This is a Demand Side Economy

The discussion is promoted by David Brooks column “A Little Economic Realism” in the July 5, 2010 New York Times.

The American economy is driven by consumer spending. That fact has been driven home by articles, commentaries, and TV talk shows. The United States is a consumer nation. Our biggest trading partner is China. That countries recent growth has been the result of America’s demand for low cost products. Wal-Mart and Costco are filled with products that consumers want. American credit card debt totals almost $1 Trillion. It has been a Demand Side economy.

Need more proof that this is Demand Side economy? I found this December 20, 2006 Think Progress report:

Today, President Bush held a news conference where he discussed the “way forward” for the economy in 2007. Renowned Morgan Stanley economist Steven Roach says the “odds of the U.S. economy tipping into recession are about 40 to 45 per cent.” New York Times columnist Paul Krugman notes that “the odds are very good — maybe 2 to 1,” that the U.S. will teeter toward a recession in 2007. Bush’s solution? “Go shopping more.” Watch it:

http://video.thinkprogress.org/2006/12/bushshopping.320.240.flv

Similarly, after the Sept. 11 attacks, Bush simply asked Americans for their “continued participation and confidence in the American economy.” From the International Herald Tribune, 1/14/03:

Bush did nothing to mobilize public opinion to accept the sacrifices that war implies — the first thing a leader would do. Tax cuts could go ahead as planned, and energy saving was dismissed out of hand. “Go shopping” was the administration’s message.

Bush added today that 2007 will “require difficult choices and additional sacrifices” from the American people.

Bush Transcript (unerlined and bold by me):

As we work with Congress in the coming year to chart a new course in Iraq and strengthen our military to meet the challenges of the 21st century, we must also work together to achieve important goals for the American people here at home. This work begins with keeping our economy growing. … And I encourage you all to go shopping more.

Of course David Brooks is a Republican and supports their belief that lower taxes are the salvation to all our economic problems. Most American corporate interests are now multi-nationals and are more concerned with their net income than the welfare of the average American.

More Jobs is Job 1!

July 8, 2010

A Dow Jones news report issued today, July 8, started with the words “In a hopeful sign for the labor market, the number of U.S. workers filing new claims for unemployment benefits fell last week by more than analysts expected.” That is a totally misleading statement. New claims dropped into the 400,000 to 500,000 range in the week of November 21, 2009. The number has never dropped below 433,000 claims in any week since then. So while the latest number is less than the previous week, what is hopeful about new claims of 454,000?

July 2, 2010

The unpleasant reality is that new job claims are continuing at a rate that will cause more people to vote for Republican representatives to the Congress and Senate. The following graph demonstrates the unending recession. Click the graph to see a better view. It’s not a pretty picture.

Both congressional Republicans and Democrats don’t seem to get it. The United States is in serious economic trouble. While the monthly unemployment report seems to be improving there really has not been an improvement in this economy.

Look at these quotes from Businessweek magazine.

The improvement in jobless claims in the U.S., however, has stalled above the 400,000 mark, including today’s surprisingly weak report.

Yet, claims since then are stuck in a range of 440,000 to 490,000 this year. Today, the government said claims rose to 472,000 in the week ended June 26.

“To get the unemployment rate going down you need 200,000 plus jb growth,” said Mark Zandi, chief economist with Moody’s Analytics in West Chester, Pennsylvania. “If that doesn’t happen by the end of the year, then this will go down as another jobless recovery.”

This week’s employment report may move the U.S. further away from hitting Zandi’s job growth target.

If payrolls grow an average of 100,000 a month, Bloomberg calculations show, it would take six years for the U.S. to return to the peak in employment of 138 million people set in December 2007.

From Bloomberg.com Almost a year ago, economic strategist Dan Greenhaus of Miller Tabak & Co. in New York told his clients the U.S. economy would recover while job growth would be scarce.

His prediction for a so-called jobless recovery, derided by some clients when he made the forecast last July, may be coming true.

