Okun’s Law and Sequestration

This isn’t rocket science.  For anyone wondering why Austerity doesn’t produce Prosperity, the answer lies in this simple formula.  We measure our economic growth in terms of the gross domestic product, the GDP.

Investopedia explains:

“GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country’s standard of living. Critics of using GDP as an economic measure say the statistic does not take into account the underground economy – transactions that, for whatever reason, are not reported to the government. Others say that GDP is not intended to gauge material well-being, but serves as a measure of a nation’s productivity, which is unrelated.”

In short, we can critique the use of the GDP as a measure of our economic well being for not including bartered transactions, or private sales in which sales taxes aren’t applied, or we can note that the notions of productivity and economic health aren’t necessarily related.  However,  what we can’t do is dismiss the utility of the formula, nor can we argue it isn’t one of the most commonly used (and understood) metrics applied as an economic description.

So, why is this formula plastered on this blog for the umpteenth time?  Because when Uncle Fester brashly opines that “We’ve got to cut government spending and get the economy back on track,” he’s offering up a classic demonstration of his ignorance about how we measure our economic situation.

Consumers buy things.  That’s the C in the formula. Companies and corporations buy things.  That’s the I in the formula.  Governments buy things. That’s the G in the formula.  We sell things to other countries, and we buy things from other countries. Those are the X and the M in the formula.  The greater the DEMAND for goods and services (aggregate demand in some explanations) the more wealth is generated.

Now let’s bring this down to Uncle Fester’s level by considering the life of the lowly paper clip.  Consumers buy paper clips, which are mostly used to hold sheets of paper together, or may find themselves altered to perform other tasks like being poked in the little hole in the electronic gadget to “reset” the thing, or to hang Christmas ornaments, or whatever a person might think to do with a piece of bent wire.  Businesses buy paper clips.  And, yes, various levels of government purchase paper clips.  In fact, there are about 11 billion paper clips sold in the U.S. every year.  [WSJ]

Now, imagine the impact of taking one part of the formula out of the whole.  What if government cut backs caused agencies to scale back on the purchase of office supplies?  This is the point at which the artificial demarcation between enterprise and government breaks down.  If the government manufactured it’s own paper clips there would be no need to put the G in the formula, but it doesn’t.  The federal government, like the consumers and the companies, gets its paper clips from one of two domestic producers of bent wire clips. [WSJ]

Here comes the obvious.  When the government scales back purchase orders for office supplies (like our lowly paper clip) that represents a decline in demand.  And, guess what! The formula for Aggregate Demand is exactly like the formula for the GDP.  [Investopedia]

“The total amount of goods and services demanded in the economy at a given overall price level and in a given time period. It is represented by the aggregate-demand curve, which describes the relationship between price levels and the quantity of output that firms are willing to provide. Normally there is a negative relationship between aggregate demand and the price level. Also known as “total spending”.  [Investopedia]

To see an example of the classic aggregate demand (AD) curve click here.   The FRED graph for our GDP to date looks like this:

The gray area shown on the chart is the recent Recession.  The blue line graphs the trajectory of our GDP to date, and the thinner red line is more technical. It’s the “Nominal potential gross domestic product,” [CBO 2001 pdf]  which assumes that the line would show what happens if everyone who wanted a job had one, and all resources were being used efficiently.  [See also: KCFED, pdf] Frankly, this one is a bit technical for Uncle Fester, so let’s keep it simple.

If the demand for paper clips is reduced, when consumers, businesses, and governments stop purchasing, the micro-graph for the subcategory of office supplies and the sub-classification of paper clips,  would mirror the overall aggregate demand.  And, the bottom line?  That which reduces the aggregate demand also reduces the GDP.

This simple, but basic, proposition from classical economics is precisely why austerity measures never produce prosperity — which we measure by using the gross domestic product.

If we can hold Uncle Fester’s attention this long, perhaps we can introduce Okun’s Law.   Okun’s Law observes that for every 1% decline in unemployment there’s a 3% increase in the GDP.  There are some issues with the “law” the first of which is that it’s not really a law, but an observable component of the United States’ economy; and, it’s a bit funky when we add in some other variables like productivity.   That said, for all its imperfections, when we reduce unemployment in the United States the GDP moves up.   This isn’t just common sense — it’s an observable and quantifiable fact.

