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Without the quirk in courier jobs, employment increased by 160,000.

The unemployment rate fell to 8.5 percent in December, the lowest level since the 8.3 percent rate reported for February of 2009, the month that Congress approved the stimulus package. The drop was driven primarily by a 0.3 percentage point decline in the unemployment rate for men to 8.0 percent. The unemployment rate for women edged up slightly to 7.9 percent. Over the last year, the gap in unemployment rates between the sexes has virtually disappeared as the unemployment rate for men fell by 1.4 percentage points, while the rate for women only dropped by 0.2 percentage points. The employment-to-population ratio (EPOP) for women has actually fallen by 0.4 percentage points over this period, while it has risen by 0.8 percentage points for men. Overall, the EPOP stands at 58.5 percent, 0.2 percentage points above its year-ago level and 0.4 percentage points above the lows hit in the summer.

White men have gained much more than black men over the last year, with a 1.4 percentage point drop in their unemployment rate to 7.1 percent. For black men, the decline has been 1.1 percentage points to 15.7 percent. The unemployment rate for black women has risen by 0.9 percentage points over the year to 13.9 percent, while their EPOP has fallen 1.6 percentage points.

Other news in the survey is mixed. The number of people involuntarily working part-time fell by 406,000, the third consecutive month of sharp declines. On the other side, the unemployment rate due to job leavers fell by 0.4 percentage points, suggesting workers lack confidence in their job prospects. The unemployment duration measures edged down slightly, but did not completely reverse the jump seen in October. The percentage of workers experiencing long-term hardship, a fuller measure that includes people who have left the labor force, is near 7.0 percent, roughly twice the share of workers experiencing long-term unemployment. (more…)

The country is still celebrating the inability of the supercommittee to cut Social Security and Medicare, but it is important to move on from this victory to retake control of the political debate from the One Percent. As it stands, the One Percent are insisting that the country genuflect over the non-problem of the budget deficit, at a time when tens of millions of workers are unemployed or underemployed, millions of people are facing the loss of their homes and tens of millions of baby boomers are approaching retirement with little other than their Social Security to support them.

The deficit is the agenda of the One Percent. There is no reason that the rest of us should be concerned about budget deficits when the rest of the country is struggling with the economic disaster created by the greed and incompetence of the One Percent.

This is not a statement of morality; it is a statement based on economic reality. Budget deficits can be a problem when an economy is near full employment and the deficit can be pulling resources away from private investment, thereby slowing growth. However, it is not a problem with large numbers of unemployed workers and vast amounts of excess capacity.

This is what the financial markets are telling us every day as interest rates on long-term government bonds hover near 2.0 percent. If deficits were really crimping the economy, we would be seeing interest rates of 6 or 7 percent, or even higher. The deficit hawks do not have an economic case to support their argument, just money and influence.

In the longer term, the deficit hawks can point to projections of outsized deficits, which they invariably attribute to Social Security and Medicare. The first part of this story is completely untrue.

Under the law, Social Security is financed from its designated tax. It, therefore, cannot contribute to the deficit unless Congress changes the law. (The payroll tax credit in 2011, which was replaced with general revenue, is an exception to this rule.) (more…)

Congress gave us a wonderful Thanksgiving present when we got word that the supercommittee “superheroes” were hanging up their capes. While many in the media were pushing the story of a dysfunctional Congress that could not get anything done, the exact opposite was true. The supercommittee was about finding a backdoor way to cut social security and Medicare, and create enough cover that Congress could get away with it.

It is important to remember the basic facts about the budget and the economy. Contrary to the conventional wisdom in Washington, it is easy to show (by looking at the website of the Congressional Budget Office) that we do not have a chronic deficit problem. In 2007, prior to the collapse of the housing bubble and the resulting economic downturn, the deficit was just 1.2% of GDP.

The deficit was projected to remain near this level for the immediate future, even if the Bush tax cuts did not expire, as originally scheduled in 2011. If the tax cuts were allowed to expire, then the budget was projected to turn to surplus.

All this changed when the collapse of the housing bubble wrecked the economy. The story is simple, the housing bubble generated over $1tn in annual demand by stimulating record levels of construction and causing a home equity-driven consumption boom. This demand disappeared when the bubble burst. This is what created the large deficits that we are now seeing.

The $1tn-plus deficits are replacing lost private-sector demand. Those who want lower deficits now also want higher unemployment. They may not know this, but that is the reality – since employers are not going to hire people because the government has cut its spending or fired government employees. The world does not work that way.

