The new austerity

Congressional Republicans have been working hard to cut SNAP funding (Food Stamps). As we know, Vice Presidential candidate Paul Ryan has worked very hard on this matter, having made his name nationally with his draconian budget proposal. While the Republican effort to cut Food Stamp funding is unsurprising, their effort remains disturbing nonetheless given the severity and length of the economic crisis which emerged in 2008 and given the looming food crisis. To be sure, the food crisis directly ahead of us will be a consequence of the 2012 drought. The existence of the drought belongs with the other effects produced by global warming, an issue on which the Republicans have an irrational position. As more Americans find themselves jobless or food-deprived and while the morbidity attributable to food-shortages will surely increase because of inflating food prices and food shortages, the Republican Party wants to intensify the deprivation many Americans will suffer by cutting Food Stamp funding.

What the Republican Party wants to impose on America is not a sound fiscal regime but an intense and risk-laden class war.

Looking for work?

Look harder. For many Americans, the labor market remains a cemetery composed of dead hopes and dreams:

The Unholy Alliance wastes vast sums of money

As early reports have made plain, JPMorgan Chase Bank has blundered its way to what is already a multibillion dollar loss. Once again, a Big Finance bank made witless bets. And, as we also know, Washington failed to temper the Great Casino during the Great Recession. Indeed, America’s political elite took bankster money and acted in the interests of the financial elite and America’s oligarchs. It has thus been business as usual for the most predatory banks, a general situation that makes Washington’s political failures with respect to Big Finance both notorious and tragic for the “lesser people” (Alan Simpson) in America and around the world.

There are silver linings in this story, however. Yves Smith pointed to one of them:

The real upside is that this may be the first real dent to [JPMorgan Chase’s CEO Jamie] Dimon’s image. The firm has gotten off scot free for dubious tactics during the Lehman and MF Global failures, and Dimon has taken to bullying central bankers and regulators (I’ve heard of incidents beyond the press reports of him browbeating Bernanke and later his Canadian analogue, Mark Carney). Dimon’s hyperaggression may simply by apparent success stoking an already overly large ego, or it may be the classic “the best defense is a good offense” strategy, of dissuading overly close scrutiny of JP Morgan’s health and practices. We’ll have a better basis for judging as the year progresses, since difficult trading markets will continue to test all the major dealers.

Sensible people always welcome the destruction of a personality cult when it surrounds a powerful person. Dimon would be no exception to this rule. Likewise, sensible people would welcome any event which diminishes further the aura of rational action which surrounds Big Finance. Wall Street may have rationalized tools but substantive rationality is not a virtue found therein. These institutions are predators, and their predation, based upon analytical mysticism, serves no useful and general purpose.

Americans should be so lucky if the Securities and Exchange Commission and Britain’s ‘private’ Financial Services Authority were to act rationally in this case. Unfortunately, it would be more realistic to expect Angels to solve our financial problems than it would be for Congress or Parliament to enact sensible legislation meant to rationalize America and Britain’s financial markets and institutions. This is a neoliberal world, after all. “There is no alternative,” as we were told.

Sha na na na, sha na na na na….

Mark Weisbrot shows that the America’s recovery from the Great Depression was hardly a recovery at all:

The U.S. recession officially ended in June of 2009, but most Americans don’t feel like we are in a recovery. That’s because it’s been a weak recovery, with the size of the economy barely bigger today than it was four years ago, when the recession started.

Since America is a rich country, it is not growth itself that matters most but employment and, of course, the distribution of income. And the employment numbers are just terrible.

The simplest measure is the percentage of the working-age population that is employed. That peaked at 63.4 percent in December 2006. It plummeted to a low of 58.2 percent last July and is hardly different now — 58.5 percent in the latest figures.

What this means is that we need about 10 million jobs to get back to full employment. There was a lot of happy talk earlier this month when the December job numbers were released. They showed 200,000 payroll jobs added in December, and the unemployment rate falling to 8.5 percent. Adding even 200,000 jobs a month is not very good for an economy that needs at least 90,000-100,000 jobs a month just to keep up with the growth of the working-age population.

And as my colleague Dean Baker pointed out, the latest jobs numbers have probably been over-optimistic. Realistically, he notes, at present trends of job growth we will not hit full employment until 2028. This would be an economic failure of disastrous proportions.

Eastman Kodak files for bankruptcy

The New York Times delivered the bad news this morning:

Eastman Kodak, the 131-year-old film pioneer that has been struggling for years to adapt to an increasingly digital world, filed for bankruptcy protection early on Thursday.

The American icon had tried a number of turnaround strategies and cost-cutting efforts in recent years, but the company — which since 2004 has reported only one full year of profits — ultimately ran short of cash.

Budget cuts and pain sharing

Catherine Rampell of The New York Times delivers a gloomy prediction:

If the economy falls back into recession, as many economists are now warning, the bloodletting could be a lot more painful than the last time around.

Given the tumult of the Great Recession, this may be hard to believe. But the economy is much weaker than it was at the outset of the last recession in December 2007, with most major measures of economic health — including jobs, incomes, output and industrial production — worse today than they were back then. And growth has been so weak that almost no ground has been recouped, even though a recovery technically started in June 2009.

After reciting the kinds of pain a demand constrained economy can impose on a people, Rampell goes on to note:

There is at least one factor, though, that could make a second downturn feel milder than the first: corporate profits. Corporate profits are at record highs and, adjusted for inflation, were 22 percent greater in the first quarter of this year than they were in the last quarter of 2007.

Nervous about the future of the economy, corporations are reluctant to make big investments like hiring. As a result, they are sitting on a lot of cash.

While this may not be much comfort to the nation’s 13.9 million unemployed workers, it may be to their employed counterparts.

Do you find it hopeful knowing that America’s corporations are sitting on a lot of cash, money they might use to retain part of their labor force? I do not. Eventually, the American economy will need to grow if it is to master the unemployment and private debt problems. Growth, however welcomed it would be, should not be expected from a stagnating demand constrained economy during a time of politically imposed austerity.

Quote of the day

Paul Krugman writes:

These are interesting times — and I mean that in the worst way. Right now we’re looking at not one but two looming crises, either of which could produce a global disaster. In the United States, right-wing fanatics in Congress may block a necessary rise in the debt ceiling, potentially wreaking havoc in world financial markets. Meanwhile, if the plan just agreed to by European heads of state fails to calm markets, we could see falling dominoes all across southern Europe — which would also wreak havoc in world financial markets.

We can only hope that the politicians huddled in Washington and Brussels succeed in averting these threats. But here’s the thing: Even if we manage to avoid immediate catastrophe, the deals being struck on both sides of the Atlantic are almost guaranteed to make the broader economic slump worse.

In fact, policy makers seem determined to perpetuate what I’ve taken to calling the Lesser Depression, the prolonged era of high unemployment that began with the Great Recession of 2007-2009 and continues to this day, more than two years after the recession supposedly ended.