Now we get to the meaty part.  If Uncle Fester is adamant about reducing federal spending because it’s a drag on the U.S. economy, then we can respond by saying if we lose 700,000 jobs as a result of the sequestration austerity measures, then according to Okun’s Law we will see a reduction in the U.S. gross national product.

A reduction in federal purchasing means a reduction in demand for goods and services.  Each decrease in demand means layoffs or reduction in production or offering of services and in turn means a reduction in the gross national product.   This is probably the point at which Uncle Fester will want to change the subject to something like “wasteful government spending.”

This recitation doesn’t assume that all government spending is productive.  The Pentagon has already said it doesn’t want some items Congress is enthusiastic about procuring.

“In February, the Pentagon released a budget that began the process to cut at least $487 billion in defense spending over the next 10 years. This included terminating the Global Hawk, which the military estimated would save $2.5 billion over five years; the C-27J, at a savings of $400 million; M1 Abrams updates, saving hundreds of millions of dollars; and cutting roughly 5,000 positions from the Air National Guard and reducing that agency’s budget about $300 million.”  [Military.com]

Since the cutbacks in these examples would come from Ohio, it’s predictable that Ohio representatives in Congress would revert to Okun’s Law and decry the loss of jobs in their districts.

“The budget is expected to be finalized after the November election, though the struggle over continued funding could extend long beyond that. Grant Neeley, professor of political science at University of Dayton, called this a “collective action problem.”

“(Legislators) need to cut the budget but (won’t) take those jobs in our state. Especially in an election year in a battleground state,” he said. “They’re going to provide rationale, but at the end of the day, it’s about protecting jobs in their district. If they have the choice between making a cut in their district and making a cut somewhere else, which one do you think they’re going to choose?” [Military.com]

What we can’t do is proclaim austerity begets prosperity calling for wider and deeper cuts in government spending — which turns the aggregate demand, the GDP measurements, and Okun’s Law upside down — while at the same time demanding that jobs not be cut from corporations and businesses within Congressional districts because of what will happen to aggregate demand and the local GDP and assuming Okun’s Law is still applicable.

Let’s guess that this is the point at which Uncle Fester pontificates that 25% of our federal budget goes to foreign aid.  In the fact based universe this isn’t the case: “Since the 1970s, aid spending has hovered around 1 percent of the federal budget. International assistance programs were close to 5 percent of the budget under Lyndon B. Johnson during the war in Vietnam, but have dropped since.“  [WaPo] OK, it’s not foreign aid, then it has to be “welfare.”

The total spending for Temporary Assistance to Needy Families program uses up a grand total of o.7% of our entire federal budget. [Klein]  “But, but, but,” squeals Uncle Fester, “There are more Takers than Makers…” whatever that means.  What it doesn’t mean is that there is an upward trend in the number of people participating in the TANF program.

Nor does it mean there’s an upward trend in Food Stamp program participation and costs.  (SNAP)

In our factually based universe, all federal programs for those in poverty comprise about 7% of the total federal budget. [MJ]  Yes, this is where Uncle Fester breaks in with the anecdote that he saw someone at the Food Bank who was driving a newer pickup than his.

However, all the mis-information, mis-conceptions, and anecdotal observations don’t repeal the basic rules of capitalism, and its basic understanding of Supply and Demand.  Nor, do they discredit the veracity of Okun’s Law.

We do need to reduce unnecessary spending, and we do need to increase revenue by closing loopholes which only serve to place more of the taxation burden on the middle class for the benefit of the top 0.1%.  What we do not need to do is torture the rules of American capitalism into a contortion which renders them risible and unrecognizable.  Okun’s Law is still functional, and as we see from the unfortunate examples in the Eurozone, austerity doth not begat prosperity.

Why Trickle Down Economics Doesn’t Work: Diagram

 

There are some features of our current economic situation which need some attention.

1. As the diagram indicates, the greater the pressure to reduce labor costs the less workers will be paid, and (obviously) the less they can spend.  Since they have less to spend, prices must be commensurate with aggregate demand.  The pressure to keep prices low puts the squeeze on suppliers and manufacturers to restraint wages for labor.  The pressure to reduce wages spirals down until the aggregate demand is so restricted that workers cannot afford to purchase anything other than the bare necessities.