From the United States BLS: In June, the number of long-term unemployed (those jobless for 27 weeks and over) was unchanged at 6.8 million. These individuals made up 45.5 percent of unemployed persons.

The graph shown here really speaks louder than words. It is provided by the U.S. Department of Labor.

My question is what is congress doing? Unless I have missed something the answer is NOTHING!

Faster Railroads are Possible

Logisticstoday posted this article on its website. It is an excellent example of American ingenuity at work. This is the way to improving America’s competitive advantage.

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New Technology Makes Faster Railroads Possible

Norfolk Southern Railway and GE Transportation, a developer of locomotives and technology for the rail industry, have developed technology for the rail industry that could lead to an increase in the average network speed of trains by 10-20%, or two-to-four miles-per-hour. One mile per hour in velocity improvement has the potential to save approximately $200 million in capital and expense annually.

GE’s RailEdge Movement Planner software integrates railroad logistics with traffic control systems to project expected track usage, based on train schedules. The solution then produces an optimized plan to get trains moving faster and more efficiently. By helping to maximize existing railroad resources, RailEdge can also help improve railroad crew management availability.

Having implemented the solution on a 200-mile section of its railroad in Georgia, Norfolk Southern is expanding the technology’s use to its entire 22-state rail network through 2012. In the Georgia application, the solution will help Norfolk Southern increase the average network speed train velocity of its trains by 10-20%, representing a significant opportunity for cost savings and train delay reductions.

Continuing Lack of Job Growth

CNBC reported that weekly Initial job claims dropped by 19,000. That is quite an improvement but it is also very misleading. Job claims for the previous week were revised upward by 20,000. So in fact, job claims actually increased by 1,000. The network’s continuing misleading reporting will result in my watching and listening to Fox Business News.

Weekly Initial job claims are revised one week after the initial report when more accurate data is compiled. The weekly revised number dropped to 433,000 in the weeks ending December 26, 2009 and January 2, 2010. It has not been that low since those two weeks. That low number is probably the result of delayed filing due to the holiday season. Last week’s revised 476,000 tells me that high unemployment is likely to be around for quite awhile.

I am not alone in this opinion. This is a quote from Businessweek magazine in the June 14, 2010 issue. “We are not going to generate a lot of jobs. The cost of labor is too high. We are having a huge substitution of technology for people to save money and make profits.” – Allen Sinai, president, Decision Economics, and former chief economist for Lehman Brothers, speaking about the U.S. economy

Who is Joe Barton?

“I think it’s a tragedy of the first proportion that a private corporation would be subjected to what I would characterize as a ‘shakedown,’ – in this case, a $20 billion shakedown.” – Joe Barton, R-Texas. What a great way to obtain national media exposure!

His apology for those words was weak at best. After all it was taking back the words he really believed. I have not heard about any subsequent interviews with him. The conundrum is that the Gulf coast relies on oil drilling and extraction as much as fishing and tourism for its economic well being.

I am far removed from the Gulf coast but I do appreciate the ecological impact of the continuing oil spill. After all if both James Carville and Mary Matalin are upset about the impact of the spill, this situation really does rise above politics. (Digression: How did those two ever get married?)

NPR reports that Joe Barton has received $100,470 in campaign donations from oil and gas interests since the beginning of 2009, according to the Center for Responsive Politics. The same group reported that since 1990, political action committees of the oil and gas industry and people who worked for it have given more than $1.4 million to Barton’s campaigns, the most of any House member during that period.

California’s Drought

The Los Angeles Times reports that the California drought may be over. No one knows if it is really over or is the filling of our reservoirs a temporary situation. Gov. Arnold Schwarzenegger isn’t lifting his drought declaration. Los Angeles isn’t ending its watering restrictions and Southern California’s major water wholesaler isn’t reversing delivery cuts.

There is more than one reason. The first is that that this rainy season was caused by an El Nino effect. That is a warming of Pacific Ocean waters which results in more rain on the California coast. This occurrence has been proven from prior El Nino years.

