The Aeration Zone: A liberal breath of fresh air

Contributors (otherwise known as "The Aerheads"):

Walldon in New Jersey ---- Marketingace in Pennsylvania ---- Simoneyezd in Ontario
ChiTom in Illinois -- KISSweb in Illinois -- HoundDog in Kansas City -- The Binger in Ohio

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Thursday, September 30, 2010

Let the poor fight it out for the crumbs

A letter I sent to the White House today:

In what parallel universe can a Democratic First Lady think it acceptable to fund the otherwise very worthy child nutrition bill by carving out a slice of the Food Stamp program?

I'm really finding it harder and harder to understand these people.

Tuesday, September 28, 2010

Can you hear me now?

Apparently Obama is blaming the Democratic base for his own failures. I say, look to yourself, Mr. President, if you want to find fault. Is Guantanamo closed, as promised after more than one year? Is DADT gone? Have we stopped torturing? Have we stopped trying people in kangaroo courts? Have we stopped spying on American citizens without warrants? Have we stopped deliberately killing civilians in Afghanistan? Are we really out of Iraq? Have we done away with the Bush tax cuts? Have we got a decent health care bill (note that even children without pre-existing conditions now are uninsurable since the insurance companies are refusing to insure any children at all rather than accept the risk of pre-existing conditions. Meanwhile premiums are skyrocketing)? Are we targeting Americans for assassination on the President's say so alone? Has the president stopped invoking the "state secrets" ploy to prevent government embarrassment in law suits? Are the banks being regulated? Are the oil companies being regulated? Has the employment situation improved?

I think the guy must have a bad Verizon connection.


Thursday, September 23, 2010

Spineless worms

With the news that the Dems (Senate and House) have decided to punt on voting to get rid of the Bush tax cuts for the rich, I've concluded they are all spineless worms. I'll vote for anything but a Democrat this fall (as long as it isn't a Republican. If that's the only choice, I'm not going to vote). The Dems deserve to lose every seat they hold!



The downturn officially ended, and the recovery officially began, in June 2009, according to an announcement Monday by the official arbiter of economic turning points, NBER's Business Cycle Committee. Since that point, total output — the amount of goods and services produced by the United States — has increased, as have many other measures of economic activity.

From December 2007 to June 2009, the American economy lost more than 5 percent of its nonfarm payroll jobs, the largest decline since World War II. And through December 2009, the month that employment hit bottom, the nation had lost more than 6 percent of its jobs.

But nonfarm payrolls are still down 329,000 from their level at the recession’s official end 15 months ago, and the slow growth in recent months means that the unemployed still have a long slog ahead.

The declaration of the recession’s end in June, 2009 confirms what many suspected: The 2007-9 recession was not only the longest post-World War II recession, but also the deepest, in terms of both job losses and at least one measure of output declines.

All three of these most recent recoveries have been known as jobless recoveries, as employment growth has significantly lagged output growth. In this recovery, the job market bottomed six months after economic output bottomed. That is still not nearly as much of a lag as experienced after the 2001 recession, when it took the job market 19 months to turn around after output improved.

Any future contraction would be a separate and distinct recession, and one that the Obama administration could not claim to have inherited. While economists generally say such a double-dip recession seems unlikely, new monthly estimates of gross domestic product, released by two committee members, show that output shrank in May and June

The unemployment rate, which comes from a different survey, peaked last October at 10.1 percent. The postwar high was in 1982, at 10.8 percent. But the composition of the work force was very different in the 1980s — it was younger, and younger people tend to have higher unemployment rates — and so if adjusted for age, unemployment this time around actually looks much worse.

Many forecasters estimate that output needs to grow over the long run by about 2.5 percent to keep the unemployment rate, now at 9.6 percent, constant. The economy grew at an annual rate of just 1.6 percent in the second quarter of this year, and private forecasts indicate growth will not be much better in the third quarter.


