US to Shed 1.5 Million Jobs to Create New Recession

Right Wing Raising the DebtUpdate: 08.09.2011, 4:00 PM. President Obama has now signed the legislation to raise the debt ceiling and avert default. The bill immediately raises the debt ceiling by $400 billion. The additional steps that our country will have to endure to raise the debt ceiling for the balance of next year are described below. “Enough talk about the debt. We have to talk about jobs,” said Democratic Minority Leader, Nancy Peloisi.

Only two days remain in this season’s final episode of the made-for-cable-news mega-series drama, “The Right Wing – Raising the Debt Ceiling”*. The whole world is watching. Whose jobs will be lost? Whose fortunes, real, imagined, hedge, shorted or political, will be wiped out? Who will blink or tear up? Will the T-Party take to the streets or is just too damn hot? Will the golf partners stick to their “deal” for an entire news cycle? What will Sarah tweet? Will a deminted Senator sabotage it all with a last minute filibuster? Can Pelosi be turned to the dark side? Will S&P downgrade the credit rating anyway leading to higher interest and a need for even greater cuts? Will we do this again before Christmas?

The stranger-than-fictional leaders of our government have leaked elements of their surprising planned finale where they use this totally made-up crisis to solve the nation’s, and the world’s, great problems. The markets have already rallied in anticipation. As has the dollar. As have oil prices. The pundits, blogmeisters, and spin doctors have already picked the winners and losers. The bottles of sparkling tea have been chilled.

The drama couldn’t have been cast with a more exciting backdrop:

  • Two official wars (Afghanistan and Iraq), one official unofficial war (Libya), two well-known secret wars (Yemen and Pakistan), revolutions underway or being brutally suppressed in Syria, Egypt, Bahrain, and Saudi Arabia, on-going and potential conflicts in Palestine, Iran and North Korea, and chaos, famine and human tragedy in Somalia and the Horn of Africa;
  • An earthquake, tsunami and nuclear disaster in Japan that will continue for a hundred thousand years;
  • A massacre of white people by a white, right-wing Christian anti-muslim lunatic;
  • Worldwide recession with grave concern for the Euro zone, specifically Greece, Italy, Portugal, Spain and Ireland;
  • A dismal 1.3% US GDP growth last quarter after only .04% first quarter growth;
  • The lowest percentage of Americans working in almost 30 years with 9.2% unemployment (20+% black unemployment) and at least 18.5% overall underemployment – more than 25 million Americans are out of work and glued to their TV sets;
  • More than 50 million Americans without health insurance;
  • 28% of US homeowners are behind on their mortgage, a backlog of six million US homes in foreclosure with more than three million homes already seized, and home prices continuing to decline;
  • Executive pay has risen 23% this year, plus, record earnings continue to be announced by our largest corporations – US companies have now accumulated and horded, depending upon who counts, $20-30 trillion in cash, while spending millions on lobbyists to whine about regulation, taxes and certainty;
  • The wealth gap continues to widen with whites now averaging 20 times the wealth of blacks, 18 times the wealth of Hispanics;
  • US worker productivity is at an all time high, yet real wages are lower than they have been in 41 years;
  • Federal, state and local taxes are the lowest per capita since 1954;
  • The number of government workers has gone down more than 500,000 since Obama took office;
  • And, it is hot, though not officially from global climate change even though the northern hemisphere is trying to endure a record-breaking heat wave.

For those who may have missed an episode, ignore the backdrop (above) – the crisis in America is clearly our deficit. With total government revenues, as a percentage of our economy, at their lowest level in more than 60 years, obviously, the only answer is to cut government spending.

The announced plans include an immediate $400 billion debt limit increase (whew) and $900 billion in spending cuts over the next 10 years. These cuts will be from the annual appropriations of the day-to-day operations of Cabinet agencies (specific cuts will be determined by the Appropriations Committee after annual lobbying and whining by each agency and their related lobbyists), but largely the cuts will be from capping projected inflation-adjusted increases. These cuts do not include Social Security, Medicare or Medicaid.

