Radio commentary, August 8, 2009
[WBAI is fundraising this week and next. My fundraiser is next week—be sure to pledge during my slot, details to follow!—and I was pre-empted on August 6. My KPFA show for August 8 is mostly a rerun, but it did contain this fresh commentary.]
If you’re an American taxpayer, you’re an owner of AIG, the failed insurance company. According to a piece in Thursday’s Wall Street Journal (which did the research itself—God, I’m going to miss newspapers), AIG and the Federal Reserve, a branch of the U.S. government, will be paying Wall Street investment banks—familiar names like Morgan Stanley, Deutsche Bank, and, of course, Goldman Sachs—around $1 billion in fees to break the company into pieces and sell them off. More public money going to investment banks to break up a corpse that was done in because of lax regulation.
I hate to keep rubbing this in, but if this is change we can believe in, then I’m Marie, Queen of Romania.
And how about that cash for clunkers program? Almost everyone purports to hate governmment spending, but if it involves a $4,500 subsidy to buy a new car, well that’s ok! Estimates are that the first installment of the program, which cost $1 billion, moved about 180,000 units off dealers’ lots, and stimulated fresh orders from carmakers. Presumably another $2 billion, the amount of a second installement that Congress passed quicker than you can say “Free Money!,” will move twice that many. To what effect?
Not much, probably. First of all, it’s quite likely that some large but unquantifable prooportion of these sales were just moved forward from future months. But aside from the economic stimulus, getting old gas guzzlers off the road and replacing them with fresh, fuel-efficient vehicles is supposed to be good for the environment. Well, barely, if at all. According to estimates by the Associated Press, the first installment of the program is likely to save altogether the equivalent of an hour’s greenhouse gas emissions by the U.S. And that doesn’t adjust for the fact that making new cars emits a lot of greenhouse gasses into the atmosphere. It may take five or more years of post-clunker lower emissions to make up for that effect.
How will our cash-strapped leaders pay for Cash for Clunkers, the sequel? By raiding the funds for a new Energy Department loan guarantee program designed to stimulate innovative clean energy technologies. Created as part of the stimulus package, that $6 bilion program will now be a $4 billion program. So they’re diverting funds from something with considerable economic and environmental promise to finance something of dubious value. More change we can believe in!
And finally, some comments on the July U.S. employment report, released on Friday morning. It may seem a little odd to take the loss of a quarter of a million jobs last month as good news, but this is the best employment report we’ve seen in nearly a year. About half the 247,000 decline was in goods production, with construction leading the way, and manufacturing not far behind. The other half was in private services, with retail leading the way down. About the only plus signs were in health care, as usual, and leisure and hospitality rose by 9,000, thanks to performing arts and spectator sports and amusements, gambling, and recreation (suggesting that people are seeking diversion from their woes?).
Despite the improvement in July’s tone, longer-term measures still look dreadful. We’ve lost almost 7 million jobs since the recession began in December 2007, almost 6 million of those over the last year. In percentage terms, we’ve lost one and a half times as many jobs in this downturn as we did in the 1981-82 affair, which is widely regarded as the worst in modern times. Yes, the rate of deterioration in the yearly measures is slowing, but we’re not yet seeing less negative annual numbers (or, to put it more geekily, we’re not yet in the realm of the positive second derivative).
Those figures come from a huge survey of employers. The Bureau of Labor Statistics does a simultaneous huge monthly survey of households as well. That looked pretty bad. While the unemployment rate fell by 0.1 point to 9.4%, the first decline since April 2008, it looks like a lot of people have given up the job search as hopeless, meaning they’re no longer counted as officially unemployed. And the ranks of the unemployed are increasingly dominated by people who’ve been jobless for half a year or more—people whose prospects for re-employment in the future are usually quite damaged by these long spells outside the labor force.
So while there are some signs that the recession is drawing to a close—an impression confirmed by the drop in first-time claims for unemployment insurance last week—the job market is still awful, and the recovery that’s likely to follow the end of the recession sometime later this year will almost certainly be very weak and not very joyful. The U.S. economy has some serious structural problems that aren’t even being discussed, much less addressed.