Tag Archives: automatic stabilizers

A Little Common Sense and Economic Literacy Required

The GOP filibuster of the bill to extend unemployment insurance benefits for “long term” unemployed people was broken by a 60-37 vote in the U.S. Senate [vote 2] with both Nevada Senators voting in favor of the cloture motion.  The bill will now move over to the House side where passage is less certain.

While Senator Heller (R-NV) is anxious for us to know that he’s “still a conservative,” [WaPo Fix] he’s also representing a state with a heavy 3.9% long term unemployment rate.  [BusinessInsider]

How They Voted – States with 3% or higher long term unemployment

Rhode Island  4.1%   Reed (D) Whitehouse (D) Yes

Nevada 3.9% Reid (D) Heller (R) Yes

New Jersey 3.9%  Booker (D) Menendez (D) Yes

Illinois 3.7% Durbin (D) Yes Kirk (R) No

California 3.7% Boxer (D) Feinstein (D) Yes

Mississippi 3.6% Cochran (R) Wicker (R) No

North Carolina 3.6% Hagan (D) Yes Burr (R) No

New York 3.5% Gillibrand (D) Schumer (D) Yes

Georgia 3.5% Chambliss (R) Isakson (R) No

Florida 3.3%  Nelson (D) Yes  Rubio (R) No

Michigan 3.3% Levin (D) Stabenow (D) Yes

Pennsylvania 3.0%  Casey (D) Yes  Toomey (R) No

South Carolina 3.0% Graham (R)  Scott (R) No

These “no” votes make no economic sense.   First, we ought to look at some of the statistics related to unemployment in this country.  The BLS report for November 2013 on characteristics of those unemployed show that of the 10,271,000 unemployed persons in the U.S. 5,400,000 were those who had been laid off or who had finished temporary jobs.   For some 4,448,000 these were not temporary lay offs.  3,329,000 were permanent job losses.  1,160,000 were those who had completed temporary jobs.

Secondly, we should look at where the jobs are increasing.  The last comprehensive report issued in November shows some pockets of economic activity which aren’t promising.  For example, in the health care and services category showed increases in most subcategories, approximately 4,000 nursing home care jobs were lost. [BLS]   While mining and logging showed general growth, support services for mining were down 3.1%.  The manufacturing sector slugged along, with significant employment up for motor vehicles and parts, up 6.7%.  Transportation equipment manufacturing was up 4.9%, and fabricated metal products related employment increased by 3.1%.

In the retail sector of the U.S. economy there was more mixed news.  Employment in electronics and appliance stores down 3.6%, in food an beverage stores down 5.4%, in health and personal care stores down 3.4% in a sector which showed an overall 22.3% increase Oct/Nov 2013.  [BLS]

The mixed news created the chart below, indicating that while employment levels were generally higher, this wasn’t necessarily good news for those who were among the long term unemployed (longer than 26 weeks.)

Duration Unemployment 2013Looking at some of the other labor data could indicate some of the employment sector weakness facing the long term unemployed.  Unemployment rates in the construction sector, while far better than in 2012, were still at 8.6% as of November 2013. [BLS]  The unemployment rate in the leisure and hospitality sector was still above the national average at 9%, and unemployment in the agricultural sector was at 9.7%.

Given a situation in which there hasn’t been enough job creation in significant sectors, and in which while employment has generally improved, there remain pockets of losses, and what we don’t want to create are more “discouraged workers.”

BLS Table A-16 puts paid to the conservative theme that the unemployed are sitting on the stoop swilling beverages of choice and “taking” a living from “hard working Americans.”

Discouraged Workers 2013The number of Americans “marginally attached” to the labor force declined from 2,505,000 in 2012 to 2,096,000 in 2013, meaning that there was a decrease in the number of persons “who want a job, have searched for work during the prior 12 months, and were available to take a job during the reference week, but had not looked for work in the past 4 weeks.”

There was also a decline in the “discouraged worker” category, from 979,000 in 2012 to 762,000 in November 2013.   Discouraged workers  are categorized as “those who did not actively look for work in the prior 4 weeks for reasons such as thinks no work available, could not find work, lacks schooling or training, employer thinks too young or old, and other types of discrimination.”  These people obviously didn’t drop into the infamous “other category” because those numbers also declined.

