Thursday, March 10, 2011

Wisconsin and a Couple of Economic Thoughts

Last night Republican Senators in Wisconsin pushed through Governor Walker's plan to strip collective bargaining rights from many government unions (just the ones who didn't support Walker). We'll find out if the deceptive way in which they did it was legal or not in coming weeks/months with court challenges. The thing that is scary about what is going on is that it gives greater power to government and large institutions and corporations at the expense of individual workers. People who think this will actually help the country don't have even a basic understanding of capitalism and what unions have done to help individuals.

Without unions and collective bargaining, we would not have 40 hour work weeks or employer health benefits. Capitalism is all about maximizing shareholder value - it is not a social program to help people rise up. Organized labor created the conditions for demanding more from employers - this has helped even those who are not part of unions. In any event, we will see what happens.

Now a couple of economic thoughts. Unrest in the Middle East is driving up oil prices. Our over-reliance on oil is embarrassing. The "Drill Baby Drill" crowd needs to give way to alternative energy (clean energy) sources. If Saudi Arabia were to have a couple of terrorist attacks and protests in the streets emerged, we would have $5/gallon gas overnight. We don't have adequate supply of oil reserves in the U.S. and even if we could tap more all that would happen is that it would be exported to the world markets to the highest bidders - that is capitalism. Unless people want to privatize oil production in this country - which is a bad idea for a variety of reasons - drilling won't do anything. The rising gas prices are going to continue because of ongoing unrest and a continually weakening dollar.

Unemployment is now up in the air. Any stabilization that does occur will be hampered by the fact that the jobs that are emerging are not nearly as good, and with the attacks on unions will not offer benefits. But the deficit will continue to rise. Republicans want to give more tax breaks and cut spending. This will only raise the deficit and create more unemployment among both government workers and government contractors. On the Democratic side, there is little push back so we will get another "compromise" like the horrible tax deal that President Obama struck with Republicans at the start of the year.

We are in trouble as a country.

Friday, March 04, 2011

Unemployment Falling

Not surprising, unemployment is falling - dropped to 8.9 percent.

As I have said for months, employment figures are a lagging indicator. Wall Street has been booming which means that capital is flowing. Corporate profits then recovered. All of the cash is now flowing into job creation.

That said, the deficit is unacceptably high. Some spending cuts are in order, but the government needs to get serious about deficit reduction and look at tax increases. There is simply no way to grow out of the deficit as it now stands or with its structural deficits that exist.