Where Are the Jobs Going to Come From?

By Peter Galuszka

The conservative dogma machine continues to whine on in full gear. There’s Texas  Gov. Rick Perry talking about it and Mitt Romney, sort of. Our own esteemed James A. Bacon Jr. is on Norm Leahy’s right-wing radio citing it chapter and verse.

What is it? The government should not be in the business of creating jobs.

OK, fine. Then who should be creating new jobs? In case you haven’t noticed, Virginia’s unemployment rate has increased from 6.1 percent to  6.3 percent in August despite the efforts of Lt. Gov Bill “The Jobs Guy” Bolling.

The answer is the private sector should be hiring. But they are not, according to a revealing story in Saturday’s Wall Street Journal. Instead of hiring, companies are collecting ever more cash to horde. It is up from $1 trillion to $2 trillion — the most in a half a century. Horded cash is up $88 billion since March, according to the Federal Reserve.

To be fair, one reason that the companies are stashing cash away is that banks aren’t lending, but the point is so very obvious. If you don’t have a recovery, banks won’t lend. And if banks don’t lend, you don’t get more jobs (at least not in the U.S.).

For those of you old enough to remember, this is a basic lesson from economics professor Paul Samuelson’s classic basic textbook. The phenomenon is called “the paradox of thrift.” It’s when people and businesses save for a downturn but since everyone does it, it makes a downturn a certainty.

Funny how you never hear about this from Bacon and his Baconauts or the GOP presidential wannabees. Our predicament, of course, is entirely Barack Obama’s fault and no, he should not create temporary jobs with another stimulus. Uh- uh. Too Keynesian.

But the Baconauts don’t exactly say how we are going to start getting jobs if the private sector they love and honor SOOO much is stashing away cash and not hiring. They can’t blame budget overspending or their other favorite themes.

This could be why a stimulus to create jobs — that’s right gang, do exactly what the Baconauts say we should not do — might finally break through this gridlock. People working even for government money on infrastructure might start spending, giving the financial sector some confidence. They start lending. Corporate America stops acting like Scrooge and spends and hires. Revenues start flowing. Sure we need to be frugal with long term public spending, but now is not the time to make it our priority.

And by the way. Three cheers for the Warren Buffet tax on the millionaires. If Obama goes and gets approval from Congress, only 0.3 percent of the country’s taxpayers would see a tax  hike. In fact, Obama should have done this months ago instead of bowing to conservative pressure and keeping on George W. Bush’s tax cuts for the rich.

As far as the millionaires, they can be sure I am crying for them. As for Obama, let’s hope he stands up to the Boehners, the Cantors and the Tea Party nuts and tells them to kiss his ^$%.

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22 responses to “Where Are the Jobs Going to Come From?

  1. Banks don’t want your money. They have too much already. Companies don’t want your money. They have too much already. Governments don’t want your money. They have a printing press running non-stop.

    A paradox of thrift? Nah, there is no paradox in a liquidity trap. Do something paradoxical, raise interest rates and turn off the printer.

    http://www.latimes.com/business/la-fi-low-yields-banks-20110918,0,3758580.story

  2. Government spending might work if the government wasn’t so hopelessly incompetent.

    Solyndra? Are you kidding me? A half billion dollar loan guarantee to a start-up. News flash to Obama – you don’t loan money to start-ups. That leaves you will all of the downside risk (bankruptcy) and almost none of the upside potential (dramatic equity appreciation).

    Solyndra applied for a loan from the Bush Administration and was denied. Then, Obama’s donors tried again with Mr. Hopey-Changey from Chicago. The stench of Chicago politics is all over this deal.

    Here’s another news flash – the Chinese can make solar panels cheaper than they can be made in the San Francisco Bay area.

    So, why weren’t there more real news flashes? Here’s one from a typical reporter:

    http://swampland.time.com/2011/06/24/the-white-house-wouldnt-answer-republican-questions-so-ill-try/

    Here’s the bozo’s closing two sentences …

    “As for Solyndra, I can report to the Republicans who seemed so concerned about the company’s viability that it no longer seems to be on the verge of a humiliating collapse. I’m sure they’ll be relieved.”.

    Published: June 24, 2011.

    As I asked in my last article, “Tax the Rich, and then what?”.

    Does anybody really think that giving these idiots more money will make anything better?

  3. the word is that Solyndra’s operations in China will continue……

    if that is the case – beyond the scandal-potential .. what does this mean in terms of jobs in this country?

    It’s not that there are no jobs available… it’s that people in China are willing to do those jobs for 1/4th of what we can and they don’t even need to sneak across our border to take away jobs…

    can the govt ‘create’ jobs??? no directly…. but when the gov decides it wants drones – there are real jobs involved in building them.

    It’s true that when the govt does that – that it’s basically deciding that you and I need a drone more than we need a big screen TV or a new car…..

    but in all 3 cases -a job is created and real money his paid to a real employee.

    is the drone an overpriced piece of hardware? probably no more or less so than a TV or a smartphone, eh?