The second is the continuing construction industry search for new business. The state will include a proposal on November’s ballot for $11 Billion in water conservation bonds. As I pointed out this past November 5, 2009, building more reservoirs and channels will not increase the water supply. It will, however, put money in the pockets of contractors. As I pointed out then, we have already spent over $13 Billion on water projects since the year 2000. The great water projects were built at an earlier date and continue to provide adequate distribution of water throughout the state.

Creating Private Sector Jobs

Nevada has a distinction it probably doesn’t want: the nation’s highest unemployment rate — 14%. That’s up from 13.7% in April and 11.5% in May 2009 and an all-time low of 3.8% in April 2000. California’s unemployment rate decreased to 12.4 percent in May. April’s unemployment rate was 12.5%. The number of people unemployed in California, for May, was 2,277,000 – down by 21,000 over the month, but up by 212,000 compared with May of last year.

The Associated Press reported that President Barack Obama dashed into Ohio for the groundbreaking of a road project, hoping to remind Americans that the massive, costly stimulus act is still churning out jobs for a nation plagued by high unemployment.

In all of this political grandstanding there is one simple fact. The government has failed to take any consequential action that will increase the number of private sector jobs. The dismal reality is that no politicians have offered any new ideas to induce new job growth. That includes those who want to replace incumbents.

A good example is Carly Fiorina, Republican candidate for Senator in California. She is focusing on job creation in her campaign. The problem is that she sent 40,000 jobs overseas as CEO of Hewlett-Packard Company. Read her web site and you quickly learn she does not have one new or different idea.

The president is no better than Ms. Fiorina. His ideas are all about government jobs. When the money runs out what will happen to those government employees?

My idea (actually my wife’s idea) is the two tier business tax. Every dollar earned as the result of American made products will be taxed at a lower rate than those dollars earned from foreign products. That means Walmart, Toyota car dealers (some Toyotas are partially made in America), and other who rely on imports will pay a higher income tax rate on at least part of their earnings. That just might help bring some jobs back to America.

Creating More Jobs is Job 1!

The Obama administration has failed to focus on the one most important issue in the United States right now. That is the lack of jobs. The Gulf oil spill only makes things worse.

Phony meetings of leading corporate executives conferring with the president do not create jobs. There have been no publicly spoken thoughts that indicate any thinking “outside the box.” I believe that is the case, because President Obama’s advisors are just the same old people that are part of the Democratic Party machinery. The Republican Party is no better.

An idea that is unique is the report by Michael Porter in the May 31-June 6, 2010 Businessweek. Michael Porter is a Harvard Business School Professor. The essence of the article is as follows.

A small struggling printer-toner distributor, in a poor neighborhood of Boston, made a connection with the CEO of Staples, the giant office supply company. The result is that the company is now a manufacturer and now successfully employs 65 people. Three things result from this relationship. 1) More people are employed. 2) Staples has an improved image in the community. 3) Staples has a reliable supplier in this nation.

The administration needs to look for more of these examples and find ways to encourage more of the same. Tax incentives would be a good place to start. Or perhaps tax penalties for those companies that do not participate.

New Israeli Developments

Jews Really are smart!! Is it in the genes?

1. Scientists in Israel found that the brackish water, drilled from underground desert aquifers hundreds of feet deep, could be used to raise warm-water fish. The geothermal water, less than one-tenth as saline as sea water, free of pollutants, and a toasty 98 degrees on average, proves an ideal environment.

2. Israeli-developed designer-eyeglasses, promise mobile phone and iPod users, a personalized, high-tech video display. Available to US consumers next year, Lumus-Optical’s lightweight and fashionable video eyeglasses, feature a large transparent screen, floating in front of the viewer’s face that projects their choice of movie, TV show, or video game.

3. When Stephen Hawkins recently visited Israel , he shared his wisdom with scientists, students, and even the Prime Minister. But the world’s most renowned victim of amyotrophic lateral sclerosis (ALS), or Lou Gehrig‘s disease, also learned something, due to the Israeli Association for ALS’ advanced work in both embryonic and adult stem cell research, as well as its proven track record with neurodegenerative diseases. The Israeli research community is well on its way to finding a treatment for this fatal disease, which affects 30,000 Americans.