While this is the reality, the supercommittee was about turning reality on its head. Instead of the problem being a Congress that is too corrupt and/or incompetent to rein in the sort of Wall Street excesses that wrecked the economy, we were told that the problem was a Congress that could not deal with the budget deficit. (more…)

If anyone still questioned who owns Washington, the Congressional supercommittee charged with reducing projected deficits by $1.2 trillion seems determined to end any doubts. According to press accounts, both the Republicans and Democrats on the committee support a plan to reduce average Social Security benefits by 3 percent.

While whacking our parents and grandparents with a big cut in Social Security benefits apparently draws bipartisan support, the supercommittee will not even score a plan to tax Wall Street financial speculation. No committee member from either party is prepared to make a simple request to the Joint Tax Committee of Congress that would allow a speculation tax to be one of the items considered in the mix.

It’s hard to know which part of this picture is worse. The plan to cut Social Security benefits at a time when seniors are more dependent than ever on them is incredibly pernicious. The people who would see their benefits cuts under this proposal paid for their benefits contributing to Social Security over their entire working career.

Most retirees have little other than Social Security to support them in their retirement. In large part, this is due to the economic mismanagement of the supercommittee types. If they or their friends, like former Federal Reserve Board Chairman Alan Greenspan, actually had been doing their jobs, we would not have had the huge housing bubble that wrecked the economy. The collapse of this bubble caused most of the wealth that retirees and near retirees had accumulated in their home to disappear, leaving them with nothing other than Social Security to sustain them in retirement. Now, they want to cut Social Security as well.

This particular cut is especially pernicious since it will hit the oldest and poorest beneficiaries hardest. A person who is in their 90s and has been getting benefits for 30 years would see a reduction in benefits of close to 9 percent under the new cost-of-living adjustment formula apparently supported by members of the committee.

The benefit cut is being justified by claiming that the current cost-of-living adjustment exceeds the true rate of inflation. In fact, the Bureau of Labor Statistics index that measures the cost of living of the elderly indicates that the current adjustment understates the rate of inflation experienced by retirees. There should be no doubt, this is a proposal for cutting Social Security benefits; it has nothing to do with making the cost-of-living adjustments accurate.

While the supercommittee has plenty of time to think of ways to make life more miserable for seniors, it won’t even countenance the idea of taxing Wall Street speculation. In spite of the repeated pledges that everything is on the table, taxing Wall Street speculation is absolutely off the table.

In order for a tax bill to be considered by Congress, it must be scored by the Joint Tax Committee (JTC). While many members, including some very senior members from both houses, have requested a score from the JTC of a bill taxing financial speculation, the supercommittee has the JTC completely tied up meeting its requests. By refusing to include a financial speculation tax (FST) in its scoring request, the supercommittee is preventing this idea from even being included in the discussion. (more…)

Those who follow the rants from our business leaders and their allies in politics and the media have been struck by a disquieting cry in recent months. We have been repeatedly told that, even though we have more than 25 million people unemployed or underemployed, businesses are unable to find qualified workers.

For example, last week New York Times columnist Thomas Friedman took us to Illinois where Doug Oberhelman, the CEO of Caterpillar, one of the largest companies in the country, complained that he could not find qualified hourly workers for his manufacturing facilities. Oberhelman went on to complain that he also could not find engineering service technicians or even welders.

Friedman also recounted a conversation with Chicago’s new mayor, former Obama Chief of Staff, Rahm Emanuel. According to Friedman, Emanual complained about “staring right into the whites of the eyes of the skills shortage.” Friedman recounts a story from Emanuel about two young CEOs in the healthcare software business who claimed that they have 50 job openings today, but can’t find the people.

There are many other accounts like the ones in Friedman’s column of businesses who find their growth prospects stunted by their inability to hire good workers. There are two parts to this story that should bother people.

First, in spite of all the complaints in the media about businesses not being able to find good workers, this problem doesn’t seem to show up in the data. According to the Bureau of Labor Statistics, the overall ratio of job openings to existing jobs is just 2.3 percent. This is down by almost a third from its pre-recession level.

Mr. Oberhelman’s experience at Caterpillar doesn’t seem to be common among his peers; the job opening rate in manufacturing is just 2.0 percent. Even in professional and business services, the category that would likely include the workers that the software execs wanted, the job opening rate is just 3.5 percent, down by more than 25 percent from pre-recession levels. (more…)

The Federal Reserve Board has provided the basis for thousands of conspiracy theories in its near-100-year existence. These conspiracies have some basis in reality as can be seen by the Fed’s recent moves on monetary policy. In the last two meetings of the Fed’s Open Market Committee (FOMC), the Fed’s key decision-making body, the members appointed through the political process unanimously supported stronger measures to spur growth and create jobs. By contrast, three of the five voting members appointed by the banking industry opposed further action.

This extraordinary split has not received the attention it deserves. It suggests that the financial industry is using its power at the Fed to try to block the course preferred by the appointees of democratically elected officials of both parties.