  4. We are missing the point who cares about the wind company the question is why the rivate sector is hoarding cash and not creating jobs pg

  5. I don’t think the private sector is “hoarding” cash even though they have accumulated it – no more than people who decide to save more money rather than spend it are “hoarding” it.

    I think both people and companies hunkered down and trying to not take any more losses than they already have.

    when your job is not a guaranteed proposition – and your house has lost value and your health insurance may well go up… etc… you’re not going to buy like you used to.

  6. my observation is that WalMart is about as crowded as it has always been but the small businesses in the strip shopping centers are getting killed…

    WalMart is carrying much less stock – more variety but what they carry is not deep in stock and not unusual to see them out of things after a weekend.

    in other words – they’d rather miss the sale than risk carry too much stock.
    many stores are very lean on their inventories…

    this translates into flat sales at the companies that supply products… so they’re not about to hire people if they can make production targets with overtime and part time employees.
    and when they do hire – they have such a large pool to choose from that they can demand a pristine job history… and those who may have gotten jobs before – are not going to get hired this time.

    I don’t think business “job” is to hire people. I think businesses “job” is to stay in business – to survive – to continue to function and not to risk failure by hiring people that they are not absolutely sure they need.

    It’s a vicious circle – aggregate demand is what drives business expansion and we’re flat or perhaps as Darrell speculates… we’re is a liquidity trap.

    I do not believe that cutting taxes on businesses and the wealthy will “create” jobs. No one is going to hire a new employee just because they pay less taxes – they hire when their business needs new employees.

    stimulus will increase aggregate demand but it has been totally demonized as a strategy so now tax cuts are being pursued… the ironic thing is that the more unemployment we have – the more entitlements we pay – which will increase the debt.

  7. Around 175,000 large companies provide half of US employment. The other half are provided by companies that employ fewer than 100 persons. There are a million of them. Five million businesses have no employees.

    Typically from the time a business starts until it hires the first employee is ten to fifteen years.

    Don’t count on new businesses solving the employment problem.

  8. new businesses have a horrendous failure rate… and almost always mean that some poor smuck lost his life savings…

    small business jobs might be the largest chunk of jobs but small business jobs are problematical in terms or providing pension and health care benefits.

    to a certain extent – we have built an economy that counts on big companies that can provide pensions and health care benefits and we have modeled our Federal, State and Local government employees jobs on this – i.e. to provide health care (untaxed) and pensions.

  9. most folks if given a choice between a company that provides health insurance and pension and one that does not – will take the job with benefits in a heart beat.

    you’ll find that a lot of small business employees are SPOUSES or sons/daughters of someone who has that job with benefits.

    The union guys know what is important to their families – and that is a job that provides health care and a pension.

    Perhaps we are entering an era where such benefits are not going to be standard.

    part of what has ruined this country is the tax code waiver of taxes on employer-provided health insurance.

    if everyone got the same tax treatment – then many folks would not seek a job with “benefits” as long as they could find a job that paid more – that they then could purchase their own insurance – and – like those who work for companies with benefits – write them off on their taxes.

    why don’t we do this? Well.. in a word – it would bankrupt the country.

    see the WaPo article:

    Ever-increasing tax breaks for U.S. families eclipse benefits for special interests

    http://www.washingtonpost.com/business/economy/ever-increasing-tax-breaks-for-us-families-eclipse-benefits-for-special-interests/2011/09/15/gIQAgdjcaK_story.html?hpid=z1

  10. A big reason is that insurance is not available. Cannot be purchased at any price, because of pre existing condition, or can be canceled at an irregular heartbeat.

  11. The second to last thing a business wants to do is hire someone. The last thing they want to do is pay them.

    The point of my post above is thkat type conservative claim that lowering taxes and reducing regulation will unleash small business to create joebs is a fraud. Even if it works, it will Take a decade. More likely, big business will benefit, and the wealth gap will continue to grow.

    At the present rate of change, in 20 years the top 10% will have virtually all of the income. The bottom 50% will live primarily on d
    dole. Today’s headlines about the government giving more breaks than it collects in taxes will seem quaint. No one will argue about taxing the rich, because there will be no one else to tax.

  12. Unemployment numbers are comprised of those that are in the job market for the past 30 days. It does not include those that have not been in the job market in the last 30 days: people who have given up looking; those that have gone off unemployment because it has run out. One solution to unemployment is “High Speed University” check it out

  13. Groveton,
    Thanks for the cite, but I already knew that. IN fact, I got a lot of hate mail when I noted that GE wasn’t paying taxes and putting jobs overseas.

  14. the reason businesses outsource is competition. Competition is fundamental to capitalism and is in turn fundamental in lowering costs which leads to lower prices and the companies that do this – survive and prosper and the ones that do not – fail.

    but “free trade” and globalization basically means that countries with the fewest regulations and lowest pay have a competitive advantage that, in the end wins.

    China and other countries believe in State-sponsored capitalism where they play a direct role in …. “creating jobs” by taking those jobs away from other countries.

    they don’t really “create” jobs – but when there are X jobs building and selling widgets (like big screen TVs) – they will basically subsidize that industry.

