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Why voters are angry in one graph

071410-snapshot.jpg

Source.

By Ezra Klein  |  July 15, 2010; 9:59 AM ET
Categories:  Charts and Graphs  
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Next: What's Congress likely to do about the Bush tax cuts?

Comments

By voters do you mean shareholders in corporations that want to vote for lower profits in exchange for hiring more people on overhead or do you mean people that want to vote for rolling back the minimum wage hike so that we can do more work in this country as opposed to overseas?

Posted by: staticvars | July 15, 2010 10:11 AM | Report abuse

Wrong. People are mad about bailouts, stimuus and healthcare, all big government and big spending interventions. Each may have merit or not depending on your own views, but people certainly feel they have not improved their lives in any tangible way, and so are they are viewed and wasted trillions either bailing out the well connected (TARP) or using their suffering to indulge in liberal agenda items (healthcare). It'd be nice for the majority party if it all boiled down to that old chestnut of economic populism. Bit it doesn't.

Posted by: CW13 | July 15, 2010 10:17 AM | Report abuse

Ezra,

that may be your take and others of like mindset but many others are angry about things like the below.

http://biggovernment.com/jbambenek/2010/07/07/while-illinois-goes-broke-state-union-employees-get-14-raises/

and of graphs like this one:

http://www.data360.org/dsg.aspx?Data_Set_Group_Id=228

and stories like this one:

http://www.washingtontimes.com/news/2010/feb/02/burgeoning-federal-payroll-signals-return-of-big-g/

Posted by: visionbrkr | July 15, 2010 10:21 AM | Report abuse

Ezra! I see no line graphed there which shows the rise in Socialism and the fall of Liberty! What about the increase in chalk used for Glenn Beck's charts!?

Posted by: MosBen | July 15, 2010 10:44 AM | Report abuse

I've noticed that people seem to get angry about things that don't mean much budget wise in the long run (TARP which will probably pay for itself, HCR which raised taxes to pay for itself) and ignore the major major items that do affect the budget. (wars in Iraq/Afghanistan, Bush tax cuts)

Posted by: lol-lol | July 15, 2010 10:55 AM | Report abuse

@lol-lol: yes, i really don't get it either. i mean, you can say that hcr will reduce the deficit all day, and the right refuses to hear it. you can say that the stimulus saved 1.6 million jobs according to the cbo, but the right won't hear it. on top of that, they won't respond to the fact that bush's tax cuts blew up the deficit on a much, much larger scale -- while having no point whatsoever (like, you know, improving the economy for instance). so it's really hard to take folks like cw13 seriously, when they're so demonstrably wrong about the policies they complain about, and so non-responsive about their own hypocrisy.

Posted by: Chris_ | July 15, 2010 11:05 AM | Report abuse

HCR will not reduce the deficit. It is the taxes associated with it that would have reduced the deficit, if they weren't tied to the HCR. HCR will increase spending, which means, with the taxes, but without the HCR, the deficit would actually have been reduced.

To reduce the long term spending, we need to cut the cost of benefits or give them to fewer people, not increase them or give them to more people. Unfortunately that gets politicized to "rationing", so we are stuck on the road to bankruptcy.

Posted by: staticvars | July 15, 2010 11:13 AM | Report abuse

Staticvars makes a good point. You can always make voters happy by paying them less.

Seriously, though, Ezra, consider using real wage trends in your analysis. I suspect that voters are angry because fewer of them are working and those that are working are doing so for less money than they were making ten years ago.

Posted by: slag | July 15, 2010 11:15 AM | Report abuse

see also http://www.nakedcapitalism.com/2010/07/58-of-real-income-growth-since-1976-went-to-top-1-and-why-that-matters.html

Posted by: bdballard | July 15, 2010 11:18 AM | Report abuse

Except for the company they work for or the industry they work in, I'd guess that the typical voter doesn't keep track of corporate profits.

What would be interesting would be plotting the change in the unemployment rate in the blue states and red states since the 2008 election.

Posted by: tuber | July 15, 2010 11:20 AM | Report abuse

I'm pretty sure voters, for the most part, only care about the red line.

When credit is tight, the blue line is important. If external financing is expensive, firms need internal financing to even begin to consider funding projects and new hires.

