| Originally posted by Nesster The thing that is skirted in this chat: the Bush years were fiscally irresponsible in that government defecit spending was not curtailed during good economic times, quite the contrary, the defecits soared. This undermines any stimulus effect of increased defecit spending during bad economic times, and creates the political problems we are now seeing.
There is another, even worse, interpretation: the inside information on the economy even in the Bush years indicated major structural problems, and the only way 'growth' was possible then was through large scale defecit spending. If this is true, then we may well be at the end of the American era, and Americans need to get set for a long difficult period of decline.
However, the more reasonable interpretation is that the Republican party (with Democrats going along) is no more concerned about the long term than the major corporations are. Republicans see the main goal of politics as winning the next election. Thus the rhetoric on one hand, stirring up emotions and voters, and the economic policies often contrary to rhetoric on the other hand - these policies to ensure both continuing corporate support and the desired 'good economy' when in power and 'bad economy' when out of power. This also explains Medicare Part D, an unfunded and expensive expansion of socialist medicine enacted under Bush, aimed at both gaining the AARP vote and the support of the drug industry. And so do the liberals.
Just a little clip for you THEOFFICE Quote:
Terminated: Rise of the machines
U.S. companies are spending more money on automation and less of it on hiring workers, hampering the economic recovery.
By Catherine Rampell
New York Times
Companies that are looking for a good deal aren’t seeing one in new workers.
Workers are getting more expensive while equipment is getting cheaper, and the combination is encouraging companies to spend on machines rather than people.
“I want to have as few people touching our products as possible,” said Dan Mishek, managing director of Vista Technologies in Vadnais Heights, Minn. “Everything should be as automated as it can be. We just can’t afford to compete with countries like China on labor costs, especially when workers are getting even more expensive.” Vista, which makes plastic products for equipment manufacturers, spent $450,000 on technology last year. During the same period, it hired just two workers, whose combined annual salary and benefits are $160,000.
Two years into the recovery, hiring is still painfully slow. The economy is producing as much as it was before the downturn, but with 7 million fewer jobs. Since the recovery began, businesses’ spending on employees has grown 2 percent as equipment and software spending has swelled 26 percent, according to the Commerce Department. A capital rebound that sharp and a labor rebound that slow have been recorded only once before — after the 1982 recession.
With equipment prices dropping, and tax incentives to subsidize capital investments, these trends seem likely to continue.
“Firms are just responding to incentives,” said Dean Maki, chief U.S. economist at Barclays Capital. “And capital has gotten much cheaper relative to labor.” Indeed, equipment and software prices have dipped 2.4 percent since the recovery began, thanks largely to foreign manufacturing. Labor costs, on the other hand, have risen 6.7 per*cent, according to the Labor Department. The rising compensation costs are driven in large part by costlier health care benefits, so those lucky workers who do have jobs do not exactly feel richer.
Corporate profits, meanwhile, are at record highs, and companies are hoarding cash. Many of the companies that are considering hiring say they are scared off by the uncertain future costs of health care and other benefits. But with the blessings of their accountants, these same companies are snatching up cheap, tax-subsidized tractors, computers and other goods.
“We had an opportunity to buy equipment at a very discounted rate,” Mishek explains of his decision to make bigger investments in equipment than in workers. “Now that the economy has turned around a little bit, it made sense to upgrade.” Usually economists cheer on capital spending and have supported Congress’ tax breaks for capital investment, like bonus depreciation, which lets companies expense the full cost of purchases immediately instead of waiting several years. That is because capital and labor can be complementary: A business that buys a new truck often hires a new driver, too. But with the rising costs of hir*ing, companies like Vista are finding ways to use capital to replace workers whose jobs are relatively routine.
“If you’re doing something that can be written down in a programmatic, algorithmic manner, you’re going to be substituted for quickly,” said Claudia Goldin, an economist at Harvard. To add insult to injury, much of the equipment used to replace U.S. workers is made by workers abroad, meaning that capital spending is going overseas. Of the four pieces of equipment Vista bought last year, one was made domestically. The others came from Israel, Switzerland and Germany. (“I try to avoid buying Chinese at the workplace and at home,” Mishek says.) Better technologies may eventually offer better job opportunities, but only if people can upgrade their skills quickly enough to qualify. That is hard to do in the short run, especially when so many displaced workers need to be retrained at once.
“People don’t seem to come in with the right skill sets to work in modern manufacturing,” Mishek said, noting that job applicants were often deficient in computer, mathematics, science and accounting skills. “It seems as if technology has evolved faster than people.” |