Others is a category which “Includes those who did not actively look for work in the prior 4 weeks for such reasons as school or family responsibilities, ill health, and transportation problems, as well as a number for whom reason for nonparticipation was not determined.”  Those numbers dropped from 1,526,000 to 1,334,000 between November 2012 and November 2013.   It’s truly hard to argue that people are willing to avoid work when even at a point at which there are three applicants for every single job available those who have only the most tenuous connection to the labor force are demonstrating a reduction in their numbers.

When the numbers of “marginal, discouraged, and ‘other'” workers are dropping people are obviously NOT willing to accept “dependency” on the government for their income.

If we are truly interested in improved economic growth then we’d be well advised to take both some long term and short term measures to develop it.

Short term activities should include extending unemployment insurance benefits so that people have the wherewithal to continue to seek work.  No one is giving away gasoline to get to job fairs and interviews.  Further, (once more will feeling) such benefits act as a automatic stabilizer for the economy, keeping spending levels from gyrating wildly in times of economic instability.  DB’s been on this topic at least since April 2011.

Long term investments in infrastructure rehabilitation and construction would go a long way toward providing employment to meet short term needs in the construction sector and long term necessities for economic activity.

However, there may be little hope that the 233 Republicans in the House of Representatives (112th Congress) will manage to throw off the shackles of ideology.  We know that Trickle Down Economics is a hoax.  We’ve had thirty years of it.  We know that tax cuts don’t “boost the economy;” had this been the case the Bush Administration would have been wildly successful.  We know that deregulation produced one amazing financial sector collapse. And, we can see from the BLS statistics that unemployed people are leeches on the body politic.

However, all this information and experience didn’t prevent 37 Republican members of the U.S. Senate from voting to sustain their filibuster of the bill to extend unemployment insurance benefits to the long term unemployed — including some from the states which could have definitely benefited from the legislation.

Common sense and a modicum of economic literacy are in order.

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Filed under Heller, Politics, Reid

Thank You For Your Service, sort of

VeteransThe CBPP estimates that 11,300 veterans — that’s Veterans — in households receiving SNAP (food stamp) benefits in Nevada will see benefits cut — that’s CUT — on November 1, 2013.

“The 2009 Recovery Act temporarily raised SNAP benefits as a form of effective economic stimulus and to reduce the hardship that low-income families faced during the recession.  This benefit increase is set to expire on November 1.  The coming benefit cut will reduce SNAP benefits, which are already modest, for all households by 7 percent on average, or about $10 per person per month.” [CBPP]

The assistance will drop back to less than about $1.40 per meal.  Again, the point remains that programs like SNAP are economic “automatic  stabilizers.”  At the risk of continual repetition, an automatic stabilizer is a financial augmentation in income designed to offset deflationary pressures during economic downturns.  In English, that would be money to offset income lost during recessions and depressions to keep the aggregate demand from succumbing to further contractions — leading to more contraction.  We know from analysis during the Great Recession of 2007-08 that those SNAP benefits created $1.73 in economic activity for every $1.00 expended.  [Moodys pdf]

And so now we have the Farm Bill stalled in conference between the House and Senate which would address SNAP related issues, and the two sides arguing about whether to cut yet another $35 billion from the food assistance program. [USAT]  This, in the face of the obvious point that the “Recovery” hasn’t been a general success for all levels of income earners.

“All told, average inflation-adjusted income per family climbed 6% between 2009 and 2012, the first years of the economic recovery. During that period, the top 1% saw their incomes climb 31.4% — or, 95% of the total gain — while the bottom 99% saw growth of 0.4%.”

Last year, the richest 10% received more than half of all income — 50.5%, or the largest share since such record-keeping began in 1917. Here is how the top earners break down: Top 1%: incomes above $394,000 in 2012; Top 5%: incomes between $161,000 and $394,000; Top 10%: incomes between $114,000 and $161,000.”  [Wall Street Journal]

The 1% have done very nicely, thank us all very much, while the remaining 99% — including those 11,300 Nevada veterans in low income brackets — have witnessed the income gap widen.  Thank you for your service…

The right wing response is generally, “Why don’tcha get off your lazy butt, get some job training, and find a better job?”  Well now, that might have been easier for some active duty military personnel had not the House/Senate GOP decided to shut down the federal government, including the office that processes military education benefits. [IHE]