Posted by: justin84 | July 15, 2010 11:24 AM | Report abuse

Just to echo what others have said, voters do not keep track of corporate profits. Your graph does not jibe with your headline, because voters are not angry about corporate profits.

Posted by: ostap666 | July 15, 2010 11:31 AM | Report abuse

Ezra believes that corporate profits (or any profits for that matter) are somehow evil.

Isn't that the road to prosperity..to produce wealth? Would you prefer corporations go broke, not be able to produce goods and services, not provide jobs, etc?

Is that really better?

Posted by: WrongfulDeath | July 15, 2010 11:32 AM | Report abuse

"Ezra believes that corporate profits (or any profits for that matter) are somehow evil."

No, Ezra believes that a jobless recovery produces a frustrated electorate.

Posted by: Patrick_M | July 15, 2010 11:54 AM | Report abuse

I have a lot of clients in industries that one would think would be doing well, such as Oil and Gas.
However, even at $76 bbl no one wants to invest (hire workers) because they don't know what the rules are.

And this is happening all over corporate America. They have the cash, but aren't sure about what tax rates they will pay, if the government will impose new regulations, or even take over their industries in a Chavezesque manner.

And who can blame them? Government should be trying to create an environment friendly to business, if jobs are what they want. However, that hasn't happened and the resulting stagnation of the evil business community has resulted.

Obama was going to "focus like a laser" on jobs. Well, if this is the best he can do, he needs to be voted out of office 'cause he has concentrated on the liberal socialist agenda at the EXPENSE of jobs.

Posted by: WrongfulDeath | July 15, 2010 12:00 PM | Report abuse

The graph I would use would be this one:

http://michaelscomments.files.wordpress.com/2010/07/stimulus-vs-unemployment-june2010-dots.gif

Also, see Paul Krugman's take here:

http://krugman.blogs.nytimes.com/2010/07/09/what-went-wrong/

This is key:

"The administration has chosen to deal with this by trying to have it both ways — condemning Republicans, rightly, for obstructionism, while at the same time claiming, falsely, that we’re still on the right track."

See also his comments on how they undermine their own arguments:

http://krugman.blogs.nytimes.com/2010/07/14/my-obama-problem/

Posted by: jnc4p | July 15, 2010 12:41 PM | Report abuse

"They have the cash, but aren't sure about what tax rates they will pay, if the government will impose new regulations, or even take over their industries in a Chavezesque manner."

Businesses will enlarge their pool of employees when their existing staff is inadequate to meet rising demand for their products and/or services. Period.

Note to any captain of industry that is frozen with uncertainty about the "Chavezesque" policies of the current government:

The Bush tax cuts have always had an expiration date, and you have had ten years to plan for that eventuality. "Chavezesque" Obama has been a good friend to business by lowering taxes, continuing the Bush bailout of the financial sector, bailing out the auto industry, passing a health care package that preserves an all-private delivery of services (remarkably similar to Bob Dole's Republican alternative from 1993), and by fueling private sector demand with a stimulus package of tax cuts, infrastructure investment, and other funds targeted to help businesses employ more people.

You have a friend in the Oval Office, big business. Tea Partiers and Glen Beck viewers suffer from delusions to the contrary.

Posted by: Patrick_M | July 15, 2010 12:46 PM | Report abuse

And voters think Republicans are going to fix this? Which party is (more) corruptly in bed with corporate interests over the interests of working people? Really.

Posted by: RalfW | July 15, 2010 12:55 PM | Report abuse

The "Chavez-like takover" comment above is absurd. I've said it here several times, and I'll say it again: If Obama had wanted to do an actual socialist takeover, he was handed the opportunity on a platter when the big banks and investment houses were teetering.

He didn't nationalize any of them - to the chagrin of the wacky left - because he believes in free markets. But that notion doesn't fit with GOP marketing, so we get nonsense terms like "Chavezesque" tossed about.

Posted by: RalfW | July 15, 2010 1:02 PM | Report abuse

"And this is happening all over corporate America. They have the cash, but aren't sure about what tax rates they will pay, if the government will impose new regulations, or even take over their industries in a Chavezesque manner."

