02.06.09
Morning Reading
More bad economic news today, The U.S. economy lost another 598,000 jobs in January.
U.S. businesses and institutions have shed jobs now for 13 consecutive months, and the increasing pace of the job losses may indicate worse to come. Since the current recession began in December of 2007, 3.6 million payroll positions have been lost, with about half of that decline coming in the last three months, according to data released this morning by the Labor Department.
It’s the height of insanity that the GOP still thinks that more of the Bushian economics that got us into this mess - tax cuts, tax cuts, tax cuts - will get us out.
Krugman tells us why the debate has turned out like it has so far, On the Edge.
A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
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Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy … the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
On a more local not Kuff has all the poop, Craddick’s cleanup, on the computer files being erased from Speaker Craddick’s computers before the incoming Speaker Joe Straus took over.