America needs a Margaret Thatcher!
Today is the day of her funeral. It wasn’t broadcast on any of the main channels but I was able to watch it on the Wall Street Journal’s webpage, which I really appreciate.
If you are thinking that the US economy is improving, you should subscribe to the WSJ for the full picture. It’s not a good one.
Mortimer Zuckerman, editor of US News and World Report and a wealthy real estate investor, wrote the following for the Journal recently:
“The present phase of our Great Recession might be called the Grand Illusion because all the happy talk and statistics that go with it, especially on the key indicator of jobs, give a rosier picture than the facts justify. We are not really advancing. We are, by comparison with earlier recessions, going backward. We have a $1.3 trillion budget deficit. And despite the most stimulative fiscal policy in our history and the most stimulative monetary policy, with a trillion-dollar expansion to our money supply, our economy over the last three years has been declining or stagnant. From growth in annual GDP of 2.4 percent in 2010, we bumped down to only 1.8 percent in 2011 and were still down at 2.2 percent in 2012. The cumulative growth for the last 12 quarters was just 6.2 percent, less than half the 15.2 percent average after previous recessions over a similar period of time. It is the slowest growth rate of all the 11 post-World War II recessions.” (“The Grand Illusion”, WSJ, 4/4/13).
What about jobs? Isn’t the decline in the official unemployment figure a reflection of how much better things are? Mr. Zuckerman continues:
“Still, can’t we take comfort in headlines celebrating the decline in unemployment to 7.7 percent? Not really. If you add in all the unique categories of people not included in that number, such as “discouraged workers” no longer looking for a job, involuntary part-time workers, and others who are “marginally attached” to the labor force, the real unemployment rate is somewhere between 14 and 15 percent. No wonder it has been harder to find work during this recession than in previous downturns.
“Though last month we theoretically added 236,000 jobs, these numbers are misleading, too, because so many of the jobs are in the part-time, low-wage category. So the backdrop to the most recent job numbers is the fact that multiple job-holders are up by 340,000 to 7.26 million. In essence then, all of the “new” positions are going to people who already are working, mostly part time. It is clearly more important to create jobs for people who aren’t. Other aspects of the jobs picture deteriorated, too. The pool of people unemployed for six months or longer went up by 89,000 to a total of 4.8 million, and the average duration of unemployment rose to 36.9 weeks, up from 35.3 weeks.
“Moreover, the decline in the unemployment rate to 7.7 percent is shaky. It reflects the departure from the workforce of some 130,000 individuals. A change in the denominator makes the unemployment numbers look better than they are. The labor force participation rate, which measures the number of people in the workforce, also dropped to around 63.5 percent, the lowest in more than 30 years. The workweek remains short at 34.5 hours. Quite simply, employers are shortening the workweek or asking employees to take unpaid leave in unprecedented numbers, and these people are not included in the unemployment numbers.”
So, where is the US headed?
“State and local governments owe $7.3 trillion in promises they’ve made that were never approved by taxpayers”, wrote Steven Malanga in the WSJ, March 29th. The title of the article was “The debt bomb that taxpayers won’t see coming.” As Mr. Malanga points out, taxpayers “will ultimately bear the burden of the officials’ misdeeds.” Most of the problem is unfunded commitments to state employees in pensions and healthcare.
Further signs of a deteriorating economy are reflected in another WSJ headline: “Use of food stamps swells even as economy improves” (March 27th; article by Damian Paletta and Caroline Porter). Enrollment in the free food program has soared 70% since the 2008 recession began. Now, 47.8 million people are food stamp recipients. Waiting in line at supermarket check-outs, the government issued light orange EBT credit card is now as common as other cards. Another noticeable trend at the check-out line is the increasing number of people using cash, afraid of over spending on credit cards when they may lose their job next week or take a big pay cut.
Still another sign is the continuing housing crisis. In our own county, Michigan’s Eaton County, foreclosures are at an all time high, meaning the economy is definitely not improving where we are. “Eaton County sees record high foreclosures” ran the headline on the WLNS, channel 6 website April 10th. This figure also disguises the fact that many more people are underwater, where they owe far more on their home than the house is worth.
The above are good reasons for needing a Margaret Thatcher, somebody willing to take unpopular measures to reduce government spending, lower taxes and boost the economy. Instead, the United States is headed in the opposite direction.