The shutdown was a temporary tantrum, the Sequester (Budget Control Act) was more serious:

March 8, 2013: “Due to the current fiscal challenges, the Secretary of the Army has approved the suspension of Tuition Assistance (TA) effective 1700 EST Friday, 8 Mar 13. The suspension applies to all components and will remain effect until the fiscal situation matures.
Effective 1700 EST 8 Mar 13, Soldiers will no longer be permitted to submit new requests for Tuition Assistance through the GoArmyEd portal.”  [TDB]

There was sufficient outrage to move the Congress to reinstate Pentagon authority to restore the tuition assistance program by March 28, 2013. The U.S. military was ordered to find other areas in their budget to cut and to reopen enrollment in the TA program. [HuffPo]  Are we beginning to see a pattern here?

The Budget Blasters in the U.S. Congress are delighted to take very grand, or grandiose,  general positions like shutting down the government — but for Heaven’s Sake don’t shut down the World War II Memorial; and, cut all that fat from the federal budget — but for Heaven’s Sake don’t cut tuition assistance for members of the U.S. military.  A person could easily conclude that the Budget Blasters in Congress dislike federal spending on anything in general, but come to a screeching halt when we get down to the specifics in real federal functions.

The Senate Republicans successfully filibustered a bill in September 2012 to create a job training program for veterans which would have involved a relatively modest $1 billion in expenditures over a five year period.

“Sen. Tom Coburn (R-Okla.) said GOP concerns were about the $1 billion price tag for the program over five years. Republicans described the proposal as a political ploy of no practical value. “If, in fact, we want to help veterans get jobs, there are lots of ways to do it,” Coburn said on the floor before the vote. “We need to make sure the job training programs we have are working, and they’re not.” [WaPo]

There might have been “lots of ways” for veterans to find job training programs in 2012, except that the Budget Control Act which Senator Coburn and others referred when filibustering the 2012 bill to death also shaved funding from other job training programs:

“Federal money for the primary training program for dislocated workers is 18 percent lower in today’s dollars than it was in 2006, even though there are six million more people looking for work now. Funds used to provide basic job search services, like guidance on résumés and coaching for interviews, have fallen by 13 percent.” [NYT April 2012]

One year on, and the same squeeze was observed by the National Skills Coalition which issued its report on the impact of diminished support for job training programs in July 2013, including this conclusion:

“Over the past three years, Congress has cut funding to employment and job training programs by over $1 billion. Sequestration and spending caps will result in further cuts for the next decade. In addition, some in Congress are proposing additional, even deeper cuts that will worsen the existing skills gap and make it difficult for businesses to grow and compete globally.” [NSC]

Excuse the impertinent inquiry — but job training programs have already been cut by $1 billion as a result of Sequestration and spending caps, and the Congressional Republicans have blocked more targeted programs for training veterans, so exactly where are veterans supposed to go for help once they are home and trying to transition back into the civilian economy?  If Senator Coburn believes there are “lots of ways to do it” then perhaps he’d care to point out where the federal government is poised to give the assistance to veterans they need to improve their job skills?

“Thank you for your service” is a hollow bromide, with little more staying power than those cheap yellow ribbon car magnets, unless we are ready and willing as a nation to assist veterans with educational programs, job training skills, and some basic resources — like Food! — so that they can fully contribute to  our economy.

Meanwhile, some 11,300 Nevada low income veterans who are struggling to put food on the table are about to be hit with another blow from the authors of the great American con job, those espousing the notion that we can get everything we want, we just shouldn’t have to pay for it.  And the 1% keep rolling along…

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Filed under Economy, Nevada economy, Nevada politics, Politics

Farm Bill Tom Foolery

PlowThe House of Representatives of the United States of America was supposed to pass a Farm Bill (HR 1947) on June 20, 2013 but that didn’t happen, and the actions of Nevada Representatives Heck and Amodei weren’t helpful.

Head counters, AKA the Whips, were fairly certain there would be about 40 votes from the Democratic side of the aisle for passage.  Let’s review the basic numbers.  There are 234 Republican Representatives and there are 201 Democrats.  There are no Independents.  Given these numbers, the House Republicans could theoretically pass any bill they want without Democratic assistance.  Since they’ve voted some 37 times to repeal the Affordable Care Act and Patients’ Bill of Rights it’s reasonable to assume there is some cohesion in the majority.