Another $500 billion debt limit increase would be allowed later this fall, which Congress could only disapprove, which President Obama could veto, which Congress could overturn by a two-thirds vote in the House and Senate (I’m not making this up).

A third installment of debt limit increase of between $1.2 and $1.5 trillion would be available after enactment of the recommendations on November 23, 2011 by a 12-member super Congress (also to be announced) of three members from each party and each chamber.

The super Congress’s report to the mortal Congress could include tax code changes, maybe even revenues, and changes in any other program – including Social Security, Medicare, Pentagon spending. All dependent upon an up or down, no amendments allowed, vote in Congress on December 23, 2011.

Should super Congress not agree (how likely is that?) or the mortal Congress does not act on the recommendations, we’ll face the poison pill of across the board spending cuts to be implemented by the White House including cuts to the Pentagon, domestic agency budgets and farm subsidies… beginning in 2013, after the next Presidential election. However, Social Security, Medicaid, veterans benefits and military pay would not be subject to cuts.

Oh, yeah, the House and Senate are also required to vote, but not pass, which they won’t, a balanced budget amendment to our Constitution. The bill will establish at a cost of $1 billion, a “program integrity” initiative in an attempt to stem abuses in Social Security and federal health care programs. This bill will also preserve Pell Grant funding for 2012-2013 by cutting student loan subsidies. Go figure.

This is one terrific plan.

“The result would be the lowest level of annual domestic spending since Dwight Eisenhower was President,” said President Obama in announcing the deal. “Now, this process has been messy; it’s taken far too long… We’re not done yet.”

“I know this agreement won’t make every Republican happy. It certainly won’t make every Democrat happy,” Senate Majority Leader Harry Reid said.

“Now listen, this isn’t the greatest deal in the world. But it shows how much we’ve changed the terms of the debate in this town… There is nothing in this framework that violates our principles. It’s all spending cuts. The White House bid to raise taxes has been shut down. And as I vowed back in May – when everyone thought I was crazy for saying it,” said Speaker of House John Boehner (R-Oh.).

Senate Majority Whip Dick Durbin (D-Ill.) said, “I would say … that symbolically, that agreement is moving us to the point where we are having the final interment of John Maynard Keynes… So here we are in the horns of a dilemma. In order to avoid the disaster that would occur August 2 if the United States defaulted for the first time in its history, we are being told we have to cut back on government spending and by cutting back on spending, we may also have a negative impact on our economy.”

The head of the Congressional Black Caucus, Rep. Emanuel Cleaver, (D-Mo.) called it “a sugar-coated Satan sandwich.”

Over time, the combined cuts should add about 1.25 million to our unemployment rolls, and could bump unemployment over 10%. The cuts in spending will almost certainly turn our anemic GDP growth into negative numbers putting us back into official recession – this time, an official bipartisan recession. But don’t be fooled that the impact will stop there. The cuts will have dramatic impact on every state. Those laid off will be teachers, law enforcement and regulators. Food and medical care will be cut for our poorest children and their families. Transportation and infrastructure spending will also be cut.

When the series continues, we’ll get to watch who is to blame. How gerrymandered districts will make things even more partisan? How the T-party will get revenge on Boehner? How Obama will seek to mend fences with his base? And how all, but a few of us, will continue suffering and electing these fools? I wish I could change the channel.

 

*A sequel to the popular series, “The West Wing.”

Note: This story was updated at 5:45PM, August 1, 2011 to correct details once the bill was announced.