2. The short term focus on quarterly earnings (to keep investors happy) magnifies the pressure to reduce production costs (wages + equipment) and contributes to the overall problem.

3. The economic system as currently practiced puts a premium on lower labor costs, but has fewer restraints on management.  If management can use bankruptcy to lay off workers with seniority, to reduce its pension obligations, and to liquidate corporate assets — while still collecting  their salaries and bonuses — then the merger/acquisitions game will be highly profitable for the investment advisers and executives; but, not for the employees.

4. Higher compensation for investors and executives combined with lower wages for employees creates the Income Inequality Gap.  The more the gap widens the less aggregate demand there will be for goods and services, and the greater the tendency to flirt with the economic death spiral.

5. Bankers worry about inflation; often about wage-push inflation.  When the primary downward pressure is on the employees’ side of the scale this fear is not realistic.

6.  Investors argue that “Gee Whiz, what are we worried about. This is a global economy, and if workers are willing to offer their skills at less cost over seas then what’s wrong with improving the quality of life in foreign lands?“  This is ultimately self defeating. Because…..

7. The widening gulf has a tendency to cause what one economist called a division of jobs into the “lovely” and the “lousy.”  [Reuters]  Highly skilled, highly educated, or highly placed individuals get the few “lovely” jobs while the downward spiral forces the majority into the “lousy” ones.  This serves only to further depress wages and hours, and push the spiral down harder.

This explanation ought to be simple enough for the low-information Crazy Uncle at any holiday gathering?

Senator Heller: Any Talking Point In A Storm

Nevadans have a relatively clear choice in the 2012 election between two Senate candidates who are examples of two entirely different political and economic philosophies.   Senator (By Appointment Only™) Dean Heller (R-NV), who has demonstrated a few precious moments of moderation, has more often illustrated the politics of the Senator Jim DeMint (R-SC) brand of ultra-right side of the aisle protection of corporate and financial interests.  His opponent Rep. Shelley Berkley (D-NV1) has more often sided with the interests of middle class working families, consumers, and small business interests.

Our first clue that Double Dean Heller isn’t espousing a critical view of large corporate and financial institutions in America comes from his choice of buzz-words.  He is pleased to tell us that he voted against “taxing small businesses and job creators.” [Heller]

It should be remembered at this point that Senator Heller supports the Republican expansive definition of what constitutes a “small business,” i.e.  The differentiation between small business enterprises as they are commonly known, and small business enterprises as they are generously defined by the Republican Party has been discussed at some length previously; notably HERE, and  here in a 2010 post.   Cutting to the chase, the GOP definition includes K-Street lobby shops, some major law firms, and anyone else who can squeeze into the “small business” tent because they employ fewer than 500 people.

Secondly, Senator Heller’s use of the term “job creators,” is instructive.   There’s nothing particularly original about the term, in fact if we climb in the political time capsule and return to 1993 we’ll find the Republican members of Congress balking at President Bill Clinton’s upper income tax hikes, calling them “job killing.”  “At issue was President Bill Clinton’s $496 billion program of stimulus and upper income tax increases. And what Republicans then decried as disaster ushered in the longest economic expansion in modern American history, a period which produced 23 million new jobs and a balanced budget.” [Perrs]

Not only is there nothing new about the “job creators” term, if the object is to reduce the federal deficit and to create jobs in the United States, then the Clinton tax hikes and economic policies were Job Creating.  Witness the following chart from the Center For American Progress:

This somewhat elderly tried and true graphic shows the marginal tax rates at the bottom — note what’s NOT happening in terms of job growth in the left hand side of the chart.  While there may be several factors in play concerning tax rates and job growth, what cannot be demonstrated is a causal relationship between low marginal income tax rates and increased employment.

Additionally, IF balancing the federal budget is a desirable thing, and Senator Heller touts his votes for various balanced budget legislation, then one obvious way to do that is to follow the recent example of the Clinton Administration and raise the marginal rates on the wealthiest among us — the 0.1% — and seek to replicate the budget balancing accomplishment of the Clinton Administration which left office with a tidy surplus. [FactCheck]

There’s another graphic we should dust off and  haul out of the vaults one more time, because it serves to illustrate the difference between Budget Deficit Hawks and Budget Deficit Chicken Hawks, a Chicken Hawk being one who squawks loudly about “OMG the sky is falling we have a no-good horrible terrible heinous humdinger of a deficit/debt” and then supports the very policies that created the aforementioned debt.

