GREAT RECESSION VERSUS THE GREAT DEPRESSION - II

Part I of the comparison between the Great Recession versus the Great Depression dealt with the emotional after effects of a financial collapse for a country like the U.S.  Herein I will only discuss the economic effects of the Great Recession on labor wages in the Upper Midwest.  This region is often called the Rust Belt, a term that became popular back in the 1980s.  So the labor problems of the Rust Belt have been around for a long time and have little to do with the Great Recession.  Nonetheless, the angry "white" Midwestern workers came to a boil in the recent election.  So why now?

 Every so often on Morning Joe, they have Steve Rattner give the status of some economic condition.  I thought Rattner presented two very compelling charts on the December 1, 2016 show that I have captured related to some of the angry feelings in the Midwest towards government.  Of course one should notice in the figure that the steep decline in Rust Belt manufacturing jobs started well before the Great Recession, mostly during the administration of George W. Bush, with a particularly steep drop ("waterfall") going into the Great Recession.   Such improvement as there has been was during the administration of Barack Obama.  Note that with the Obama administration the decline in manufacturing workforce has stopped and has even started a slow recovery in all the states except Pennsylvania.  You would think that workers would be happy that the decline (the bleeding so to speak) has not only stopped, but actually has slowly reversed in most states.  However, we  are told they aren't happy at all, so the reason for their anger must be sought elsewhere, such as the emotional effects of the Great Recession (see Part 1).  but before we get too hysterical about this, please recall that Trump won these states by very small margins Michigan by less than 11,000 votes out of more than 4.8 million votes cast and Wisconsin by 27,200 out of 2.9 million votes cast and for Pennsylvania won by 46,530 votes out of nearly 6.9 million votes cast.), so maybe many people were grateful for the progress after all.

Below is some of the text of Rattner's presentation (in italics):

(Click on figure to enlarge)

The role that white working class voters played in Trump’s election is now widely accepted; this chart provides graphic back up for how tough it has been for these workers over nearly two decades and how minimal the much vaunted renaissance of manufacturing has been. ...  Pennsylvania, once the home of the steel industry, has had no recovery in manufacturing jobs since the financial crisis.

Only Michigan – thanks to the success of the auto industry – has shown a meaningful rebound in manufacturing jobs and even Michigan’s total is still just two-thirds of what it was at the peak.

It’s important to recognize that not all these job losses are due to trade or globalization; improving efficiency also played a role in the lower need for workers (although those productivity gains have been minimal in the last several years.)*

(Click on figure to enlarge)

Note in the above figure, that although jobs have had a rebound in Michigan, the decline in wages that started long before the Great Recession has continued since, though at a slower pace.  One can see some cause for anger there.  Something like "It is nice to see my friends get back to work, but not at the expense of my wages."

In contrast,  although Pennsylvania has not seen a rise in manufacturing employment, those remaining have seen the largest increase in wages of the five states and actually are even back to 2003 levels.  One might wonder why manufacturing workers in Pennsylvania are so angry as the current workforce has bounced back in wages.

Certainly a part of the problem for the slow wage recovery was lack of a meaningful infrastructure program as construction (among other occupations) was very hard hit by the Great Recession.

Steve Ratner continues:

While attention mostly is focused on jobs, it’s important to recognize that falling wages are also a problem – and nothing in Trump’s announcement will address that problem, which is directly a result of trade and globalization, not automation [Emphasis added.  See comment below]. In this category, Michigan – again because of the strong presence of the auto industry – has been the hardest hit, with average hourly wages in manufacturing falling from $28 per hour in 2003 to just over $20 per hour at present. (These numbers are all adjusted for inflation.)*

Though I have great appreciation for him, Rattner is certainly wrong that automation has had nothing to do with the decline of wages by workers.  The wages actually must be below the costs of automation as well as achieve some sort of parity with the wages of the lowest cost countries.**  Low wages in many countries, however, are tempered by the costs of shipping and some other factors like the generally higher price of natural gas in foreign countries.  Thus the cost of selling something in the US. made in China may be more equivalent to, let's say, $8/hr  (as a guess) rather than the $4/hr cost of labor in China, still a large difference.