12 thoughts on “US to Shed 1.5 Million Jobs to Create New Recession

  1. Will Cantrell

    Lee: As Snuffy Smith used to say “Quit yer belly achin” (or some such). Get with the program, man. Isn’t all of ‘this’ EXACTLY what that the Founding Fathers (and Jesus) intended when they wrote the Constitution? Good piece…frightening though it be. Will

    Reply
    1. Lee Leslie Post author

      When Jesus wrote the Constitution, he was likely an atheist or deist, as most of the others who worked so hard to protect rich white men from other rich white men, while making sure that those of a different complexion or gender, had no rights whatsoever. When he came back to write the 13th, 14th, 15th amendments; then again for 19th, 21st, 24th and 26th amendments, he’d of had a tough time finding a congregation, at least in the South, where he’d felt much at home.
      Didn’t mean to belly ache. I’m all for a balance budget and honestly believe it would be good for our economy. I just think we should start when unemployment is around 2-3%. We have tens of millions of health motivated unemployed workers who are wasting their time as opposed to doing good with their time by improving our infrastructure, helping our sick and aged, teaching our children, etc. The waste in this country, my friend, is not interest on the debt, it is the wasting the greatest resource we have as a nation -- people.

      Reply
  2. Lee Leslie Post author

    Expecting a question on how I arrived at 1.5 million jobs, I offer this: there would be fewer jobs lost if the cuts were for the military or direct foreign aid. I acknowledge that the cuts will be phased in and the job loss will be spread over a decade and be difficult to track. Further, I acknowledge that a greatly increased growth rate (not likely) would suck up and large number of these displaced workers and/or would decrease the deficit because of increased tax revenues making cuts unnecessary.
    In arriving at the number, I first took a simple approach: our GDP is $14.12 trillion that generates 139.8 million jobs (labor force less unemployed) which creates a value of $100,979 in GDP per job. Without even considering removing the compounding effect of the cuts, $2.5 trillion in deficit reduction in GDP (assuming it all cuts and no revenue) over 10 years, equals a loss of 2.5 million jobs. But we know that a significant amount of those accumulated savings come from winding down the wars or decreased interest expense on the resulting federal debt, so I used $1.5 trillion in spending reduction to arrived at the figure. There are more complicated methods, none, as far as I could document, get to an number any more accurate than mine. Even if I’m off by half, that is an awful lot of unemployment compensation checks that will be written and tragic increase in human suffering.

    Reply
    1. Monica Smith

      Unemployment need not necessarily produce suffering. Unemployment is an opportunity to make capital improvements to one’s domicile and neighborhood (some German economist actually calculated the impact of DIY home improvement on the level of capital assets in his country). It’s also an opportunity to engage in political action and volunteer for public office. Republicans know that well. Whenever there’s a downturn in the private employment of middlemen (particularly insurance, real estate, retail sales), they come out in droves to run for public office. Even if they don’t get elected, “raising” money for campaigning passes the time and covers the cost of lunch and transportation. Running for public office is like starting up a small business, except that people are actually more like to donate for that than for your selling widgets. Then it turns out that selling ideas is a lot less risky than selling widgets. Ideas never go out of style.

      Reply
  3. Trevor Irvin

    Lee,
    The Tea Partisans and the republicans are too ignorant to realize what they are doing and the Democrats folded like the proverbial cheap suit … Paul Krugman smells disaster and he may be correct. I better get back to canning beans it’s gonna be a long, hard winter.

    T

    Reply
    1. Lee Leslie Post author

      I disagree with your characterization of Republicans. The remaining 19% who are Republicans, are very smart and many know what they are doing. The goal here is to tar (intended as a reference to historic treatment of people of color) President Obama with the sins of their revered and hoped to be reinvented President W and his sidekick, Dick. They tried starving state and municipal governments and that didn’t work well enough, so they want to starve Federal Government until they get back in office. They just want the check book again. The “t-partisans”, however are another story altogether. Save me can.