Again, what’s that wide swath of burnt orange comprising the largest portion of contributing factors to the current deficit?  BUSH TAX CUTS.   Who still supports extending the Bush Tax Cuts for the wealthiest Americans?  Senator Dean Heller (R-NV).

The Case of the Small Business Jobs Act

One piece of legislation we can use as a touchstone to measure willingness to support the interests of small businesses is the 2010 Small Business Jobs Act.

On Sept. 27, 2010, President Obama signed into law the Small Business Jobs Act, the most significant piece of small business legislation in over a decade. The new law is providing critical resources to help small businesses continue to drive economic recovery and create jobs. The new law extended the successful SBA enhanced loan provisions while offering billions more in lending support, tax cuts, and other opportunities for entrepreneurs and small business owners. [SBA]

When the bill came up for a vote in the House of Representatives on June 17, 2010 one member of the Nevada Congressional delegation voted in favor of the bill — Rep. Shelley Berkley (D-NV1); Rep. Dean Heller (R-NV2) voted against it. [GovTrack]

The Case of the Economic Development Revitalization Act

Section Seven of the EDR Act in the 112th Congress would have boosted the U.S. economy, with specific attention on public works construction projects and planning:

“Modifies provisions regarding grants for planning and administrative expenses for public works and economic development to authorize funding for: (1) fostering regional collaboration among local jurisdictions and organizations, and (2) facilitating a stakeholder process that assists the community or region in creating an economic development vision that takes into account local and regional assets and global economic change. Requires any overall state economic development planning assisted to be part of a comprehensive planning process that considers the provision of public works to support practices that enhance energy and water efficiency, reduce U.S. dependence on foreign oil, and encourage efficient coordination and leveraging of public and private investments.”

However, this provision and others in the bill which might have boosted the lagging construction sector faced the usual Republican filibuster in the Senate.  When a cloture vote was called on June 21, 2011 Senator Dean Heller (R-NV) voted to sustain the Republican filibuster. [roll call 94]

The vote is interesting given that in February 2011 the situation in the Nevada construction sector was pretty dismal:

About 70,000 of the 180,000 jobs lost in Nevada during the recession were construction related, said Bill Anderson, chief economist of the Nevada Department of Employment, Training & Rehabilitation.

Some of those workers told lawmakers that they are still out of work after being unemployed for two to three years.  [RGJ]

The problem with the opposition logic to public works bills is that if a significant sector is experiencing high unemployment a drag is created on local economies because of lost wages and salaries.  Lower wages or lost wages mean less demand, and less demand further depresses the local economy.  For all the fretting about the perils of inflation, it’s the deflation cycle which puts the greatest strain on economies.  If we’re truly worried about a long and tedious recovery from the Crash of 2008, then one way to speed up the process would be to relieve the drag created by long term unemployment in the construction sector.  This would benefit construction companies and their employees.

The Case of the American Jobs Act

S. 1549, sponsored by Senator Harry Reid (D-NV), another attempt to move Congress off the dime and move on infrastructure needs and construction industry hiring, was introduced in the Senate on September 13, 2011 — and it’s still sitting there — locked in the logjam that has become the legislative process in Washington, D.C.

When a portion of the bill was brought forward to provide funds to hire teachers and first responders on October 20, 2011, Senator Heller voted against it.  [TPG]   Senator Heller castigated the bill as “another stimulus,” and pointed to the “failure” of the initial ARRA to put a dent in Nevada’s unemployment rate.  Senator Heller was at some pains to posit a direct correlation between a bevy of legislation and the increase in Nevada unemployment rate.  [YouTubeVideo] If anyone is looking for a classic presentation of post hoc ergo propter hoc this would be it.

That the ARRA failed is an article of faith among Republicans, and that’s all it is because the numbers don’t support the contention.

From the Congressional Budget Office: What did the Stimulus Bills do?

They raised real (inflation-adjusted) gross domestic product by between 1.1 percent and 3.1 percent,  Lowered the unemployment rate by between 0.6 percentage points and 1.8 percentage points, Increased the number of people employed by between 1.2 million and 3.3 million, and Increased the number of full-time-equivalent (FTE) jobs by 1.6 million to 4.6 million compared with what would have occurred otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers).