Translation:

"Businesses are pissed off that they can't find government departments willing to collude with them to cheat their workers and get out of paying taxes.

Corporate fatcats, having grown so accustomed to being the recipients of money from the citizenry, are unwilling to compete on a level playing field."

Unfortunately, this isn't true. No matter the administration, businesses own the government. And they're not worried in the least. They're not hiring workers because they're doing fine without them.

Posted by: dpurp | July 15, 2010 1:06 PM | Report abuse

Patrick,

While the fringe elements that bring up Chavez deserve their rightful place in obscurity you cannot say that THIS administration is as friendly to business as the last. Its not even close. That's where I don't get many on here who like to have it both ways.

That's like saying a Lindsay Graham is as good on environmental issues as Sen Sanders. Maybe Sen. Graham wants to save the planet but he's not as "friendly" towards the planet as Sen Sanders.

Is he Chavez, Heck no. But he's no GWB either. You can't bash Bush for pro business policies and then try to claim Obama's as good as him there and not get called out for the hypocrisy that that statement is.

Posted by: visionbrkr | July 15, 2010 1:41 PM | Report abuse

"You can't bash Bush for pro business policies and then try to claim Obama's as good as him there and not get called out for the hypocrisy that that statement is."

I guess my memory is failing. Please refer me to the section in my comments where I bashed Bush, and also the section in which I compared Obama's pro-business policies to Bush's.

Thanks.

Posted by: Patrick_M | July 15, 2010 1:44 PM | Report abuse

Patrick,

You was in the plural sense. You meaning Liberals, Democrats or anyone that claimed that the former administration was too pro-business.

You NEVER did that???

Posted by: visionbrkr | July 15, 2010 2:12 PM | Report abuse

visionbrkr,

This is completely unrelated to the comments I made about what is taking place now, but since you insist that I compare Obama to George W Bush, here goes -

Given that the economy went into recession during Bush's first term, followed by a period of moderate growth due to a housing bubble with fishy mortgages and securitized mortgages, which then brought down the entire economy, I would not say that the Bush administration proved to be pro-business.

That administration was a wrecking crew for businesses and for individuals.

Posted by: Patrick_M | July 15, 2010 2:27 PM | Report abuse

Patrick,

also unrelated but since you did I figure I will as well. While I'll agree that for the overall economy they were a disaster, for employment they were a boom (until it all went bust). That being said this to me is why employers aren't hiring. Also some of the blame for the housing crisis lies with every single President (except the current one) for keeping interest rates arbitrarily low. that INCLUDES Clinton. Not to mention NAFTA et al too. There's plenty of blame to go around and more belongs to Republicans than to Democrats but they're not innocent at all.

Posted by: visionbrkr | July 15, 2010 2:32 PM | Report abuse

"While I'll agree that for the overall economy they were a disaster, for employment they were a boom (until it all went bust). That being said this to me is why employers aren't hiring."

And, as a business owner, I will repeat what I said originally:

"Businesses will enlarge their pool of employees when their existing staff is inadequate to meet rising demand for their products and/or services. Period."

Businesses are not waiting for the return of George W. Bush. They are waiting for the return of customers. When there is robust growth in demand, businesses will meet the increased demand by hiring additional workers to supply their products and services. They won't do it any sooner or any later.

Posted by: Patrick_M | July 15, 2010 2:45 PM | Report abuse

"While I'll agree that for the overall economy they were a disaster, for employment they were a boom (until it all went bust)."

Which is a bit like saying that 'the drug overdose felt really good, until it killed me.'

According to the Wall Street Journal:

"Bush On Jobs: The Worst Track Record On Record ... The Bush administration created about three million jobs (net) over its eight years, a fraction of the 23 million jobs created under President Bill Clinton’s administration and only slightly better than President George H.W. Bush did in his four years in office."


http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/

Posted by: Patrick_M | July 15, 2010 2:50 PM | Report abuse

"Businesses will enlarge their pool of employees when their existing staff is inadequate to meet rising demand for their products and/or services. Period."


And as a business owner I'll repeat what I said as well. You are correct but many businesses are very fearful of the over-regulation, over-taxing that is already beginning to occur as compared to the past administration.