    Well…. how do they subsidize it to start with and whose money are they using to subsidize it?

    turn this around – what would it take to build big screen TVs in this country?

    it would take companies that paid low wages, no pensions and no health care – right?

    we already have jobs like that ….. and we already have people complaining about “illegals” taking those jobs…

    I’m not sure I see coherence in our collective views of globalization and how we, as a country, operate in that world.

    China seems to have no problem operating in a globalized economy but we have problems.

    We point with pride to our increased standard of living compared to Asia and Europe – but in a globalized world – is it really sustainable?

  15. Peter says, “Sure we need to be frugal with long term public spending, but now is not the time to make it our priority.”

    When *will* be the time to make public frugality a priority? Will there *ever* be a right time? If and when the economy does get going again, do you seriously believe that the Keynesians among us will say, “OK, now’s a good time to slash spending?” Won’t they be terrified of undermining the economy just as it’s finally growing again? Won’t there still be an endless list of “needs” that still need to be met, and if we can’t meet them then when the economy is growing, when will we ever meet them?

    The problem with putting off austerity forever (if you can call reducing a $1.1 trillion-a-year deficit to, say, $700 billion a year “austerity”), is that one day the national debt will be so huge and the interest payments so overwhelming that the U.S. will default on its debt. When Boomergeddon comes, the game ends. Investors refuse to buy any more Treasuries, leaving the Federal Reserve as the borrower of last resort. At that point the value of the dollar collapses, massive inflation sets in and economic chaos breaks out.

    We can suffer the bearable pain of austerity now or the unbearable pain of economic collapse later.

  16. Peter:
    I don’t know why you got hate mail for saying that GE didn’t pay taxes and that they move US jobs overseas. Both points seem observably true to me.

    I’d also add that their CEO is a mollycoddled FOB (Friend of Barack) who is rewarded for his un-American behavior with one plum appointment after another. Coupled with the Solyndra scam it is becoming obvious that “hopey changey” was just marketing spin designed to get another of the same old, same old elected.

    The people in America need to wake up. The battle is not between rich and poor or Democrat and Republican or Liberal and Conservative. The battle is between the people and the government. It’s time to throw the long term politicos out of office. It’s time for term limits. It’s time for campaign donation limits. It’s time to curtail lobbying. In short, it’s time to return the government to the people.

  17. Jim:

    Your point about austerity is well made. However, it is the lesser point of the anti-spending argument. The greater point is that government spending has been increasing as a percentage fo GDP for the last 100 years. In the last 11 years it has gone from about 31% of GDP to about 41% of GDP.

    The governemnt should stop spending because government spending isn’t making anything any better.

    If someone has a better idea as to how governemnt should spend, then I’d like to hear it. However, the present government on both sides of aisle has proven that it cannot turn increased spending into a better life for Americans.

  18. I do have serious concerns about the amount of cash held on the balance sheets of corporate America. As an investor I am frustrated that the companies in which I invest are holding money during a time of historically low returns. This is contrary to my interests and evidence that the corporate board structure of American business is a failure.

    As an American I am frustrated that this money is not put to use for R&D in America. Instead, it is used to increase dividend payments and buy back the company’s own shares on the open market. The dividends concern me less than the share buy-backs. Dividends are taxed when paid and the remainder goes back into people’s pockets where it can be spent or re-invested. Share buy-backs are an admission of incompetence on the part of a company’s management and board of directors. They should be taxed at least at the same rate as dividends.

  19. where was Bacon’s thinking when the two wars were funded with debt?

    now that we’ve run up 14 trillion in debt from a doubled DOD budget – we say that the time for austerity is now – at the point where we have the worst recession in history that rivals the great depression in some ways.

    When we say let the Bush tax cuts expire and let us return to the tax policy that was in place when we reported a surplus – we are told that those levels of taxation kill investment and jobs.

    when you fight two wars at the same time you cut taxes and then a decade later ..suffering a 14 trillion dollar debt during the depth of a recession … and your solution is austerity… you call into question your whole concept of how to budget.

    fiscal conservatives used to be known as people who advocated – what it would take to have a balanced budget – taxes and revenues.

    now.. they say we have to get there with cuts alone – but none of them will be honest enough to show how we get there with cuts alone.

    advocating generic cuts without reality-checking the results is what Conservatives are about now days.

    I’d no more want them in charge of the country than the man in the moon.

    they have demonstrated not only that they are abject failures – having been the principle architects of our 14 trillion debt but they also demonstrate they don’t understand how we got there much less how we get out of it.

    Conservatives are ideological losers…. now days… not to be admired much less trusted to do what will actually work.

  20. If a company buys back enough shares it will eventually go private. Share buy back is a sign of confidence among the principal owners, and a way of consolidating and increasing their share of the wealth gap.

  21. Jim,
    For the zillionth time,it is important to watch spending but now is NOT the time to do it. Not when we have such high unemployment and a sputtering economy.
    As I read in a column somewhere today, doctors used to cut into sick patients and drain them of their blood. Dumb idea. The patient died.
    Do you want me to draw you a picture?

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