So, why did the Federal Agriculture Reform and Risk Management Act (HR 1947) go down on roll call vote 286 with a 195-234 count?

Representative Mark Amodei (R-NV2) was among the 195 voting in favor of the bill. Representatives Heck (R-NV3), Horsford (D-NV4), and Titus (D-NV1) were counted among the 234 opposed.  Why did those 40 Democratic votes vanish?

There wasn’t much Democratic support for the House version of the Farm Bill to begin with, estimates of 70 Democratic votes were probably too optimistic in the first place, and if Rep. Collin Peterson (R-MN7) is to be believed the straws that broke the old camel’s back were amendments brought to the floor which decimated the SNAP (food stamp) programs.

“And then, you know, we had made a deal on food stamps where I agreed to more cuts than we had considered last year, but I thought we had a deal that there weren’t going to be any other…that we were going to stand together to oppose any other changes in the food stamp area, but that’s not what happened. And three amendments got approved, that each one of them peeled off more support, so we got down to 24 votes, and that wasn’t enough.”  [Peterson, pdf]

The Southerland Amendment was the last straw — the “deal was off” as far as the few remaining House Democratic supporters were concerned.  This amendment was passed on a 227-198 margin [vote 284] with both Amodei and Heck voting in favor of the deal killing amendment.  House Amendment 231 (Southerland) proposed “An amendment numbered 102 printed in Part B of House Report 113-117 to apply federal welfare work requirements to the food stamp program, the Supplemental Nutrition Assistance Program, at state option.”

The federal welfare work rules are: “The Federal government provides assistance through TANF (Temporary Assistance for Needy Families). TANF is a grant given to each state to run their own welfare program. To help overcome the former problem of unemployment due to reliance on the welfare system, the TANF grant requires that all recipients of welfare aid must find work within two years of receiving aid, including single parents who are required to work at least 30 hours per week opposed to 35 or 55 required by two parent families. Failure to comply with work requirements could result in loss of benefits.”  [WI.org]  Rep. Eric Cantor was only too pleased to see these requirements added to the qualifications for the SNAP program. [Cantor] Cantor acknowledged the need to assist citizens in dire need but added, “our overriding goal should be to help our citizens with the education and skills they need to get back on their feet so that they can provide for themselves and their families.”

The last point goes absolutely nowhere toward explaining why the House hasn’t taken up legislation to prevent student loan interest rates from doubling from 3.4% to 6.8% next Monday — but, that’s another story.  Or, why in the midst of innumerable anti-choice bills there hasn’t been time for a JOBS Bill… but that’s yet another story.

The GOP axe job on the SNAP program probably wasn’t going to secure the total support of Representatives Horsford and Titus, and Rep. Titus’s interest may indeed have declined precipitously when her amendment, H. Amdt. 192, “to continue the USDA’s Hunger-Free Communities grant program,” failed on a voice vote.

Representative Amodei may one day have to explain why he voted for the Farm Bill, AND also voted for the amendment (Southerland H.Amdt. 231) which was the Deal Killer.   Mother always repeated the old saw, “Can’t have your cake and …..”

Representative Heck behaved precisely as one might expect of a Tea Party Darling, voting against the Farm Bill and voting for the Southerland Amendment.   There’s no time, and I’ve no enthusiasm for explaining yet again, the role of Automatic Stabilizers in the U.S. economy (such as Food Stamps) to a Representative who obviously doesn’t understand and evidently doesn’t want to.

Suffice it to say that a bill was reported out of House Committees, and then subjected to recorded votes on amendments from vote 256 to to 284 (not including the voice vote amendments).  It shouldn’t really surprise anyone that the final bill failed after minority support was peeled off during successive waves of amendments.

What is a bit incredible is that House Speaker John Boehner (R-OH) couldn’t have foreseen the cumulative effect of the amendments on Democratic supporters of H.R. 1947.

Representative Cantor’s feeble attempt to lay the defeat of the Farm Bill at the office doors of Democrats who watched as “deal breaker” amendments were added to the legislation on the floor notwithstanding, perhaps the Washington Wags are on to something — Speaker Boehner cannot control his own caucus.   Brokering a “deal,” and then allowing amendments to come to the floor for recorded votes — amendments which are designed to deplete the store of minority good will — is a recipe for failure.

