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An economist and reality

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On today’s Wall Street Journal opinion page you will find an essay by economist Allan H. Meltzer arguing that, thanks to some fluky contradictions in the statistics, this “recovery’s” employment situation isn’t as bad as it looks. Meltzer makes a reasonable case (though one that is more theoretical than based on hard evidence) that the jobless numbers look worse than they really are because the Labor Department’s “Establishment Survey” records jobs shed by large companies faster than the government tracks jobs generated by small new companies.

What’s happening in the economy today, Meltzer argues, is that a lot of big corporations are outsourcing lots of service jobs to other, often smaller, companies. So that the janitor who might once have shown up as an employee of BigCorp disappears from the government’s numbers, and we think a “manufacturing” job has been lost, but that’s not what’s happened. Same number of jobs, same work being done: “In fact,” according to Meltzer, “nothing real happened.”

Oh, but there is one other little thing that Meltzer notes, almost as an aside: that worker “may receive fewer benefits and perhaps lower wages.”

This strikes me as a critical point, both for said worker and for the economy as a whole, which is depending on consumers’ purchasing power and which is trying to cope with a burgeoning health care crisis. But to Meltzer, all of this is “nothing real.” Who cares if hundreds of thousands of workers are making less money and losing their benefits? “Nothing real.”

It came as no surprise to read, in the author’s description at the end of the piece, that Meltzer is affiliated with the American Enterprise Institute.

The micropayments debate

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For as long as the Web has been around people have talked about the possibility of a “micropayments” system to support small-time creators of content. Clay Shirky wrote a persuasive essay a couple of years ago laying out why such schemes have generally failed. More recently, Scott “Understanding Comics” McCloud put a new comic online and charged users 25 cents to read it using a new system called BitPass (I wrote in July about my experience with this, which was positive).

Shirky updated his critique in a new article, and now McCloud has fired back with this detailed and thoughtful defense of the BitPass approach.

Both of these guys are smart; I thought I agreed with Shirky while I was reading his analysis, but then McCloud won me over. I think he’s right to feel that it’s way too early to be certain that micropayments are a dead end; we have only begun to experiment. (Salon’s “DayPass” system of offering one-day access to premium content after users view a fancy ad could be thought of as an alternative micropayment approach.) Both pieces are worth your time if you’re at all interested in the subject.

Deficit Attention Disorder

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We’re still waiting for that Great Golden Recovery in the Sky that the Republicans have promised ever since they passed their first tax cut in 2001. Taxes were cut but the economy kept tanking, so they decided to cut taxes again: They’re thinking, “Hey, if it didn’t work once, maybe it will work the second time around. And if it doesn’t, well, in the meantime at least our campaign contributors have a lot more money in their pockets to give us!”

So the tea leaves keep circling in the bottom of the glass, and the prognosticators keep seeing those signs of a turnaround, and in the meantime, George Bush has earned the distinction of having the worst record on jobs of any president since Herbert Hoover. That should give the Democrats some sort of ammunition, if they can un-dampen their powder.

For a look at how the Republicans plan to position the president’s defense, consider this paragraph from today’s Wall Street Journal (the piece is by Greg Hitt):

  Even if the administration’s expectations don’t hold, the prresident’s political allies suggest that voters — mindful of the challenges he has faced while in office — will give him credit for trying to fix the economy. “He might have an uncertain economy, but nobody’s going to be able to legitimately lower the boom on him for lack of attention on the issue,” said Rich Bond, the former chairman of the Republican National Committee.

The context here seems to be political analysts’ view that Bush the elder lost the 1992 election because voters felt that he’d “lost touch” with their economic troubles and hadn’t “paid attention” to their hardships. That may be. But this “pay attention” theory really underestimates the average voter’s expectations.

“Paying attention” to a recession and unemployment doesn’t get you many points if you’re president of the United States. It sort of comes with the job, like the Oval Office. It’s a prerequisite, not extra credit. The credit comes not with giving “attention” to the economy but with making good choices that help the economy recover and people find jobs. Bush supporters like to say that he inherited a downturn — during the 2000 election cycle they took great pains to say that the recession had already begun during Clinton’s term — and they’re right. But if we consider this downturn to have begun in 2000 that means the Bush folks have had nearly three years to turn things around, and they haven’t.

If things do improve between now and Election Day, Bush may be able to rest easier, but if they don’t, or don’t much, I don’t think the public will give him a B for trying. I think they will be mad, and rightly so. “Paying attention” doesn’t help if the things you do after you’ve paid attention make matters worse, not better.

Unbrand me, you cad!

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As a consumer who hates the commercialization of public space, the creeping of logos onto our clothing, the placement of products in our entertainment and the corporatization of our imaginations, I assume I am just the sort of person whom “Unbrand America” is aimed at. This campaign — which emanates from Adbusters — seems to involve the placing of a big black blotch on ads and logos everywhere (there’s a gallery of examples here).

