Senator Don Riegle, another member of the initiative.

Hindery and Riegle argue that not nearly enough of the recent economic stimulus bill went toward activities that would create jobs and that the government's most commonly cited unemployment figures dramatically understate the scope of the job deficit. They trace the causes of the current crisis to tax policies that favored the wealthy, a steady erosion in union membership and the debilitating domestic effects of major trade agreements with Canada, Mexico and China...

The great David Plotz coaxed me off the fence about blogging when he launched his “Blogging the Bible” feature on Slate, about three years ago. He proved over months that by blogging he could write something very worthwhile and even lasting in a way that could not be done as successfully in any other format. The fruits of his adventure will be published tomorrow in extended book form: “Good Book: The Bizarre, Hilarious, Disturbing, Marvelous, and Inspiring Things I Learned When I Read Every Single Word of the Bible.”

No inspired achievement of this kind will long go un-imitated. This morning, full of new-Monday vim, I printed out all 407 pages of the stimulus bill, thinking that I should commit an act of think-tank citizenship and read it. I was planning just to skim through it, educate myself, and find a blog post or two in it. Then I remembered Plotz. Actually, it was the Old Testament type face on the first page that reminded me of his earlier work...

There are days when tracking the Obama Administration’s bank-rescue plans seems to require a graduate degree in Kremlinology. As was true of those Cold War analyses of who stood where on the May Day reviewing stand, there is a sense at Treasury these days that runes and signs lie embedded in the most ordinary scenes. In public, Bernanke and Geithner continue to say that nationalization—or temporary receivership, the gentler euphemism—is not required and is not in their plans. Yet there are persistent indications of a hidden, whispered narrative of personal rivalry, debate, and unfinished decision-making within the Adminsitration about how to rescue the banks, and in what sequence...

The lucid survey of American bank insolvency in the Times this morning only helps to emphasize how poorly the Treasury Secretary Timothy Geithner did earlier this week when he issued the outline of his forthcoming “Financial Stability Plan.”

There are many sources of uncertainty and confusion in the seven-page Fact Sheet put out the Treasury Department, which is all we really have to go by. Perhaps the most vexing issue involves what role the government will eventually play in removing from the balance sheets of large banks the toxic-debt instruments tied to housing mortgages—“‘legacy’ assets,” as the Fact Sheet refers to them, that have created huge paper losses at many banks...