However, if the Speaker and his Party, are willing to offer the American public the governance philosophy that Nothing is Better Than Anything then he’s been successful.   If this is “success” then how to explain the tanking of Congressional approval?  The Congress of these United States now has an historically low approval rating — a rather miserable 10%.  [Gallup]

This sad state of affairs doesn’t bode well for some important measures which should be coming to the House floor — Immigration Reform, Student Loan interest rates, and JOBS, JOBS, Jobs, Jobs?

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Filed under Amodei, Heck

Heller’s Platitudes on a Platter: With Charts and Pictures

Heller 2Quick! Someone get some valid economic information to Senator Dean Heller (R-NV) before he embarrasses himself again.

“The nomination of Jack Lew to be Secretary of the Treasury suggests that this Administration has learned nothing from the debt-driven economic policies of the past four years, and intends to move forward with more of its signature tax and spend policies.

“As the architect and defender of the President’s irresponsible budgets amid grave economic circumstances, Mr. Lew has failed to demonstrate the leadership and commitment to responsibility that this country needs in its chief economic advisers.

“While I respect the fact that Mr. Lew has remained a public servant for many years, I cannot support the nomination of an individual who does not share my commitment to treating taxpayers’ dollars responsibly,” Heller said. [RGJ]

Let Us Parse:

“….debt-driven economic policies of the past four years…”  OK, Senator Heller isn’t expected to be reading all the articles in every economic and business magazine and journal, BUT he could at least look at the pictures in Forbes.  We Repeat:

Obama spending forbes chart

Now what does the headline, “Slowest spending in decades,” tell us?

…signature tax and spend policies…   Here’s a heads-up for everyone. There are basically two things to do with tax revenues: (1) spend the money for government services, or (2) utilize the funds to reduce the federal debt.  However, if you’ve been reading this blog even for a short while, you know that already.

Of all the GOP talking points, the elderly “tax and spend” bumper sticker shorthand is the most hoary, and least accurate.  For example, the last time we had a budget surplus it was during a Democratic Administration.   Notice that the annualized growth in federal spending stood at 3.2 and 3.8 during the Clinton years.  Notice what it did during the two Administrations of George W. Bush, during the “Credit Card Conservative” years?  Those numbers are 7.3 and 8.1, even if the 2009 stimulus is assigned to the Democratic Obama Administration.

Secondly, during any recession, and we had a whopper when the Housing Bubble exploded all over the economy in 2008, government spending increases when AUTOMATIC STABILIZATION programs kick in to soften the damage to our economy.  Unemployment insurance benefits, food stamps (SNAP), and similar stabilization programs prevent recessions from becoming depressions.   The Tax Policy Center explains:

“Automatic stabilizers are features of the tax and transfer systems that tend by their design to offset fluctuations in economic activity without direct intervention by policymakers. When incomes are high, tax liabilities rise and eligibility for government benefits falls, without any change in the tax code or other legislation. Conversely, when incomes slip, tax liabilities drop and more families become eligible for government transfer programs, such as food stamps and unemployment insurance, that help buttress their income.”

Why keep repeating this basic bit of modern economics? Because it seems to have escaped Senator Heller and other radical conservatives, who believe that if we simply reduce taxation on the wealthiest Americans investment in domestic business enterprises will magically increase even if consumers don’t have the financial wherewithal to increase the demand for goods and services.

“…As the architect and defender of the President’s irresponsible budgets amid grave economic circumstances…”  There are several problems with this analysis, aside from the fact that it is vacuous and vague.  First, I thought one of Senator Heller’s complaints was that we don’t have a budget…that we haven’t passed a budget…that we are operating without a budget? [NPR]

Heller No Budget

All right, the President is functioning with numbers from the 2011 Budget Control Act, the response to the GOP threat to shut down the federal government in the debt ceiling fight of 2011, and the source of the Silli-quester we’re now engaged in.   So, is the “out of control” spending a function of the Congressional act of passing the Budget Control Act?

Frankly and bluntly, the phrasing adopted by Senator Heller is nothing more than a repetition of the Tax and Spend mythology from the first paragraph of his statement.   And, now to the second point.