The Web site offers this explanatory text:

  In the coming months a black spot will pop up everywhere . . . on store windows and newspaper boxes, on gas pumps and supermarket shelves. Open a magazine or newspaper – it’s there. It’s on TV. It stains the logos and smears the nerve centers of the world’s biggest, dirtiest corporations. This is the mark of the people who don’t approve of Bush’s plan to control the world, who don’t want countries “liberated” without UN backing, who can’t stand anymore neo-con bravado shoved down their throats.

But there’s a problem here. The idea is to oppose mindless Pavlovian responses to ultrasimplified graphical logo representations of objects of consumerist desire, right? So why is the campaign based around … an ultrasimplified graphical logo representation of opposition to consumerism? Does Adbusters really think the answer to the logo-fication of the world is to introduce a logo for the anti-logo-ites? Why would one want to protest the omnipresence of advertising campaigns by, in essence, creating a new advertising campaign? Why should we “unbrand America” by creating a new anti-brand brand?

If you oppose mindless Pavlovian responses, you manifest that opposition by thinking, and perhaps acting on that thinking — not by trying to counter mindlessness of a corporate species with mindlessness of a leftist species.

California’s energy drain

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One of the problems with the news media today, even when they do their job properly, is a failure to make connections, even when they’re obvious.

There is an unfolding story in California that your newspaper will typically cover as two separate stories. One story is a tale of budgetary woe, in which the state, suffering under a tenacious recession and stymied by its own political logjams, struggles to figure out how to close a gap of many billions of dollars in its budget. If it can’t, we Californians will discover very quickly that just as the federal government cuts our taxes (a little bit if we’re middle class, a lot if we’re rich), the state will either raise our taxes or cut our services and schools (or, if we’re really lucky, both).

This is a big story. Meanwhile, in the other story, the state of California tries to persuade federal energy regulators that it should be able to abrogate exorbitant energy contracts it signed at the height of the energy crunch in 2001. It is now a matter of public record, established by those same federal energy regulators, that California’s energy prices jumped through the ceiling because energy companies were illegally manipulating the deregulated market. (Though at the time the much-reviled Gov. Gray Davis was sneered at for suggesting as much, his claims were dead right.) But, strangely, the Federal Energy Regulatory Commission, which thinks those prices were illegal enough to be bringing “enforcement actions” against 60 energy companies for gaming the California energy market, nonetheless thinks that they are still legal enough that the state — and citizens — of California should have to pay them.

It seems completely obvious to me that these two stories are closely connected. Californians, your billions can go to (a) buying energy at prices that were “Insane!!!!”, as Crazy Eddie used to put it, and illegal too (as Crazy Eddie turned out to be); or (b) keeping your classrooms open and your state services running.

Instead of wasting our time recalling the governor, we should be impeaching the FERC.

More fast talk on taxes

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The recent Bush tax cut offered a child-credit rebate to lots of Americans, but not to millions of low-income taxpayers. Now Congress is squabbling over attempts to restore this tax break, which attempts to spread just a handful of the billions being handed out to people who actually need it.

Tom DeLay isn’t buying it. This is his explanation, in today’s N.Y. Times: “To me, it’s a little difficult to give tax relief to people that don’t pay income tax.”

DeLay would have you believe that the Democrats and moderate Republicans who are pressing this $3.5 billion tax-cut handout — and who have suggested that the Republicans goofed in leaving it out while pushing for tax cuts for investors that cost hundreds of billions of dollars — are being illogical. What? Give tax rebates to people who don’t pay taxes at all?

But note that insertion of the little word “income.” People in the bracket under discussion — roughly $10,000 to $25,000 a year wage earners — pay plenty of taxes. But they pay it in payroll taxes, which typically swipe about 8 percent of income. The Republican tax-cut architects have always done a deceptive shuffle with the language here: Payroll taxes count as taxes when these legislators want to tally up the onerousness of the tax burden on American citizens. But the same taxes magically disappear when they want to keep low-income people off the gravy train that they are loading up for their high-income constituents and campaign contributors.

All of which is a shame — not only in the broad moral sense that helping people who are struggling on low incomes is a social good in and of itself, but also in the pragmatic sense that when you put a $400 tax credit in the pockets of low-income wage earners they are more likely to spend it and help boost the economy.

Peace in our time

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So, let’s see, Microsoft pays AOL $750 million, AOL switches to Internet Explorer, and the two biggest behemoths in the online world start working together instead of competing.

The next time you hear anyone in the Bush administration talk about the importance of competition and the free market, remember whose Justice Department it was that brought us the Microsoft antitrust settlement.

Crystal-balling the recession

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“This spring’s college graduates are entering the worst job market in 20 years.” A brief Robert Reich op-ed in today’s Times begins with this line. I read it over breakfast and it took me back…

…Because I graduated from college in 1981 and was looking for a job in 1982 — precisely the previous “worst job market” Reich is referring to, 20 years ago. It was the long Reagan recession — a painful, protracted period in U.S. economic history that is largely forgotten today thanks to the rosy hues the Gipper era has inexplicably assumed in the collective memory.