      Reply
      1. Trevor Irvin

        Lee,
        I must disagree, the republican strategy you outline is one I would characterize as the very definition of ignorant. To destroy a country that they themselves live in so they can grasp control of the last remaining smoking shreds can hardly be considered smart. I stand by my original statement. I shall meet you at Manuals to finish this duel to the death … you choose the weapons (My suggestion would be death by beer and a McClosky sandwich)
        Regards,
        T

        Reply
  4. Monica Smith

    It’s only money. While having less to pass around will have some real immediate consequences, I expect Americans will do like the Greeks and simply do their wheeling and dealing under the table. The Greek economy is reported to be 30% in the shadows or underground. Nobody’s keeping track of our underground, ’cause all the calculators are scared to look.
    If you google for news of the underground economy, you find a few references such as the piece in the Des Moines Register which talks about a

    new study from AARP estimates that family caregivers deliver $450 billion worth of care to their loved ones each year.

    That’s almost as much as America spends on Medicare. And it’s nearly four times what Medicaid spends on long-term care.

    http://www.desmoinesregister.com/article/20110730/OPINION01/307300029/-1/SPORTS12/Guest-columnist-Seniors-should-not-debt-ceiling-victims

    It turns out that “economic development” merely means making sure that all transactions are mediated by money, which is sort of like insisting that all human communication be in writing, to make them easier to trace and tax — i.e. extract a portion for some other future use. But, just as the absence of pen and paper won’t halt people communicating, taking away their money won’t keep them from trading. Mostly, it will probably make it more intimate.
    Does care for the elderly improve in quality if the providers get paid? That’s debatable. Of course, in the case of incompetents, who can’t even look after themselves, paying an expert makes sense. Especially if the payment is based on a realistic assessment of expert qualities.

    But, in the up-coming elections, ask yourself whether you’d trust your incumbent legislators to change the sheets. If not, s/he’s not qualified and needs to be replaced. The Founders anticipated that. That’s why they scheduled elections for every two years.

    Reply
  5. Frank Povah

    A balanced budget in the sense of “outgoings = incomings” is an impossibility, except in what passes for the minds of Bland Paul and others of like persuasion.

    What happens in a year such as this when natural disasters strike one after another? Where does the money for assistance come from – education, health, unemployment relief? Probably all three. Of course climate change doesn’t exist so we don’t really need to worry about that, this year was just a fluke.

    And I suppose we can keep funding wars by cutting education and taking a leaf from the books of the coal and natural gas industries. They pay for advertisements telling us that coal is clean and that no harm is caused by natural gas extraction so if the ads say so it’s true. I advertise, therefore it’s so (and how long before the nuclear lobby does the same thing). We just need to apply the same tactics to promoting a policy of educating only the children of the comfortably well off.

    But hey, Wall Street’s doing fine and what’s good for Wall Street is good for the world.

    It’ll get no better till people all over the world realize that governments have not been in control of their respective countries for quite some time now.

    Reply
  6. Monica Smith

    The “seven deadly sins” are manifestations of the basic instincts going haywire. Wrath, envy, pride, lust, greed, gluttony and sloth are all self-defeating when they’re not modulated by conscious thought. The ability to think is what these instinct-driven humans seem to be missing. They also don’t learn from experience. Our mistake is in letting these incompetents make any decisions.
    In any event, the 12 supers ought to be referred to as the Dirty D.C. Dozen.

    Reply
    1. Lee Leslie Post author

      Right on. But I’d bet the Super 12/Super Dirty Dozen will actually set the talking points for the next election cycle for both parties. No way they will agree on a majority report. Instead, you’ll have the right cutting benefits for the elderly, disabled and poor with no tax cut. On the left you’ll have a balanced approach. Then the automatic cuts will be triggered — they don’t go into effect until after the election. And they are meaningless. The Bush tax cuts will expire at the same time, the wars will wind down and way more than the $1.5 trillion will already be saved -- likely enough for a serious stimulus bill, should we get new and decent Congress. I think this discussion should never have happened, but Obama and Company played Bohner and Company. The T-party will figure it out and there will be hell to pay by the Republican party.

      Reply

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