What grave economic circumstances? For Whom?

Is he talking about economic activity in terms of the U.S. financial markets?  If he is then someone needs to get him a newspaper.  Here’s the graph of financial markets as measured by the S&P 500 for the past five years:

SP 500 march 2013

For reference, the index was at 683.38 as of March 2, 2009.  An 831.03 increase (or 121.606 % increase) in the S&P doesn’t signal anything “grave” to me about the health of our financial markets.  So, if a family’s income depends on investments then the past five years have been anything but “grave.”

If, however, ones personal wealth doesn’t come from investments, then indeed, the picture isn’t quite so pleasant. Consider the following information from The State of Working America (pdf).

Change in Wealth

Those reports about most of the increase in the nation’s wealth going to the upper echelons of American economic elites are accurate, and not only are they accurate they follow a pattern beginning in the 1980s in which the rich start becoming yet richer while the percentage going to the bottom 80% of the U.S. population begins to trend downward.

And, it’s not only wealth distribution which is increasingly headed toward the top, it’s income as well.  During the recovery we’ve seen most of the income going to about 15 counties in the United States.  [Forbes] Forbes has more:

“Galbraith’s not the only one who feels that way. Here’s the free market apostle Alan Greenspan in 2007 admitting that “you cannot have a market capitalist system if there is a significant mood in the population that its rewards are unjustly distributed.” Notice please the notion “unjustly distributed” from one of the policymakers who made it so.”

So, at this point it might be wise to ask if Senator Heller and his Republican colleagues in the U.S. Senate might be amenable to suggestions regarding how to devise a more just distribution, one in which more American consumers could be encouraged to support our manufacturers and retailers by spending more money?

The Real Questions

Does Senator Heller understand that, as discussed previously, aggregate demand and Gross Domestic Product are essentially the same thing?  And, that a reduction in government spending means the reduction in spending for everything from personnel costs to paper clips? From aircraft carriers and armaments to thermometers for food safety testing?  Some companies are manufacturing and selling these products — thus if orders decline so does our GDP.  [See more here]

Would Senator Heller and his associates agree with legislation to increase the minimum wage?  If you really want to put more money into more people’s pockets this is the easiest way to do it.  We can assume he would not be in favor of this remedy because he voted against raising the minimum wage in January 2007.  [H.R. 2 Fair Minimum Wage Act 2007, vote 18]

Since most of the wealth for those not earning most of the family income in the financial markets is tied up in the family home, would Senator Heller support measures to bolster the value of family residences and to help families facing foreclosure?  Judging from his voting record, it doesn’t seem so.  Senator Heller’s on record opposing the Home Affordable Mortgage Program (2011), and opposing modification to bankruptcy laws to help homeowners avoid foreclosures (2009). [OnTheIssues] Nor could he even find it in his conscience to support funding affordable housing renovation in “severely distressed public housing.” [OnTheIssues]

The Real Answers

Contrary to popular thinking among Republicans it really is possible to be Pro-Business and to also consider the needs of shareholders and consumers.  Being Pro-Banking doesn’t necessarily mean a person is Pro-Growth.   Growth, as former Federal Reserve Chairman Greenspan came to understand by 2007, requires a vigorous consumer base, which in turn requires protection for those who work in our factories and provide our services.  Consumers and shareholders do not benefit from policies which further exacerbate wealth and income inequities, nor do they benefit from policies and legislation which undermine the faith in our free market system.

Protecting the incomes of the economic elite does precious  little to prevent economic instability for the majority of American wage and salary earners.  Protecting the economic elite can never add to the total wealth of a nation as much as adding more willing participants in our markets…our housing market, our retail markets, our automotive markets, or in any other market.

In short, Senator Heller’s platitudinous palaver and vague rhetoric is bumper sticker speak obscuring the very real economic issues and the very real economic answers we should be discussing.

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Filed under Economy, Heller, Nevada politics

Romney-Ryan 2012: Be Very Quiet! Be Very Very Quiet!