The Congressional Budget Office wasn’t the only source of optimism, “The End of the Great Recession,” authored by Mark Zandi (Moody’s) and Alan S. Blinder, Princeton University, (pdf)  noted what Senator Heller failed to acknowledge — that without the ARRA (Stimulus) and other federal interventions the Recession could have been far worse.  The Federal Reserve Bank of San Francisco (pdf) also weighed in making an astute observation that economic multipliers may have differing impact on national and regional numbers, but the effect was essentially the same — ARRA saved jobs.

Both Ways?

Our first clue that Senator Heller is repeating Party talking points rather than offering substantive proposals for economic growth was the “jobs creator – small business” rhetoric.  It sounds ever so much nicer to speak of those in the top 0.1% of American income earners as “job creators” than to describe them as hedge fund managers, financial sector executives, and merger & acquisition specialists.

Our second clue is that Senator Heller seems impervious to hard data on the source of our current federal deficit and debt, and the lack of a causal connection between marginal income tax rates and actual economic growth.

The third clue is that Senator Heller has voted against or refused to support bills that would relieve unemployment in the public sector (teachers, police, firefighters) and to create jobs in the hard pressed Nevada construction sector.

The fourth clue is that Senator Heller relies on the post hoc ergo propter hoc   fallacy to justify his opposition to any legislation which might serve to enhance “economic multipliers” or to save or create jobs.  Again, he espouses the GOP Article of Faith (All Stimulus Measures Were Failures — which the Republicans were announcing before the laws took full effect) rather than look to the actual numbers.

Doubling down on talking points doth not an economic vision make.

What Matters? The Long Climb Back From A Very Deep Pit

Often it’s easy to have the attention span of a gnat, a problem exacerbated by the 24 hour news cycle in which topics are headlined for a time, and then hit the public equivalent of the Lost and Found barrel.  Nevada’s economic situation in 2008 and early 2009, and how we got to our current position, are illustrative of the issue.  The Las Vegas Sun has a summation, a kernel of which says:

“Even though the government stepped in to stabilize the system, the economy still seized up. Only last year did we learn that the American economy saw an annualized decline of an astounding 8.9 percent in the fourth quarter of 2008, far worse than original estimates. By the time Obama took office, the private sector was losing 700,000 jobs per month, with state and local governments soon to follow with their own layoffs.”

The point made by Sun writer J. Patrick Coolican deserves repetition:  When something crashes this hard it takes more time to recover.

#1.  Recapitalize the investment institutions.  Done. Although the term “bank bailout” is as popular in some quarters as fire ants at a ‘clothing optional  beach’ picnic, the lending institutions had become so baffled in 2008 that they couldn’t properly determine the price of their own financial products, nor could they assess the price of their risks — hence the seizure.

#2. Enact legislation to prevent the repetition of the banking issues. Done. The Dodd-Frank Act (pdf) is far from perfect, however it does (a) require more regulatory oversight of the derivatives markets, a major component of the initial problem, (b) revise regulations involving the ratings agencies, another important issue, (c) create a Financial Stability Oversight Council to act as an Early Warning System to evaluate the financial viability of our banking institutions, (d) require banks to draft a type of Living Will, in the form of a plan for orderly liquidation, (e) seek to prevent “regulator shopping” in which institutions sought to slide under the jurisdiction of the least restrictive regulator, (f) include the Volcker Rule, and (g) create the Consumer Financial Protection Bureau.

This item on the check-list is a work in progress. While, the legislation has been enacted, the drafting of regulations associated with the new law is still a work in progress.  The Federal Reserve Bank of St. Louis has an updated time line of the drafts, and is a good resource for those wanting to see what has been done and what remains.

There are two essential points included in the Dodd Frank Act which are extremely important, and speak directly to avoiding another crash based on the lack of adult supervision associated with the 2008 Debacle.  First, is the oversight of the derivatives markets — an activity loudly criticized by some on Wall Street, but nevertheless necessary for insuring that the next amalgam of Quants, Wizards, and Masters of the Universe, doesn’t repeat their performance of 2008.  The second is the inclusion of an independent panel to warn banks of impending problems combined with the Orderly Liquidation Authority provisions.   The bankers are still squawking about being subject to the Financial Stability Oversight Council because they believe in “self regulation;” however, they were “self regulating” prior to 2008 and they drove the system into the ditch.

