JOB LOSS RECOVERY MEANS HARD TIMES AHEAD
Charlie Brown Economics

From the UPI courtesy of Eschaton:

It's clear that we're not going to get the 3.8 million new jobs in 2004 absurdly promised by Bush in January's Economic Report of the President, far from it. But the interesting question (intellectually, if you're not hoping to be one of the 3.8 million) is: why not?

Employment patterns are not following those of a normal economic recovery (even the "jobless recovery" of 1991-93 had created millions of jobs two years after the low point) for one very simple reason: this is far from a normal recovery.

And

At this point, with both tax cuts and monetary laxity about played out as stimuli to the economy, the central contradiction in the economic picture will begin to take effect. The United States, far from being the economic dynamo that its admirers like to paint, has been living hugely beyond its means since 1995, and now faces severe problems of budget deficit, balance of payments deficit and capital overhang.

Capital overhang sounds arcane but isn't; it is the syndrome, first diagnosed by John Maynard Keynes in the 1930s, which occurs when a country has through a stock market or real estate boom over-indulged in capital investment, and faces a prolonged period of low returns, over-capacity and low investment in new facilities. It occurred in the United States in 1929, in Japan in 1990 and in the U.S. in 2000. The Greenspan/Bush policies of throwing money and tax cuts at the problem have certainly mitigated its immediate effects, as did Japan's low interest rates and budget deficits in the 1990s, but in the long run the price of depressed capital markets, low returns and low investment must be paid. By now, there is over-investment in housing as well as in capital equipment, and a correspondingly greater drag on the economy to be faced.

Let's face it: the boom economy of the 90s was a shell game that made a few people rich but left most of us holding the bag. Bush and his cronies have absolutely no idea how to get us out of this mess. That's assuming, of course, that they want to.

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