The Romney-Ryan campaign keeps adding to the impression that it is run by Elmer Fudd who has mistaken his opponents for the rascally rabbits.  Elmer would like for everyone to be Very Quiet, but periodic outbursts of honesty keep impeding his adventures.  Example Number Whatever:  Hedger funder John Taylor on CNBC:

“Hedge funder John Taylor is on CNBC and expressing major disappointment in Romney for selecting Paul Ryan for being his running mate.  Why? Because he’s too open about wanting to cut Medicare, and that will cost the election.

Taylor thinks Romney would have been better for the economy, but that now he blew it.

Taylor even thinks that the budget cutting needs to be done, but that it’s a mistake to be so open about it.

I agree that we have to do this stuff… but you don’t want to do it in public,” he said.”  [Business Insider] (emphasis added)

No, it would definitely be counter-productive to tell the American voting public you want to end the Medicare program as we know it, end assistance for nursing home residents under Medicaid, or — cut Pell Grants for students from middle class families, gut clean air and clean water regulations, end urban redevelopment programs under HUD, or cut funding for WIC programs for women and infants….

Be Quiet, Be Very Very Quiet!  The Republican plan gives every appearance of being entirely composed of vague generalities, unspecified numbers, soaring rhetoric, carefully crafted talking points, and lots of Flags and references to freedom.   The first step is to get elected, the second is to (do what?)

End Medicare as we know it for future generations, and cut every social safety net program to shreds so that there aren’t any economic  stabilizers left the next time unshackled Wall Street enthusiasm creates the next crash.

Be Very Quiet.  The Romney-Ryan Budget Plan doesn’t really reduce the federal deficit.  Ezra Klein ran the numbers:

“The question then is how should we in the media report on Ryan’s plan? Do we use the revenue numbers he tells us to assume, despite the fact that he offers no path for reaching those numbers, and despite the fact that he and his party have a long history of choosing tax cuts over deficit reduction? Or do we use the policy changes on the page, in which case Ryan’s plan is wildly fiscally irresponsible? […]

At the very least, people should know that when they hear about the Ryan plan’s deficit reduction, those numbers are assuming that Ryan, who has thus far refused to name even one tax break that he would get rid of, has either eliminated almost every expenditure in the tax code, including the capital gains tax break and the home mortgage interest deduction, or he’s sacrificed his tax cuts.”  [WaPo]

And, there we have the formula: Don’t specify what tax breaks would be eliminated!  Get the votes and then happily revert to the Voodoo Economics of the Bush Administration which got us into the current mess in the first place.

Be Very Quiet! The Romney-Ryan Ticket promises to dismantle financial regulation.   OK, the President certainly isn’t talking about dismantling financial regulation or de-regulating the Wall Street Wizards, and Governor Romney definitely doesn’t want to say much beyond making his new regulations “modern” and “streamlined.”   Whatever on Earth that might mean.   We’re all supposed to be very very quiet and accept that the Romney-Ryan ticket promises “freedom,” “prosperity,” “employment,” and all those other buzz words associated with happy feelings.

We are not supposed to ask tricky questions like:

(1) Would former Governor Romney eliminate the Consumer Financial Protection Bureau which protects customers from invidious practices by unethical lender, mortgage scam artists, and seeks to prevent lenders from practicing predatory lending practices on members of our Armed Forces?

(2) Would former Governor Romney repeal the provisions of the Dodd Frank Act which require large banks to create a plan for their orderly liquidation in case of bankruptcy?

(3) Would former Governor Romney repeal the provisions of the Dodd Frank Act which grant the Commodity Futures Trading Commission authority to regulate and oversee the derivatives markets?

If we’re all very very very quiet, then the Romney-Ryan ticket can be elected and then they can “do all that stuff…without having to DO it in PUBLIC.”

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Filed under 2012 election, financial regulation, Medicaid, Medicare, Politics, Romney

What’s A Small Business?

Small businesses are defined in the eyes of the beholder.  A small business seen through the eyes of a large commercial bank any enterprise with less than $20 million revenue is “small.”   The FDIC defines a “small business loan” as one for $1 million or less. The Small Business Administration uses the FDIC definition for its reporting.   [HuffPo]  Programs for small business lending in the Treasury Department are based on different criteria.

