Right now, 2/3 of the economy is not consumer spending. It's some fraction of what it was and what it could be (if people had jobs). Without the consumers spending as much, there's a whole slew of industries that have less demand for product and less need to build and keep inventory of their products. So less need for them to hire. Though oddly, those they would hire would be consumers of their product, directly or indirectly... It is a fucking big deal to hire anyone, even in a state like California where employees can be terminated at will. Employers are subject to lawsuits for wrongful termination anyhow, and there's unemployment insurance they have to pay for their workers, etc. An employee is an investment in the corporate culture and knowledge as well. If it takes a month or a year to fully train said employees, there's that additional cost to hiring. Thus it better be worthwhile to the employer.
Directly, yes. Indirectly, you've got to consider that low-skilled, low paid workers are often complements to not only expensive professionals but also expensive capital improvements. The uncertainty isn't in hiring/firing them per se, but in creating and using the more expensive system of assets to make use of them. No, I didn't they were lazy and don't want to work. I said working, given the alternative, works out to be more costly for them than not working. Indeed it is not pleasant for a worker forced to do so, but it certainly does help the economy. In the case of a worker refusing work and taking unemployment, they are, essentially, sitting on the wagon everyone else is trying to push. By getting off the wagon and joining in the effort to push, the wagon is going to get further, lose weight, and have more folks pushing it. By increasing the value of staying on the wagon and not helping to push, unemployment hinders success. I agree in the long-run that that reducing unemployment isn't the only measure of success, but it's a step in the right direction to get people employed in the first place.
Frequently the more expensive system of assets reduces the need for low-skilled labor via automation. So I'd argue that lack of industrial investment may actually be supporting the low-wage labor pool, rather than harming it. What does it mean to push here? Seems to me the most obvious meaning is to engage in consumer spending. Which they can do more of if they have more, not less, money. So they are pushing harder by taking unemployment rather than flipping burgers. barfo
I agree with the idea that basing current spending (and by that I mean all current spending, not just consumption) on too much credit is risky, has been, and is a problem. I don't agree that developing an export driven economy always reduces risk. First, everyone can't have an export-driven economy. More importantly, while risk is reduced in general by enlarging your market, you also tend to aggregate local issues to the extent your market integrates. This is often a good thing. For instance, it's pretty inconceivable, despite big talk, that China and the US would fight a war. It would be ruinous for both sides. However, with different sets of politicians responding to different incentives, there's also the possibility they might not understand or care about this. I think you're much more on the mark when you talk about the relationship between our population and government needing to change than on the export stuff. The latter would require significant government manipulation, and it's a variety of government manipulations that have laid the ground for the pernicious problems you point out with respect to debt and savings. It's worth considering that Japan is the original "export driven economy", is it not?
Actually, consumer spending is well over 2/3 of total spending. Over the last 30 years, it's increased from about 65% to over 70% of GDP. Essentially, as GDP has grown, the extra income we've made has gone toward additional creature comforts. Yup
While I think the second order effects of bad governance on low-skilled labor are much less important than the first order effects on higher skilled labor and capital, I think this is basically the "we must destroy the village in order to save it" mentality. Regardless of what it means to push, I think you should devote some thought about what it means to sit. Consider Homer: [video=youtube;KE0-zQBL-Sc]http://www.youtube.com/watch?v=KE0-zQBL-Sc[/video]
Was Homer sitting? Or was Homer pushing? Would the sled have gotten as far as it had if not for Homer's whipping? The easier analogy is Homer-as-CEO, not Homer-as-unemployed-person-on-public-dole. barfo
Disagree. If you want to see where it is a fucking big deal to hire someone, try France or Japan, where you are basically stuck with anyone you hire permanently. California is probably the toughest state in the union for employment law (favoring the employees) but still it isn't hard at all to get rid of employees in CA. If it takes a month or a year to train a low-skilled, low-wage employee, you are doing it wrong. barfo
China needs to do two things to fully integrate itself into the world economy: They need to let the RMB float to make their exports more expensive and imports cheaper; and they're going to have to allow their citizens to spend their money. If I were President, I would be heavily leaning on the Chinese to do those very things. Too often we've been content to take in cheap goods at the expense of our manufacturing jobs. I don't mind that dynamic where it's honest; I mind it greatly when it's being done to destroy American jobs, like the Japanese steel dumping scandal of the 1980s or today's forced ceiling on the RMB by the Chicom government. The Japanese economy wasn't done in by a drop in exports; it was done in by a real estate bubble and a banking crisis that--adjusting for relative size of our economies--makes ours look like just a ripple.
NEW YORK – Treasury Secretary Timothy Geithner pledged on Monday to move with speed to implement the biggest overhaul of the financial system since the Great Depression. He said that a top priority will be simplifying the complicated forms that consumers have to fill out to get credit cards, auto loans and mortgages. http://news.yahoo.com/s/ap/us_geithner_financial_overhaul