#3.  Stabilize the housing market.  Getting there.  This is crucial for Nevada, and for middle income Americans in all 50 states.   The Crash of 2008 was a cruel blow to everyone, but middle class Americans whose wealth was in large part a function of home-ownership were particularly hard hit.  Between 2007 and 2010 the average American middle class family lost about 40% of their total wealth as property values plummeted. [CNN]  However, we need to be realistic and remember that part of that wealth was illusory:

“For the vast majority of families, “wealth” essentially means, “home equity”. And the relatively high wealth levels of the mid-2000s reflected the inflation of the housing bubble. The bursting of the bubble exposed the wealth gains as having been unreal and produced the sizable declines in net worth revealed in the government data.”  [RCM]

As mentioned previously, American families are de-leveraging, i.e. paying down debt and restructuring their family finances.  At this juncture it appears that stagnating wages and job losses are more pressing concerns than loss of home equity for most families.*  The inflated equity is already gone, the problems associated with wages and job losses remain.

The housing sector is adjusting to reality, home construction may be declining but if we compare year-over-year numbers building permit requests are up 21.5% over last year. [LAT]

#4. Halt the suppressed demand cycle.  Stalled.  Deleveraging is good.  American consumers had piled on the debt during the Housing Bubble. They needed to deleverage.  Financial institutions which grabbed up the mortgages and repackaged them in altogether too many creative ways needed to deleverage.  However, the down side to deleveraging is that when people stop spending  our economic growth slows down.

The necessity of looking at the demand side of the economic equation has been covered here, here, here, and here.  I believe at one point I’ve even threatened to rename this blog something like the Aggregate Demand Review.

At the risk of even more redundancy, let’s review — the formula for aggregate demand is AG = C + I + G + (X-M).  That would be consumer spending + business spending + government spending – (exports – imports).  Demand drives orders, orders drive hiring.  Economic policies which depress orders will depress economic growth.  The current case of Republican obsessive-compulsive discussion of reducing government spending threatens to further diminish the “G” part of the equation AND the layoff of public sector employees tends to decrease the “C” part of the equation.  As if we needed any more reduction in aggregate demand, the Republicans would very much like to reduce government support for SNAP and other social safety net programs which act as our old friend, the economic automatic stabilizer — the shock absorbers on our economic vehicle.

Then there’s the American Jobs Act which is stalled in the 112th Congress.  Obviously, when people have jobs they have money to spend.  When they spend money that creates — you guessed it — demand.  Demand drives orders, orders drive hiring.  The economic concepts involved really aren’t very complicated.

One of the more interesting features of the Republican argument is the “government doesn’t create jobs” line,  but eventually every subsequent argument about cutting defense spending includes a recitation of the number of jobs which will be lost by those employed by defense contractors.   If it’s true in the defense sector, then it ought to be true in the education business — cuts to defense spending mean job losses in defense industries, and cuts to education funding lead to job losses in the education sector — the public safety sector, etc.   Job losses depress demand, depressed demand reduces economic growth.  Now, how hard was that?

The Bottom Line

All it takes to comprehend the terrain on the long hard slog we have ahead of us, is to focus on what really matters.   Reducing the likelihood of another Wall Street Debacle matters.  Stabilizing the housing market matters.   Enacting and implementing measures to increase demand for goods and services matter.  Everything else falls into two general categories: (1) Self serving promotion of policies designed to protect the 1% of the American population already doing well; and (2) Ideological assertions which describe neither the current American economic system, nor present solutions to contemporary American economic problems.   There is a choice.

We can either follow the Voodoo economics of the Supply Side Hoax and dig ourselves more deeply into the pit, or we can pay attention to both sides of the economic equation and start digging some ‘stairs’ in the side and climb up.

* At least one source is counseling against being too optimistic about the current decline in foreclosures, because there is still an inventory of properties in the pipeline, and although foreclosures have hit a five year low, realistically there is more to come.

Chart of the Day: Median Household Income

 

 

And we wonder why aggregate demand isn’t moving?

No improvement in wages and salaries, no increased demand for goods and services.  There are TWO sides to the economic equation, supply AND demand.  Believing that only one side matters (supply) is Magical Thinking.  Henry Ford understood this, his modern day disciples have lost track of this crucial equation.