Why do you think the Business Roundtable and the Chamber of Commerce came out with the statements that they did?


Posted by: visionbrkr | July 15, 2010 2:56 PM | Report abuse

Patrick,

While i'm certainly not a Bush defender (was and IS against the wars) that's a little unfair. You do realize that the Internet was created and exploded during Clinton's time right? That was a nice little jobs bill that landed in his lap.

Maybe we'll revisit this after President Obama's completed his one or two terms and see how he compares???

Posted by: visionbrkr | July 15, 2010 3:01 PM | Report abuse

"Why do you think the Business Roundtable and the Chamber of Commerce came out with the statements that they did?"

Because they would be happier if their members paid zero taxes and had zero regulations.

But the supposedly "fearful" business owners will hire when they need more people to meet existing demand, whether or not all of their policy dreams come true.

Posted by: Patrick_M | July 15, 2010 3:03 PM | Report abuse

"While i'm certainly not a Bush defender (was and IS against the wars) that's a little unfair. You do realize that the Internet was created and exploded during Clinton's time right? That was a nice little jobs bill that landed in his lap."

The typical dotcom startup did not employ many people, visionbrkr. The few that did are the businesses that are still with us (like Amazon) and even those are not huge employers.

There was a lengthy broad-based expansion of the economy during those years that accounts for the 23 million new jobs. But if you seriously want to argue that the WSJ is wrong, and that the Bush era was better for job growth than the Clinton era, go for it.

Posted by: Patrick_M | July 15, 2010 3:18 PM | Report abuse

But the supposedly "fearful" business owners will hire when they need more people to meet existing demand, whether or not all of their policy dreams come true.

Posted by: Patrick_M | July 15, 2010 3:03 PM | Report abuse


Any suggestions as to how to increase demand? I think we've seen that the stimulus that this congress can stomach still is going to be inconsequential as compared to what's needed.


I also think you're more than a little over the top to lop all members of the COC into wanting zero regulation. Sure we'd all like to pay no taxes but that's not realistic either.

Posted by: visionbrkr | July 15, 2010 3:21 PM | Report abuse

Patrick,

I don't think I said that the Bush era was better for job creation. You may want to re-read what I said. I said that Clinton had the explosion of the internet to benefit him. And while dot.com start ups didn't have tons of jobs many did and many companies that supplemented dot coms but were not start ups grew exponentially. Think HP, Dell, Intel, Sun Microsystems etc.

Posted by: visionbrkr | July 15, 2010 3:27 PM | Report abuse

"Any suggestions as to how to increase demand? I think we've seen that the stimulus that this congress can stomach still is going to be inconsequential as compared to what's needed."

I agree with you, visionbrkr, and I am not optimistic that growth will be robust any time soon, so I expect job creation to remain slow.

"I also think you're more than a little over the top to lop all members of the COC into wanting zero regulation. Sure we'd all like to pay no taxes but that's not realistic either."

I didn't say it was realistic, and of course it was over the top. My point is obviously that COC is an interest group that will (no matter who is in office and no matter what the state of the economy might be at the time) advocate on behalf of the interests of its membership, meaning keeping taxes and regulations down. That set of interests is constant.


Posted by: Patrick_M | July 15, 2010 3:32 PM | Report abuse

"The typical dotcom startup did not employ many people, visionbrkr. The few that did are the businesses that are still with us (like Amazon) and even those are not huge employers."

What about all of the companies that made massive IT investments in the 1990s? There might even have been a few multiplier effects!

It wasn't just the tech boom either - a lot went well in the 1990s. The bond vigilantes started to back off. We slashed military spending. Welfare reform put millions back to work.

If Bush was elected when Clinton was - and assuming he didn't start a war with Iraq - he would have been considered a relatively successful President too. Maybe no surpluses, but GDP growth would have been great, and many jobs would have been created.

Posted by: justin84 | July 15, 2010 3:40 PM | Report abuse

visonbrkr,

I really don't care much about the backward-looking Bush vs. Clinton comparison, so this will be my last comment.

If you followed the WSJ link, you will have seen that job creation under all Presidents going back to Truman are compared. Clinton's record of jobs created per year is at the top, and George W. Bush's is at the bottom.