I get the feeling that the manufacturing worker has been thrashing around for some years, trying to seek a political solution to the decline in manufacturing in the Rust Belt.  In 2008, these people not only changed the "coach" (the president) but also the "team"  (the Senate and two years earlier the House).  Now in 2016, they changed the coach again, but left the team essentially in place.  We should remember that the President-elect won these Rust Belt states by very small margins, suggestiong to me a high level of confusion.  In the 2016 election they actually chose a n"coach" who was in confilct, not only with most of the Democratic Party but the Republican Party establishment as well but left the "team" essentially in place.  We will see how that works out.

(Click on figure to enlarge)

Adding to their problems is that the American worker has been convinced to disarm and abandon unions.  The decline in wages has paralleled the decline in unions.***   While unions may not be very effective, they are workers only hope in dealing with management.

* http://stevenrattner.com/2016/12/morning-joe-charts-putting-trumps-carrier-deal-in-context/

** http://stopcontinentaldrift.blogspot.com/2014/05/plight-of-american-workers.html

*** http://stopcontinentaldrift.blogspot.com/2013/10/a-race-to-bottom.html

REPUBLICAN PARTY HAS A PROBLEM

So the Republican Party has a problem.  For a couple of decades, the party has enjoyed the support of the white working class without giving them anything except to say in election years that they are "The Real Americans."  As the working class wages have stagnated and losing purchasing power through inflation, the aristocracy of the Republican Party has really felt the working class is overpaid.   Even Donald Trump has said this on at least two occasions (He later said that he was talking about the minimum wage, but a depreciating minimum wage keeps all wages down.).*  But now they are hopping mad and see a chance to take over the Republican Party through Donald Trump who talks like they do.

Particularly over the last 7 yrs, Republicans have stirred up a hate pot with the majority leader of the Senate saying first that his aim was to prevent Obama getting a second term and, when Obama did, instituted a "scorched Earth policy" of refusing to pass bills that even the Republicans want.  The latest is that he will not take up a nomination to the supreme court, supposedly because it is the final year of the Obama administration.  It should be left to the next president which means that the supreme court will have to get along with eight members, probably at least for two years if Hillary is elected President. The House has been even worse.  Both have egged on this hatred, and now they are feeling the "Revolt Of The Great Republican Unwashed" along with a wealthier Republican contingent that likes to say things like "Sit Down And Shut Up" (the Chris Christy wing).**  Donald Trump has come along who speaks their language and now the Republican Party is having to "stew in their own juices" that they fomented.

Chris Christy has now even endorsed Donald Trump.  One wonders what he wants to get out of his endorsement.  Secretary of Defense is not a good fit and Secretary of State is out for someone who "tells it like it is."  I've got it, Secretary of Transportation where he has lots of experience.  OK, joking aside, how about Chief of Staff?

* http://www.businessinsider.com/donald-trump-wages-are-too-high-2015-11
** http://stopcontinentaldrift.blogspot.com/2016/01/revolt-of-republican-great-unwashed.html

CHILD REFUGEE PROBLEM IN U.S.

The influx of child refugees into the U.S., some accompanied by adults but many not, is creating a number of problems in addition to processing them:

One side effect of the crisis: Easier drug smuggling by cartels. "The arrival of large groups of women and children on the U.S. side of the Rio Grande is pulling agents away from their patrol stations elsewhere along the border, creating gaps in coverage that the traffickers can exploit, according to Chris Cabrera, the Border Patrol union representative here. The smugglers wait on the southern banks of the Rio Grande as migrant groups as large as 250 wade across at dusk and turn themselves in to the Border Patrol, he said. Then groups of single men proceed to cross under cover of darkness....The most recent statistics...show that narcotics seizures have fallen across the entire border with Mexico this year, with the drop being larger in Texas than the average."Joshua Partlow and Nick Miroff" in The Washington Post.  (http://webmailb.juno.com/webmail/new/5?userinfo=8b254f2f4f26b1dc56d8fe41da329a7b&count=1403622068&cf=SP2&randid=1822163293)