The Treasury Department identifies criteria for a small business in two programs.  The one-shot State Small Business Credit Initiative provides for loans not exceeding $5 million to businesses with less than 500 employees. [Treasury pdf] The second program is the Small Business Lending Fund, ” Enacted into law as part of the Small Business Jobs Act of 2010 (the Jobs Act), the Small Business Lending Fund (SBLF) is a dedicated investment fund that encourages lending to small businesses by providing capital to qualified community banks1 and community development loan funds (CDLFs) with assets of less than $10 billion. ” [Treasury]

This is the point at which the IRS definitions can be inserted because for the purposes of implementing the Small Business Jobs Act of 2010 the IRS defines a small business as including a corporation which is not publicly traded, and the owner must have  $50,000,000 or less in average annual gross receipts over the three preceding tax years. [IRS] Those who would like to plow further into these weeds should see IRS publication 334. (pdf)

Just to make matters more complicated the Small Business Administration splits out its definition of a small business into sectors.  The agency makes its determinations based on the average number of employees over the previous 12 months, or on the sales volume averaged from the previous 3 years.   A manufacturing firm can have as many as 1500 employees depending on the product, and wholesaling operations from 100 to 500.   Services are based on revenue, the maximum ranging from receipts of $2.5 to $21.5 million depending on the service; the maximum range for retailing is $5 million to $21 million; construction company receipts are a maximum of $13.5 to $17 depending on the type of construction, special trade construction receipts ‘max out’ at $7 million.  An agricultural small business may be eligible if its receipts are under $500,000 to $9 million depending on the product.

What’s the point?  One point is that both political parties are overly fond of helping Small Business — and no one appears to have determined what that means.

As demonstrated in the opening section of this post, the definition of a small business can easily range from the Bechtel Corporation company to Barney’s Barber Shop.

What matters is how policies are shaped to assist economic growth, and how they define small business operations in terms of economic expansion.   The popular notion of a small business as exemplified by Barney’s Barber Shop, Charlie’s Catering, or Delilah’s Home Designs, is  perfectly acceptable if the policy objective is to promote local economic growth.

If our objective is to encourage the manufacturing of solar panels in the United States of America, then a “small” manufacturing business employing 450 meets the criteria for receiving assistance in lines of credit and in terms of tax breaks for a small business.

If the objective is to encourage financial transactions hedging risk and other financial manipulations, then a 499 person hedge fund can be classified as a small business.

What we have not had to date is a serious public discussion of What small business enterprises we want to encourage.

If our purpose is to promote economic growth in the manufacturing sector, then our public discourse should include proposals for the development of innovative products and technologies.  Merely propounding, for example, that the Trans Pacific Partnership will help small manufacturers find export opportunities isn’t enough.  We’ll need to talk about how to promote small business sales opportunities without having the outcome hijacked by multi-national corporate behemoths who are more interested in facilitating the flow of capital than they are about whether New Tech Innovations, Inc. can find buyers.

If our purpose is to promote small contractors and sub-contractors in their sector of the economy, then we need to ask if we are encouraging such infrastructure projects as will be of interest to and are attainable for those small contractors and subcontractors.  If there is still a surplus of unsold inventory in the single family housing sector, then why promote this kind of contracting when there is a need for affordable multi-family commercial properties?   Perhaps we should be asking questions like: What will be the economic  impact be of the (Fill in the Blank) project for our local contractors and subcontractors? Instead of obsessing on the project costs?

If our purpose is to promote the efforts of retailers, then do our tax policies and other public pronouncements, benefit small family owned enterprises, or can those enterprises benefit only as a segment of a sector dominated by big box corporations?   Worse still, are we creating a system in which the big box operations are given artificial advantages as they compete with smaller family owned enterprises?  Are we supporting the customers of those grocery, clothing, and other purveyors with “automatic stabilizers’  (food stamps, unemployment insurance benefits) during periods of economic volatility or contraction?

Singing the praises of Mom and Pop companies while promoting policies which give global corporations a leg up, is neither honest nor helpful.  Lauding the efforts of small business owners in 4th of July stump speech rhetoric isn’t productive unless it is backed up with proposals to encourage investment in new economic endeavors, and solicit assistance for local business activities.

We can dream that during this campaign season of specific plans to address equally specific needs in our local economies.   Small business owners are the first to feel the volatility in an economy. They are the first to feel it and too often are the last to recover from it.  They deserve more than to be told “It will all trickle back down on them…someday,” because they may have to make payroll tomorrow.

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