Now you may argue that Bill Clinton was very lucky because the Internet created some jobs (it also took some away) and that W was just an unlucky fellow, but the statistics are what they are. It is also interesting to compare the job creation track record under Republican and Democratic administrations generally.

Posted by: Patrick_M | July 15, 2010 3:46 PM | Report abuse

"If Bush was elected when Clinton was - and assuming he didn't start a war with Iraq - he would have been considered a relatively successful President too. Maybe no surpluses, but GDP growth would have been great, and many jobs would have been created."

I generally find justin84's comments to be among the most interesting on this blog, because he generally supports every argument with strong data, so that's why this little pipe dream about W in the 90's is such an exception.

If Bush had been elected in 1992, and if he (the "War President") did not start wars, nobody can no what would have happened, even accepting those "if's." It was a different era, with different Congresses and different issues, both foreign and domestic.

It is impossible for anyone to say what Bush would have done had he been elected in 1992, and it is beyond pointless to speculate.

Now (for real) I'm all done with the Bush vs. Clinton stuff. You guys can keep the discussion alive if you wish, but what both men actually did with their turn at bat is now in the record books.

Posted by: Patrick_M | July 15, 2010 3:58 PM | Report abuse

Patrick,
"But the supposedly "fearful" business owners will hire when they need more people to meet existing demand, whether or not all of their policy dreams come true."

Provided we haven't just started a double dip, demand more or less is what it was before the recession started - $13.4 trillion in 2005 dollars (2010Q1 was $13.24 trillion and we are probably in the $13.4 trillion context by now vs. $12.9 trillion in 2009Q2 at the trough), yet we're still 7.5 million jobs short of late 2007 levels. Is it really possible that the entire output of 7.5 million people can be taken out of existence by productivity gains in just 2 years or so?

I think a lot of businesses use workers more as capital input than what we would traditionally think of as labor input. Sure, many busineses do need to expand hiring to meet demand, but a lot of employment is overhead too. The decision to expand those departments is more like an investment decision. I think this accounts for jobless recovery trend in recent years. We see productivity has been soaring in recent recessions, and then (at least in the mid-2000s) it slows substantially. A possible interpretation is that the overhead employees didn't come back when demand came back, they came back along with broader investment demand - but since they were overhead and directly producing output, measured productivity in terms of output per worker hour goes up.

So some of these jobs are construction jobs, which return as demand does (and I think the homebuyer tax credit stole a lot of future - now present - demand), but a lot of, say, banking jobs are overhead.

Say a bank is considering expanding risk management in the wake of the crisis - it might hold off until it knows for sure the details of FinReg. And by holding off, it doesn't buy new risk management software. And the software company holds off hiring new programmers and expanding new features, because this uncertainty has trickled down and impacted a demand oriented business. And tax revenue falls, and we see layoffs at the state level.

Visionbrkr,
"Any suggestions as to how to increase demand? I think we've seen that the stimulus that this congress can stomach still is going to be inconsequential as compared to what's needed."

There's always monetary stimulus which we can try, although Obama doesn't seem to place a very strong emphasis here.

If the short run aggregate supply curve is flat-ish, and increasing the monetary base increases aggregate demand, then monetary stimulus can increase real growth at modest cost. If the SRAS curve is steep (which I don't think is true but who knows), we mostly get inflation, but inflation can help debtors and though normally it hurts creditors improved credit could in turn help bank balance sheets, as well as having positive supply side effects like reducing real wages and increasing employment.

Posted by: justin84 | July 15, 2010 4:03 PM | Report abuse

Patrick,
"I generally find justin84's comments to be among the most interesting on this blog, because he generally supports every argument with strong data, so that's why this little pipe dream about W in the 90's is such an exception."

Thanks! Sorry though, everyone's got to have their pipedreams from time to time, so bear with me.

"If Bush had been elected in 1992, and if he (the "War President") did not start wars, nobody can no what would have happened, even accepting those "if's." It was a different era, with different Congresses and different issues, both foreign and domestic.

It is impossible for anyone to say what Bush would have done had he been elected in 1992, and it is beyond pointless to speculate."