We should remember that there was a bill passed by the Senate and submitted to the House of Representatives but never acted upon that contained provision for 19,000 new border agents.  The inability of the House to act on anything but try to repeal Obamacare is causing problems I'm sure that opponents of immigration reform don't like.  Why can't they at least try to see if they can get through the 19,000 new agents?  Among other things it is a good lower paid jobs program. (http://stopcontinentaldrift.blogspot.com/2013/07/complete-danged-fence.html)

SUPPORTING FISCAL CONSERVATISM

In case there are those that read my previous post (http://stopcontinentaldrift.blogspot.com/2014/04/three-republicans-who-wont-get.html) that may have gotten the opinion that I hate conservatives, I do not hate conservatives and I do support a policy, for example, of balancing the Federal budget over a business cycle (but not annually).  I point out, however, that having a positive cash flow in our government is something we rarely have done.  No Republican has done even this loose balancing since Eisenhower (who had it twice), not Nixon, not Ford, not Reagan, not H.W. Bush, and not H.W. Bush.

In fact I was a Republican up until Barry Goldwater.  After he got the nomination I said to my fellow Republicans at a meeting that now we should all pull together and not just beat up on Rockefeller.  Someone replied that if I was such a Rocky lover, why didn't I become a Democrat?  So I did and have to admit that Democrats have more fun.  Later I was to break from the Democratic Party because I agreed with President Ford's pardoning of Nixon.  The Democrats were setting up to worry the Nixon issue to death, just like Republicans are doing with Benghazi now, and not do any work.

I think that Republicans putting the 1964 Civil Rights Act over the top was their finest hour.  The Act was much broader than just applying to Blacks but included sex, race, and religion as well as color.  Through the leadership of Republican Everett Dirkson, in the end 27 Republican Senators voted for the Senate version of the bill and only 6 against it.  Also 138 Republican Representatives voted for the House version and 34 against whereas 96 Democrats voted against it (http://en.wikipedia.org/wiki/Civil_Rights_Act_of_1964).  Can you imagine that happening today when a comprehensive immigration bill cannot even come to the House floor?

The same might be said for the Voting Rights Act of 1965 when 30 Republican Senators voted for it and only 2 against, 112 Republican Representatives voted for the bill and 24 against (http://en.wikipedia.org/wiki/Voting_Rights_Act_of_1965).

Of course these bills were in the days when the Solid South was in the Democratic Party and before the Southern Strategy when they switched to the Republican Party.  I consider Dirkson who shepherded both bills through the Senate to be a hero, though he was a supporter of Joe McCarthy and the Vietnam War..  Dirkson is also famous for saying, "A billion dollars here, a billion dollars there and pretty soon you are talking about real money." (http://en.wikipedia.org/wiki/Everett_Dirksen)

THE GOVERNMENT YOU VOTED FOR

On rare occasions, someone writes a piece in which almost every word carries weight.  Paul Krugman did just that on Sunday, August 4 (http://www.nytimes.com/2013/08/05/opinion/krugman-republicans-against-reality.html?nl=opinion&emc=edit_ty_20130805)  I wish everyone would read it.  Prof. Krugman writes:

Think of it this way: For a long time the Republican establishment got its way by playing a con game with the party’s base. Voters would be mobilized as soldiers in an ideological crusade, fired up by warnings that liberals were going to turn the country over to gay married terrorists, not to mention taking your hard-earned dollars and giving them to Those People. Then, once the election was over, the establishment would get on with its real priorities — deregulation and lower taxes on the wealthy.  (emphasis added)

Then they held the pointless vote on Obamacare, apparently just to make themselves feel better. (It’s curious how comforting they [Republicans] find the idea of denying health care to millions of Americans.)  (emphasis added)

An article quoted by Prof. Krugman says, The June bill included $20.5 billion in proposed cuts to the food stamp program, plus amendments calling for mandatory drugs tests for recipients and employment requirements. Democrats protested the food stamp cuts, while many Republicans said the cuts did not go deep enough.*  (emphasis added)  But now it appears the Republicans are proposing a cut twice as large though there is to be an automatic cut in food stamps amounting to $29/mo. for a family of three to $319/mo. in any event as a result of the Stimulus bill that carried a temporary increase in food stamps. (http://www.nytimes.com/2013/08/02/us/politics/gop-push-to-slash-food-stamps-puts-farm-bill-in-jeopardy.html) 