I have a file somewhere of rejection letters from publications I sought employment with — more than one of which along the lines of, “Gee, thanks, kid, you look pretty qualified, but I’m sorry to tell you we just published our last issue.” I ended up tightening my belt and freelancing for a year and a half before finally landing a regular freelance gig at the Boston Phoenix that gradually evolved into steady employment.

Now we’re stuck in another stubborn, graduation-blighting recession. The economics pros refuse to label it as such — supposedly, this recession ended over a year ago — but it sure feels like one to everyone I talk to.

And the important question right now is whether this recession will finally, as Reagan’s did, give way to economic growth and the semblance of prosperity — or whether this is a different kind of beast altogether.

The optimists have the following arguments in their favor: The economy is inherently cyclical, and sooner or later — well, by now, “later” is the only possibility — this downturn must end. And the Fed’s low interest rate policy and the Bush tax cuts (whatever their long-term cost in deficits and Social Security insecurity) provide plenty of anti-recession firepower. Just as the pain of the early ’80s preceded a rest-of-the-decade boom — and, for that matter, the pain of the early ’90s did the same — so we too can expect the sun to start shining any day now.

The pessimists survey the scene and point out that our situation today is inherently different from previous cyclical downturns. In the past, we’ve started with an inflationary trend; the Fed tightened interest rates, plunging the economy into recession but laying the groundwork for new growth as companies learned to do more with less. Today, inflation is dead, interest rates are rock-bottom and the economy is still stalled. The Fed worries about deflation, a threat unknown since the 1930s. And the very fact that nobody is sure what’s going on has a further dampening effect. Meanwhile, the Bush administration’s muddled “Cut taxes now, let our kids pick up the tab” approach is not instilling confidence in business or consumers.

A pessimist, then, views the present economy not as a repeat of the early-’80s or early-’90s style business cycle but as something more akin to the mid-’70s “stagflation” — an anomalous era when we suffered from both inflation and recession at the same time (something that economics orthodoxy insisted was highly unlikely but that those of us who lived through it remember quite vividly). This variety of cycle — the kind of fundamentally out-of-kilter global economy seen in the 1930s and 1970s — is not a two-to-three-year phenomenon; it’s more like a decade-long trauma.

My heart wants to be an optimist here, but my head is definitely feeling pessimistic.

Brand You

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Back in the ’90s, during the Net boom, Fast Company published an article by Tom Peters titled “The Brand Called You.” The idea was for professionals to start handling their own lives and careers with the same approach that a company takes in managing its brand.

The term “branding,” of course, comes from cattle, and there was always something suspicious about the idea of bringing such thinking into the realm of individual lives.

Now we have a new kind of branding on the personal level: Real honest-to-god physical branding. People walking around with corporate logos and advertisements not only sewn onto their clothing and plastered over their accoutrements but actually tattooed on their foreheads.

The idea is the brainchild of a London marketing outfit. Students who agree to be branded receive $6.85 an hour for three hours of being “out and about” with their foreheads on display.

Moo!

Look, Pa! No economic policy!

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The reports from inside the Beltway keep telling us, with numbing repetition, that George W. Bush (“43”) is utterly determined to avoid the fate of his father, George H.W. Bush (“41”). Not for 43 the sad fate of 41 — who fell from the glory of a military victory over Iraq in Year 3 of his presidency to the ignominy of electoral defeat in year 4, because voters decided he wasn’t doing enough to get a recession-burdened economy moving again. 43 is on the case! 43 will keep one eye on the bread-and-butter economic issues even as he locks his aim on Saddam Hussein. No one will be able to say that 43 doesn’t care about the economy — Karl Rove is making sure of that.

And yet, from the vantage of one year before the ’04 primaries, Bush 43 looks amazingly, uncannily like a replay of Bush 41. The economic policy details differ, but the political shape is parallel.

Despite all the rumors, the recovery doesn’t seem to have arrived in any neighborhood you or your friends actually live in. Nearly three years of the current downturn have left the economy still feeling like a disaster area. The Republicans now control both houses of Congress, but the Bush budget is such a hodge-podge of giveaways to the wealthy, outright deceptions and deficit-inducing, tax code-complexifying “reforms” that even the president’s own party is rejecting it out of hand. His all-but-launched war on Iraq — completely unaccounted for in that budget — has roiled the markets and put corporate spending on hold. His team still can’t get its message straight (do deficits matter or not?). Is anyone home?

Yes, a year is a long time, and a lot can happen between now and New Hampshire 2004. But we’ve had three years of George Bush, and three years ought to be enough time to get an economic policy together. Bush’s is MIA. Unless there’s a major turnaround in the next six to nine months, the Democrats ought to be able to make something of that. If they can’t, they don’t deserve to govern.

Postscript My readers correctly point out that we’ve only had two years, not three, of George Bush. (The perils of late-night posting.) I guess it just feels like a long time…