I agree this is pure speculation, but my premise here is President Bush's fiscal policies wouldn't have tanked the economy in the 1990s. I'll even give you that on net, lower taxes, more debt and higher interest rates would have made the 1990s economy weaker on not, but there's no reason to think it would have been drastically weaker.

The 'if he didn't invade' Iraq qualifier is there because Presidents that get involved in costly quagmires usually aren't looked upon favorably in retrospect.

Posted by: justin84 | July 15, 2010 4:55 PM | Report abuse

justin84,

Maybe I have a certain bias, being an employer myslef, but I think you are over-thinking things a bit.

"Sure, many busineses do need to expand hiring to meet demand, but a lot of employment is overhead too. The decision to expand those departments is more like an investment decision."

If you want to look upon certain jobs as somehow an investment in overhead, rather than as output-producing, that's ok with me. But I would still argue that the employer won't make that overhead investment unless and until there is inbound revenue from a steadily increasing demand, or good reason to think that demand for the product or service will grow after making the investment. Business growth is demand-based. Even a start-up is based on calculations about demand.

"So some of these jobs are construction jobs, which return as demand does (and I think the homebuyer tax credit stole a lot of future - now present - demand), but a lot of, say, banking jobs are overhead."

I completely agree. Beyond construction, the real estate bubble also created jobs for real estate professionals, morrtgage specialists, etc., and it will be a long time before all or even most of the jobs are needed again. Many of those folks will never again work in the same field.

"Say a bank is considering expanding risk management in the wake of the crisis - it might hold off until it knows for sure the details of FinReg. And by holding off, it doesn't buy new risk management software. And the software company holds off hiring new programmers and expanding new features, because this uncertainty has trickled down and impacted a demand oriented business. And tax revenue falls, and we see layoffs at the state level."

This was a good try at trying to imagine a job that is not being created because of some Obama policy, but even if we accept that there are jobs so closely tied to the outcome of legislation, how many jobs are these? And I have a lot of trouble with the hypothetical anyway. If the bank perceives a need to manage risk, it will do so, and it will adjust to any new regulations that may be passed when and if that happens. We'll see how many people are hired now just because FinReg is crystal clear.

On "Main Street" where I operate, most jobs are found in small and medium-sized businesses that were hit very hard by the collapse. Some businesses were destroyed and most others shrank. The anemic job growth we are now experiencing now is the logical result of the very modest return of demand.

And my prior post should have said: "...nobody can know what would have happened..." Sorry for the weird typo.

Posted by: Patrick_M | July 15, 2010 4:55 PM | Report abuse

"you want to look upon certain jobs as somehow an investment in overhead, rather than as output-producing, that's ok with me. But I would still argue that the employer won't make that overhead investment unless and until there is inbound revenue from a steadily increasing demand, or good reason to think that demand for the product or service will grow after making the investment. Business growth is demand-based. Even a start-up is based on calculations about demand."

I'm not saying demand isn't important. I'm simply curious about this discrepancy.

Inflation adjusted demand (as measured by real GDP)is more or less back to pre-recession levels today, and it has grown at 3.4% for a year now (using the consensus 3.1% growth for Q2) but almost none of the jobs are back.

Now look at productivity. It rose 6.1% from 2009Q1 to 2010Q1. During the last jobless recovery, it averaged 4.7% growth (2001Q4-2003Q3) - this compares to long-run averages of about 2.8% (last 60 quarters).

Everyone always says that during recessions employers work their employees harder and squeeze out a lot of extra effort. But what I'm wondering is why during the actual recession (when people are at highest risk of layoffs) productivity growth is lower than right after the recession. Productivity was up 1.8% from 2008Q1-2009Q1, vs. up 6.1% the following year, even though the intensity of job losses (and general fear) was most intense during 2008Q4-2009Q1. Perhaps now that unemployment is high, the consensus is that workers don't have options and you can work them to the bone, but my (limited) observation has been that the best workers always have options and you tend to lose them first if working conditions deteriorate.

The other thing is if you look at a chart of nonresidential investment and compare it to nonfarm payrolls (1995-present), the lines are almost right on top of each other. If you chart the quarterly growth rates of payrolls and of real nonresidential investment, you get an r squared of 0.7.