The House already had passed a meaningless farm bill stripped of food stamps and proposed a series of benefits to wealthy farmers.  Some of the members or their spouses of the Senate and House Agricultural Committees benefit from the farm subsidies the committees oversee. 9http://www.taxpayer.net/library/article/political-contributions-conflicts-of-interest-taint-u.s.-ag-policies)

Cuts are being made to the Federal budget anyway because of across the board cuts in the Sequester (But congress made an exception for air controllers so they wouldn't be inconvenienced in flying.).  Though no one says they like the Sequester, Republicans let it happen because it did make cuts in programs for the poor.  Democrats aren't too upset because at least there are some cuts to the defense budget and the Sequester seems the only way to get these.  Congressmen are not to be inconvenienced.  A part of Obamacare was that congressmen were to get their health insurance from the Exchanges like everyone else, but it looks as if they will also accept a subsidy from the government as well.

Then there is the canceled vote in the House on a transportation bill because not enough Republicans showed up.  Prof. Krugman writes:  But it turned out that a significant number of representatives, while willing to vote for huge spending cuts as long as there weren’t any specifics, balked at the details. Don’t cut you, don’t cut me, cut that fellow behind the tree. (emphasis added)

* This seems to be the new way to get a bipartisan agreement.  Democrats vote against it because the cuts for the poor go too far and Republicans vote against it because cuts for the poor doe not go far enough.

CONGRESSIONAL CONFERENCE COMMITTEES

When the Senate and the House pass the same bill but with some different wording or content, the two houses are to form a conference committee to iron out the differences. Perhaps few people realize that anything can happen in "committee." Many a bill has died in committee even if they passed both houses by wide margins. And the bill coming out of committee can look quite different than the one passed by both houses. I recall one year my Bureau ended up getting more out of conference than either house allotted. That is unusual as they usually split the difference, but this one time, at least, they gave us more. Once the conference committee resolves the language of the bill, it is voted on again by both houses but usually only in an up or down manner. It can be sent back to conference.

For a more detailed account of conference committees see: http://www.aacn.org/WD/Practice/Content/PublicPolicy/intro.pcms?menu=Practice

WHATEVER HAPPENED TO JOBS, JOBS, JOBS?

The current Democratic administration has been severely criticized for spending so much time on the Obamacare legislation instead of creating jobs. Of course, President Obama campaigned on getting a health care bill passed and he did. So now that the Republicans have taken over the House of Representatives, what are they doing to create jobs?

Well first they read the constitution out loud (HR 5). Well, they read most of it, eliminating the parts about slavery, for example. Their first bill (passed unanimously) was to get the Government Printing Office to stop printing so many copies of bills and resolutions that can be read online, saving maybe $6 million (only $1.3 trillion to go). What’s more, this legislation will probably eliminate some jobs, not increase them. Oh well, it will save some trees.

Then of course, we had the vote to repeal Obamacare (HR 2). Everyone knew this piece of legislation was going nowhere so, even though Obamacare was billed as a jobs killing bill by the Republicans, this vote of principal created no jobs.

I believe the next piece of legislation in the House will be to make sure that there is no government funding of abortions (HR 3). President Obama has already given an executive order to stop any Federal money that might go to abortions, but I guess the House wants redundancy. Lack of government money to fund abortions will probably decrease jobs somewhat (surgeons, nurses, etc.), but it is the principal of the thing.

Also high on the list is the Small Business Paperwork Mandate Elimination Act (HR 4) which has 254 cosponsors and is currently in committee. My first thought is that eliminating paperwork will cause some job loss because the people won’t be needed to fill out the paperwork, but then it may be neutral because the people that would do the paperwork may be replaced by others doing more productive work. My guess is that the bill will be passed, possibly unanimously.

Also to be addressed is HR 5 which is the New House Rules and, of course, doesn’t deal with jobs.

So when will the house start to deal with jobs?