4. Israeli start -up, Veterix, has developed an innovative new electronic capsule that sits in the stomach of a cow, sheep, or goat, sending out real-time information on the health of the herd, to the farmer via email or cell phone. The e-capsule, which also sends out alerts if animals are distressed, injured, or lost is now being tested on a herd of cows, in the hopes that the device will lead to tastier and healthier meat and milk supplies.

5. The millions of Skype users worldwide will soon have access to the newly developed KishKish lie-detector. This free internet service, based on voice stress analysis (a technique, commonly used in criminal investigations) will be able to measure just how truthful that person on the other end of the line, really is.

6. Beating cardiac tissue has been created in a lab from human embryonic stem cells by researchers at the Rappaport Medical Faculty and the Technion – Israeli institute of Technology ‘s biomedical Engineering facility. The work of Dr. Shulamit Levenberg and Prof. Lior Gepstein, has also led to the creation of tiny blood vessels within the tissue, making possible its implantation in a human heart.

7. Israel ‘s Magal Security Systems, is a worldwide leader in computerized security systems, with products used in more than 70 countries around the world, protecting anything from national borders, to nuclear facilities, refineries, and airports. The company’s latest Product, DreamBox, a state-of-the-art security system that includes Intelligent video, audio and sensor management, is now being used by a major water authority on the US east coast to safeguard the utility’s sites.

8. It is common knowledge that dogs have better night vision than humans and a vastly superior sense of smell and hearing. Israel ‘s Bio-Sense Technologies recently delved further and electronically analyzed 350 different barks. Finding that dogs of all breeds and sizes, bark the same alarm when they sense a threat, the firm has designed the dog bark-reader, a sensor that can pick up a dog’s alarm bark, and alert the human operators. This is just one of a batch of innovative security systems to emerge from Israel which Forbes calls ‘the go-to country for anti-terrorism technologies.’

9. Israeli company, BioControl Medical, sold its first electrical stimulator to treat urinary incontinence to a US company for $50 Million. Now, it is working on CardioFit, which uses electrical nerve stimulation to treat congestive heart failure. With nearly five million Americans presently affected by heart failure, and more than 400,000 new cases diagnosed yearly, the CardioFit is already generating a great deal of excitement as the first device with the potential to halt this deadly disease.

10. One year after Norway ‘s Socialist Left Party launched its Boycott Israel campaign, the importing of Israeli goods has increased by 15%, the strongest increase in many years, statistics Norway reports.

In contrast to the efforts of tiny Israel to make contributions to the world so as to better mankind, one has to ask what have those who have strived to eliminate Israel from the face of the earth done other than to create hate and bloodshed???

David

The U.S.A. is in Trouble

The facts aren’t pretty. The American economy is in a serious condition.

New jobless unemployment claims peaked at 659,500 in the week ending April 4, 2009. They fell to 441,250 in the week ending January 9, 2010. The latest report listed those claims at 459,000 people. The last four weeks have seen increases every week. The reality is there has not been any improvement in the layoff picture in many months. 41,000 new private employer hires in May doesn’t even meet the needs of the growing population.

All the reports related to business have indicated an upward trend. That translates to improved profits.

What we have here is proof that business can earn reasonable profits without the cost of hiring the 15 million people that the BLS admits to being unemployed. The real number is probably in the range of 22 million people.

They keep telling us that America is a consumer driven economy. If that is so then the United States is in for a long difficult period. We just aren’t in the buying mood when so many of our friends and relatives are unemployed.

The rich aren’t even getting richer. Well not as fast as the were. The S&P 500 is slightly below its value at the end of December 2009. Wisely those of us who use the rule that January’s stock market performance is an indicator of the coming year sold our holdings and invested in bonds.

A double dip recession appears to be a genuine possibility.

President Barack Obama has not brought “change we can believe in.” He has let politics control his behavior. He has not focused on one of America’s highest responsibilities. Jobs, jobs, jobs. Clearly he has no solutions.

Who does?