With unemployment stuck above 9 percent, Washington is trying to “pivot to jobs” once again. And already the discussion feels tired. The White House’s much-hyped ideas don’t seem bold enough, and Republicans have had little to offer aside from the idea that reducing government regulation will somehow let the free market work its magic.
A range of less conventional ideas for creating jobs can be found beyond the narrow Washington conversation, however. They aren’t necessarily politically correct–but that doesn’t mean they would not be effective. It’s not like anything else we’ve been trying lately has been working.
Here are five of the best so-crazy-they-just-might-work ideas to get the economy back on track.
1. Bulldoze excess housing stock
The struggling housing sector continues to exert a drag on the economy as a whole.
This is the final part of a 3 part series on economic myths.
For a system allegedly being strangled in its bed, U.S. capitalism seems to be in astonishingly robust shape.
Numbers published by the Federal Reserve a few weeks ago show that corporate profit margins have just hit record levels. Indeed. Andrew Smithers, the well-regarded financial consultant and author of "Wall Street Revalued," calculates from the Fed's latest Flow of Funds report that corporate profit margins rocketed to 36% in the first quarter. Since records began in 1947 they have never been this high. The highest they got under Ronald Reagan was 30%.
The picture is also similar when you exclude financials.
The Dow Jones Industrial Average (^DJI – News) is above 10,000. Small company stocks have rallied astonishingly since early last year: The Russell 2000 index is back to levels seen not long before Lehman imploded. Meanwhile Cap Gemini's latest Wealth Report notes that the North American rich saw an 18% jump in their wealth last year.
Meanwhile, federal spending, about 25% of the economy this year, is expected to fall to about 23% by 2013. In 1983, under Ronald Reagan, it hit 23.5%. In the early 1990s it was around 22%. Some socialism.
These days, three-fifths of the entire budget goes on just three things: Insurance for our old age (through Social Security and Medicare), defense, and debt interest.
Conservatives don't want to cut the $700 billion-plus we spend on defense. We can't cut debt interest payments. And while Social Security and Medicare certainly need reform, the main "problems" are simply rising life expectancy and health care demands. If we didn't provide for the insurance through our taxes we'd have to do it individually.
What about the rest of the budget? It's jumped from around 7% of GDP a few years ago to about 10% now. Out of control? It's been in the 6% to 9% range for decades. It's forecast to fall to about 8% again in a few years.
So much for a revolution. But here comes the counter-revolution just the same.
It's socialism because we have a Democrat in the office of the President. It's "trickle down" when we have a Republican in office. Let's see:
Seems like nothing's wrong to me. Oh, sure, the federal government spends a lot of money – money it doesn't have – on some stuff we don't need. But try taking away social security, Medicare, or defense. You'll be out of a job real fast if you're a national politician. Nobody has the wherewithal to do anything about any of this stuff.
So this is what I'd tell the Obama administration, if they asked: GROW the damned economy. Get it to 5-8 percent, and all this debt/deficit talk vanishes, people get hired for good jobs, and Obama gets a second term. It really is the economy, stupid, and Obama should have cracked this nut a while ago.
If I've said it once, I've said it a thousand times: The stimulus package was way too small.
And now that both sides of the aisle have either forgotten or dug in their heels on unemployment compensation extensions and further stimulatory legislation, we may be in for a classic double-dip recession.
Only this time, it might drive what seemed to be inevitable and then highly unlikely – a corporate lending and business real estate catastrophe that could dwarf the mortgage meltdown.
Then more cries, this time maybe real, for socialism will come to the forefront. Our brand of market capitalism (highly influenced by the idiots who represent us in Congress) certainly isn't working right now.
by Jack Guttentag
Yes, the mortgage market is more rigged against borrowers than ever before. If only PMI had been required on all buyers between 2001 and 2007…what if?
In my last column, I indicated that most mortgage borrowers who need private mortgage insurance are not aware that they have options in the kind of premium plan they select. Almost all are directed into monthly premium plans. Yet for many borrowers, the total cost over the period the borrowers will have the mortgage will be higher on a monthly premium plan than on a single financed-premium plan. In every case, furthermore, the increase in payment will be larger on a monthly premium plan.
A Market Rigged Against Borrowers: Why aren’t borrowers offered the option?
Did anybody expect anything less? In these circumstances (a rough, unstable economy), incentives need to stay in place – ideally – until the natural economy picks up. However, to be safe, the incentives most likely should stay in place until it’s obvious that the economy is rocking and rolling again.
WASHINGTON (Reuters) – Housing starts fell to a five-month low in May but industrial output rose, evidence of an uneven recovery that has kept inflation at a minimum.
As the government’s tax incentives for homebuyers expired, new home building dropped 10 percent to a seasonally adjusted annual rate of 593,000 units, the lowest level since December, the Commerce Department said on Wednesday.