The Fed is an enormously important if poorly understood institution. Its control of monetary policy (primarily short-term interest rates) gives it the ability to speed up or slow growth. It also has enormous regulatory power. Alan Greenspan could have used this authority to put a check on the junk loans that fueled the housing bubble in the years 2002-2006.

If the Fed wants to ensure that the economy does not grow too rapidly it can slow growth by pushing up interest rates. This was the cause of all the post-war recessions prior to the last two as the Fed raised interest rates in order to reduce growth and employment and thereby slow inflation. (more…)

The Very Serious People in Washington are busy trying to find creative ways to cut Social Security and Medicare and take other benefits from middle-class and moderate-income families. The refrain here is that we just can’t afford this level of generosity any more.

There are two parts of this story that should drive the rest of us crazy. And it is difficult to determine which one is the more infuriating.

The first is that we know that many people in this country are fabulously rich. And as Elizabeth Warren beautifully reminded us, none of them did it on their own. But Professor Warren is actually far too generous in her account.

While some number of the wealthy may have succeeded by working hard and being smart or creative, many of the very wealthy got their money directly or indirectly through the big hand of the government tilting the playing field in their direction. Their hard work involved rigging the rules to ensure that they ended up on top.

Nowhere is this better seen than on Wall Street, which is chock full of multimillionaires and billionaires who got to the top by taking advantage of items like “too big to fail insurance” for their banks, gambling with government insured deposits, ripping off state and local governments on pension management fees and, of course, the trillion dollars in bailout bucks given at interest rates that were way below market levels. These people know the role of government very well, even if they pretend this is all about a free market. (more…)

Ever since Texas Governor Rick Perry attacked Social Security as a Ponzi scheme as an opening gambit in his presidential campaign we have been treated to a spirited debate in the media on the truth of this proposition. Those of us who consider this to be ill-informed nonsense that has the effect of misleading the public about the state of Social Security’s finances were told to lighten up. After all, what is wrong with debating the topic?

In this spirit of free and open debate, perhaps our attention should be devoted to the question of whether the Washington Post is a criminal enterprise. While it is ostensibly a newspaper that purports to give the public an objective take on key events in the country and the world, it has been involved in several actions that raise serious questions about this status.

For example, a few years back its management came up with a plan to have high-priced dinner events where lobbyists would be given direct access to the papers’ reporters. The plan was to have the reporters lead discussions on important issues. The lobbyists would be given the opportunity to argue their positions, ensuring that the reporters knew these arguments the next time that they wrote on the topic. Needless to say, those who could not afford the price of admission would not get the same opportunity to educate the Post’s reporters. (more…)

Sorry deficit fanatics, this one has nothing to do with the cost of the stimulus or the deficits run-up during the Obama years. We’re talking real money here. We’re talking about plans to raise the age of Medicare eligibility to 67.

To deficit hawks everywhere this is a great way to save the government money. Life-expectancy at age 65 is roughly 20 years. Therefore raising the age of eligibility for Medicare by two years would shave roughly 10 percent off the program’s budget. (The actual saving would be somewhat less since it is cheaper to treat people when they are 65 and 66 than in their 80s or 90s.) For a program that is projected to cost more than $1 trillion a year (at 5 percent of GDP) in a decade, and even more in following decades, this would amount to real savings.

But the cost of this savings is a much higher health care bill for beneficiaries. As it is now, millions of people in their 60s struggle to hang onto jobs that provide health care insurance or do without, hoping that they can make it until 65 without a major medical problem. This proposal pushes the magic age out two more years. (more…)

Economists believe that people respond to incentives. The fact that economists never suffer career consequences for failing to consider new ideas explains why they so rarely consider any policy that has not long been in the standard bag of tricks. I mention this background since it is relevant to the reaction given a proposal on the debt ceiling that Ron Paul originally put forward and that I subsequently endorsed.

Paul suggested that the Fed could destroy the $1.6 trillion in government bonds that it now holds as a way of getting room under the debt ceiling. Debt to the Fed counts as part of the government debt subject to the limit. If the Fed destroyed $1.6 trillion in debt, then it would create a space of $1.6 trillion under the ceiling.

This is an interesting way of getting around the ceiling, although it would almost certainly require an act of Congress to do it. As it turns out, the other side of this story is even more interesting. The Fed plans to sell off the $1.6 trillion in government bonds it currently holds. It also plans to sell off more than $1 trillion in mortgage backed securities it bought to help stabilize financial markets at the peak of the financial crisis. Following the logic of Paul’s idea, I suggest that the Fed could simply hold on to large amounts of debt for an indefinite period of time. The interest on this debt would continue to be paid to the Fed and then be refunded to the Treasury—an effective and easy way to reduce the deficit that almost no one is talking about.

(more…)