The economy patient is clearly ill, but off its deathbed thanks to Obama’s stimulus. Turning the patient over to the GOP which nearly killed it is an irrational prospect. Their misguided focus on budget austerity is counter to what is needed for the patient to recover, and, that is a heavy dose of fiscal policy that can directly create jobs. That is because the economy is not creating sufficient total effective demand in the absence of fiscal stimulus. Moreover, the teaspoon fiscal prescription by Obama of $50 Bil is not going to provide a cure. Nor, is it going to help the Democrats in the mid-term elections. Driving unemployment down to under 8% by creating 800,000 jobs requires GDP growth of at least 3% and that requires around a $300 bil. dose of fiscal stimulus. With that kind of serious job creation, the Democrats won’t need to worry over budget austerity, because the middle class and below voters will have forgotten about it in the euphoria of returning to work and breaking the fall in their real incomes. Obama contrary to his seeming timidness has nothing to lose by requesting $300 bil. because the GOP will be unanimously against anything Obama wants to do to help the country in favor of increasing their election prospects by misleading the voters into voting against their own interests, a bad habit voters have developed during the past 10 years, one that is dragging the country down rapidly. One can look beyond the high unemployment, to the widening income disparity, and the rising percent of the U.S. households falling below the poverty level. While blaming Republican policies for digging the deep hole the economy is in, former President Clinton said the Democrats needed to plead with voters for more time to turn things around.“I think we ought to say, ‘Look, don’t go back to the shovel brigade — give us two more years; if you don’t feel better you can throw us all out.’ ”

Sunday, September 19, 2010

Middle class running as fast as it can

Another day older and deeper in debt

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) — This recession has strangled the American middle class, but it was in a weakened state long before anyone heard of subprime mortgages.

The great middle of American society has been falling for 30 years or more, a product of vast economic, social and political forces, both foreign and domestic. It won’t be restored with one congressional election, or even a presidential one. Its troubles are much more serious than that.

The Census Bureau reported this week that the inflation-adjusted median household income had fallen 0.7% in 2009 to the lowest level since 1997. The typical household earned just under $50,000 a year.The typical family is making less than it did 10 years ago.

The Great Recession has taken away the small gains made during the 1980s and 1990s and ripped open wounds that were festering for 30, 35, or 40 years. The middle class is more anxious now than at any time in generations. The worries aren’t new; they are just on another level.

After a great leap forward in the three decades after World War II, the typical American family has barely improved its financial status in the three decades since the 1970s. Any increase in income has been largely due to working longer hours, including sending Mom out into the world to earn a paycheck.

Unfortunately, that paycheck is getting smaller. The average weekly pay, adjusted for inflation, has dropped 13% since peaking in 1973.

In this new world, as Alice found, “It takes all the running you can do, to keep in the same place.”

In the mid-1970s, the average working family could afford to own a house and a car. It could pay for a visit to the doctor and for college for the kids.

Today, even with both spouses working, it’s harder to afford the necessities.

The decline of the middle class was slow and relentless, even during the good times. The U.S. economy hollowed out. More and more of our manufacturing output went overseas, and the domestic economy became more dependent on consumer spending and fancy financial footwork. Good-paying jobs disappeared. So did pensions. Fewer companies offered health insurance benefits, and college tuition climbed out of reach.

To maintain their consumption and to keep up with the Joneses, the middle class made an unholy pact and borrowed against an uncertain future. And now the devil wants his due.

Thursday, September 16, 2010

The German miracle and Keynes

Looks like the Germans did economic recovery right, too. Although the brain-dead American media plays right-wing fairy tales about German "austerity," in fact, according to Der Spiegel, which called it "a Keynesian success story," they didn't hesitate to pump a lot of money into the economy when the crisis hit. They also devised policies -- sometimes called "work-sharing" -- to help companies retain workers at moderately reduced hours and pay and minimize the impact of a downturn on jobs. Today, German unemployment (as measured in the same way as the U.S. does it) is at 7.0%.

Germany continues to be a manufacturing and export powerhouse, and has embraced green energy with a vengeance. We could learn a lot, although, I know, we don't stoop to learn anything from other countries, especially not from those socialists in Europe.

Sunday, September 12, 2010

Manufacturing Jobs in America

From the DC underground:

Those in the manufacturing innovation business, select and fund the development of new ideas that will be manufactured in the USA, and those ideas address some major problem that the country is facing like crumbling infrastructure, the need for clean energy, or the high cost of medical care and the entrepreneurs and innovators who drive innovation. What I have learned is that the old refrain, build a better mousetrap and the world will beat a path to your door is not true. Good quality ideas are necessary for advancement, but the best ideas in the world will never be built without investment.