If you try the same regression of job growth vs. consumer spending growth or investment growth vs. consumer spending growth, or using GDP instead of consumer spending, the r squared ranges from 0.33 to 0.56 - in other words, the variable which best explains job growth isn't consumer spending growth or GDP growth - it's investment growth.

Plot real quarterly GDP growth, real nonres investment growth, real personal consumption expenditure growth and nonfarm payroll growth from 1995 on, and run a 4qtr moving average through them. The job and investment trends line up about as perfectly as you're gonna see any two economic variables line up.

But I don't think this means investment causes job growth or job growth causes investment. I think this is at least decent evidence that many jobs today are more like long term investments in a firms capability than added capacity needed to meet increased demand.

Posted by: justin84 | July 15, 2010 7:48 PM | Report abuse

"This was a good try at trying to imagine a job that is not being created because of some Obama policy, but even if we accept that there are jobs so closely tied to the outcome of legislation, how many jobs are these?"

Probably not many. And new regulations can always add jobs too, so its fuzzy.

Again, it isn't even so much a particular Obama policy, it's that the policy was ??? for 18 months or so.

"And I have a lot of trouble with the hypothetical anyway. If the bank perceives a need to manage risk, it will do so, and it will adjust to any new regulations that may be passed when and if that happens."

Contrary to popular belief, banks do manage risk - it's not something they need to start (just need to stop sucking). The banks had invested a lot in risk management prior to the financial crisis. But there are a lot of steps between 'perceiving a need to manage risk' and implementing the best risk management practice, again as experience has shown.

Lets expand on the hypothetical further. Say a bank wants to upgrade its risk models and software which didn't do so well in 2008. The upgrade is expected to be a year long project with twenty people working full time on it, and a budget in the millions.

Why would a bank develop/buy/test new behavioral models for financial products immediately in advance of regulations which are expected to change those products and make those models immediately obsolete? That project isn't going to get approved. The bank isn't going to want to do this project twice - it will wait until the fog settles. The project won't be done no matter what revenues/profits are at the bank.

"On "Main Street" where I operate, most jobs are found in small and medium-sized businesses that were hit very hard by the collapse. Some businesses were destroyed and most others shrank. The anemic job growth we are now experiencing now is the logical result of the very modest return of demand."

I live in the midwest and the local economic picture is about the same as you describe.

According to the government, demand is basically back to pre-recession levels in terms of real GDP, and inflation adjusted consumer spending in particular is higher than the November 2007 peak as of June 2010. I can't say this jives with my personal experience but it's a big country.

So consumer spending is up relative to peak, the trend is a positive 2%-3% real growth rate, and yet we've gotten hardly any response in terms of jobs. Some of that consumer spending is the imputed rent on owner occupied housing, but I can't imagine this figure going up recently for obvious reasons.

Demand is necessary but it doesn't seem sufficient.

http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=76&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Month&FirstYear=2007&LastYear=2010&3Place=N&Update=Update&JavaBox=no

Posted by: justin84 | July 15, 2010 9:23 PM | Report abuse

1. That is not a paragraph.

2. Any person that has ever taken a college level business course knows that payroll is the first to get cut and the last to be expanded during a recession. It is the easiest expense to control.

3. Way to pander to the lowest common denominator.

Posted by: RagnarDanneskjold | July 16, 2010 10:49 AM | Report abuse

Lots of long winded explanations here! Seems to me that higher profits mean that more people are buying. Don't want corp. profits to be so high, don't buy their goods or stock.

Posted by: jeighcee | July 16, 2010 11:23 AM | Report abuse

For the moment, let's accept the chart at face value. What does it really show? Does it show that corporations are more profitable now or does it show that companies are taking future profits now in order to avoid next, and future year's higher tax rates? If I'm the CFO of a company, I would think I have a fiduciary responsibilty to the company's shareholders to do exactly that. And, if I'm the CEO looking at my year end bonus, I'm probably thinking the same way...I'd be looking to maximize this year's bonus, even at the expense of future year's to avoid being taxed at higher rates. IIR there where a couple of high profile incidences of this occuring prior to Clinton's tax increases going into effect (Michael Eisner being one).

Posted by: ucfengr_2000 | July 21, 2010 1:21 PM | Report abuse

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