Why is investment in innovation important? Because the staple industries that American depended on for good paying jobs are gone or cutting back and they will not return. In an article in the on line news magazine, 24/7 Wall Street, John Ogg listed 10 industries that will never return to their pre recession employment levels. These industries include, home construction, the auto industry, the pharmaceutical industry, telecommunications, and local and state government.

There are two sources of investment capital, large companies and venture capitalists. Large companies do not invest in breakthrough innovation for two reasons. First, their emphasis is on short-term gains. The managers need to show improved profits each quarter to satisfy the stockholders. Incremental improvements in the various processes are valued, but breakthrough innovations don’t pay off for years. So, the work to develop breakthrough innovations doesn’t get funded.

The second reason involves how large-scale manufacturing businesses operate. Established businesses are built for efficiency, which depends on predictability and repeatability, breaking tasks down into their components and holding employees accountable for accomplishing the tasks. Innovation is by definition unpredictable and uncertain. Successful businesses don’t invest in breakthrough innovation. The classic example is Ford Motor Company that nearly went out of business making the same car long after the market had gone away.

The second source for investment capital to develop breakthrough innovation is the venture capital (VC) firm. These investors are interested in funding innovative products that will come to market in 2 – 3 years. The problem is that on average it takes 5-6 years from the discovery of a breakthrough idea to the time it is ready for market. Also the more exotic the breakthrough idea is the less likely it is that the VC firm will understand its implications. For these reasons most breakthrough ideas never get the investment funds they need.

The period of time between the discovery of a breakthrough idea and the availability of development funds is known as the Valley of Death.

Two things, first, the jobs we had aren’t coming back, and second, government investment that is needed to get innovative products over the Valley of Death can also steer the innovators into regions where the jobs are needed. For the second part, the nation needs active Representatives that understand how innovation works and have the energy and motivation to take action and get the funds to the innovators and bring in the resulting businesses.

Friday, September 10, 2010

Buffoon Boehner

From: Governor Tim Kaine, Chairman, Democratic National Committee, 8/25/10

Yesterday, Republican John Boehner escalated his campaign to become the next Speaker of the House. He gave a "major speech" in Cleveland -- much-hyped by his staffers, who told reporters that this, finally, was the moment when the GOP would introduce its economic agenda. After all the build-up, all we heard was another list of what Republicans are against. Every supposedly new idea was more of the same. He wants to extend the Bush tax cuts for the rich. He wants to repeal health insurance reform. He opposes clean-energy legislation.

Nothing he offered would move America forward.

The only thing Boehner seems serious about is raising campaign cash. After the speech, he told reporters that he's prepared to help Republicans spend $50 million to win back Congress. We can already guess what he'll do: tap the special interests. He'll work the phones and call in every favor. He'll lean on the big-dollar donors and the corporate lobbyists.

On Tuesday, Boehner said his party deserves to win because it's time to "put the grown-ups in charge." What a bunch of nonsense. The last time he and Republicans were in charge, they took a $237 billion budget surplus and transformed it into a $1.3 trillion deficit. They doubled the national debt and drove the economy into a ditch.

Under Boehner, this country would go right back to the failed Republican policies that cost us 8 million jobs, left the middle class in economic peril, and shifted our tax burden to the middle class by giving $100,000+ tax breaks to the wealthy.

Tuesday, September 07, 2010

Finally, an Obama Fiscal Policy Initiative;Too little, too late.

President Obama, facing a high probability of losing the Democratic majority on Congress, finally put forth a paltry $50 bil fiscal policy proposal (compared with $800 bil for the monetary oriented Stimulus Package). Fiscal policy should have been a part of the first stimulus and it should have been $200 bil. as should this proposal. Doing either would kick GDP growth up in the 3% range and bring down unemployment to 7%. Too little, too late.

Monday, September 06, 2010

GOP Foisting Same Mistakes as 1938

In the 9/5 issue of NYT, Nobel economist Krugman demonstrates GOP is setting today's U.S. up for the policy disaster as occurred in 1938. He contends:

"Consider Gallup polling from March 1938. Asked whether government spending should be increased to fight the slump, 63 percent of those polled said no. Asked whether it would be better to increase spending or to cut business taxes, only 15 percent favored spending; 63 percent favored tax cuts. And the 1938 election was a disaster for the Democrats, who lost 70 seats in the House and seven in the Senate.

Then came the war.

From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today.

Had anyone proposed spending even a fraction that much before the war, people would have said the same things they’re saying today. They would have warned about crushing debt and runaway inflation. They would also have said, rightly, that the Depression was in large part caused by excess debt — and then have declared that it was impossible to fix this problem by issuing even more debt.

But guess what? Deficit spending created an economic boom — and the boom laid the foundation for long-run prosperity. Overall debt in the economy — public plus private — actually fell as a percentage of G.D.P., thanks to economic growth and, yes, some inflation, which reduced the real value of outstanding debts. And after the war, thanks to the improved financial position of the private sector, the economy was able to thrive without continuing deficits.

The economic moral is clear: when the economy is deeply depressed, the usual rules don’t apply. Austerity is self-defeating: when everyone tries to pay down debt at the same time, the result is depression and deflation, and debt problems grow even worse. And conversely, it is possible — indeed, necessary — for the nation as a whole to spend its way out of debt: a temporary surge of deficit spending, on a sufficient scale, can cure problems brought on by past excesses.

But the story of 1938 also shows how hard it is to apply these insights. Even under F.D.R., there was never the political will to do what was needed to end the Great Depression; its eventual resolution came essentially by accident.

I had hoped that we would do better this time. But it turns out that politicians and economists alike have spent decades unlearning the lessons of the 1930s, and are determined to repeat all the old mistakes. And it’s slightly sickening to realize that the big winners in the midterm elections are likely to be the very people who first got us into this mess, then did everything in their power to block action to get us out."

Comment: In 1938, the media may have been as much under the thumb of Billionaires (millionaires then) as now, spewing economic misinformation including myths like the rich will spend their tax cuts (not) and that fiscal austerity pulls the nation out of a recession (not) that misdirects voters decisions in the direction of economic suicide. But, a focused communication blitz by the Democratic National Committee debunking these myths and calling out the media propagandists would at least offer an opportunity for the American voter to prove whether s/he learned anything since 1938 by rejecting the Pide Pipers of Plutocracy in the upcoming mid election.

Sunday, September 05, 2010

That'll never fly here, or Why won't the Democrats meet the Republicans halfway?

Who said this? Obviously, some European socialist, like John Maynard Keynes or Karl Marx or Lenin. No patriotic American would ever extol the importance of spending on public works.

The idea of utilizing construction, particularly of public works, as a stabilizing factor in the business and employment situation has long been a plan of perfection among students of these problems. If in periods of great business activity the work of construction might be somewhat relaxed; and if in periods of business depression and slack employment those works might be expanded to provide occupation for workers otherwise idle, the result would be a stabilization and equalization which would moderate the alternations of employment and unemployment. This in turn would tend to favorable modification of the economic cycle. . . The first and easiest application of such a regulation is in connection with public works; the construction program which involves public buildings, highways, public utilities, and the like. . .

More than this, the economies possible under such a plan are apparent. When everybody wants to do the same thing at the same time, it becomes unduly expensive. Every element of costs, in every direction, tends to expand. These conditions reverse themselves in times of slack employment and subnormal activity, with the result that important economies are possible.

I am convinced that if the Government units would generally adopt such a policy, and if, having adopted it, they would give the fullest publicity to the resultant savings, the showing would have a compelling influence upon business generally. Quasi-public concerns, such as railroads and other public utilities, and the great corporations whose requirements can be quite accurately anticipated and charted, would be impressed that their interest could be served by a like procedure.

This was a speech by Calvin Frickin' Coolidge in 1927. You know, Republican Calvin Coolidge, President before Hoover? It wasn't even controversial. Economists going back to the 1600s had made the same point about public works spending when the economy is in a recession or depression. Yet since Reagan, we've moved so far to the right, to the point where any spending whatsoever by the government is deemed evil. Even Democrat Obama -- who more and more makes it look more accurate to call him an alleged Democrat -- doesn't have the guts to make a similar argument today. Too partisan. Heaven forbid.