Posts Tagged Great Depression
Posted: 25 Dec 2012
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives
Everyone now agrees that the so-called “fiscal cliff” is a stupid policy that threatens our economy and our people. Everyone agrees why the “fiscal cliff” is stupid – it inflicts austerity at a time when it is likely to throw the nation into a gratuitous recession. Causing a recession leads to increased unemployment and a larger budget deficit. We have all seen austerity force the Eurozone into a gratuitous recession in which Italy, Spain, and Greece have Great Depression levels of unemployment.
Here’s the short version of why austerity is a self-destructive response to the Great Recession. A recession occurs when demand to purchase goods and services falls and the economy contracts, causing increased unemployment. This simultaneously causes tax revenues to fall and government expenditures for programs like unemployment compensation to increase. The fall in revenues and increase in expenses causes the federal budget deficit to grow rapidly.
Austerity is a policy of raising taxes and/or cutting governmental spending for the purported purpose of cutting the deficit. If one raises overall taxes in response to the Great Recession the result is a reduction in private sector demand. If one cuts governmental spending the result is a reduction in public sector demand. The result of reducing private and public sector demand in the recovery phase from the Great Recession, where overall demand is already grossly inadequate, is to throw the nation back into recession or even a depression. That causes the budget deficit to grow. A policy of austerity undertaken under the claim that it will reduce the deficit causes a gratuitous recession that leads to a massive loss of wealth, far higher unemployment, and in increased deficit. That is why austerity is a policy that is the self-destructive economic analogy to the medical insanity of bleeding patients.
We have known that austerity is an idiotic response to a severe crisis for 75 years. The U.S. was in the midst of a strong recovery from the Great Depression until FDR’s neo-liberal economists convinced him in 1937 that is was essential that the U.S. adopt an austerity program to reduce the federal deficit. Austerity forced our economy back into a Great Depression.
It was only the stimulus of federal spending in World War II that brought the U.S. out of the depression. During World War II and for the remainder of that decade the ratio of debt-to-GDP was at or near historically record levels. The result was the greatest industrial expansion in history, full employment (including a massive influx of women), strong economic growth, and sharply declining deficits and debt-to-GDP ratio because the growth led to large increases in revenue and the low unemployment greatly reduced spending on the unemployed. We also defeated the Axis powers, created Social Security and the GI Bill, and began an extraordinary expansion of our housing stock to house the baby boom.
We learned many lessons from the catastrophic failure of austerity and the extraordinary success of stimulus in this era. The U.S. adopted a fiscal system of “automatic stabilizers.” These are counter-cyclical (they push in the opposite direction of the business cycle) fiscal effects that are designed into the system and do not require new legislation once the recession or inflation begins. The result of these automatic stabilizers has been to reduce the severity and duration of recessions. Indeed, studies show that the larger the national governmental role in the economy, the less volatile the economy. This makes sense because the stabilization function should be more effective if the stabilizers are larger relative to the economy.
Unfortunately, these sensible counter-cyclical policies that make theoretical and common sense and have repeatedly worked in the real world were forgotten by many due to a campaign of deficit hysteria funded by Pete Peterson, a Republican billionaire financier who has made it his mission in life to destroy the safety net. His ultimate goal is to privatize social security so that Wall Street can receive hundreds of billions of dollars in fees investing our retirement funds.
I’ve explained in a prior column how the fiscal cliff was created through an insane bipartisan deal in August 2011. The fiscal cliff was always a terrible job-destroying idea that also began to unravel the safety net by cutting Medicare. Everyone involved in creating the fiscal cliff acted irresponsibly and inhumanely in seeking to inflict austerity, cause a recession, and unravel the safety net.
What is forgotten, however, in discussions of the idiocy of creating the fiscal cliff is that it was part of a broader bipartisan deal intended to inflict even more self-destructive austerity and even greater damage to the safety net. The fiscal cliff was an act of idiocy in pursuit of a policy of depravity called “the Grand Bargain” that was actually the Grand Betrayal.
The bipartisan madness has increased since the August 2011 budget deal. Today, the parties are simultaneously screaming (1) that the fiscal cliff is a disaster because it imposes austerity and will cause a recession and (2) that it is essential that we agree to a Grand Betrayal that will inflict even greater austerity and cause an even more severe recession. Indeed, the Grand Betrayal mandates austerity over a decade so it is likely to cause and/or deepen multiple recessions. The Republican and Democratic variants of the Grand Betrayal are doubly destructive and inhumane because they cut the safety net. President Obama wants to begin to unravel the safety net and cut social programs even though an overwhelming majority of Democrats oppose it and even though doing so will inflict even greater austerity. That will cause a deeper recession and likely make the deficit larger, so it is as nonsensical as it is cruel.
During this this entire financial farce I have been unable to get the dominant media to make the most obvious point. Since we all agree that austerity (the fiscal cliff) is a terrible idea that will cause a recession and likely increase the deficit we must logically conclude that all variants of the Grand Betrayal are austerity programs that must be defeated in order to prevent a recession that is likely to increase the deficit. We should all be opposing any cuts in the safety net because they would inflict austerity. An overwhelming majority of Democrats and a majority of Republicans also oppose cuts in the safety net as inhumane.
So why don’t the Democrats and Republicans stop trying to do a deal that will inflict austerity? Why not simply repeal the Budget Act of August 2011? That would kill the fiscal cliff. Repeal would kill austerity, prevent the recession, save the safety net, increase growth, and shrink the deficit. All versions of the Grand Betrayal (Republican and Democratic) inflict austerity, are likely to cause a recession, begin to unravel the safety net, destroy growth, and increase the deficit.
Under the same logic we should be able to agree on two related actions – renew the extension of long-term unemployment compensation and renew the moratorium on collecting the payroll tax. These policies are superb counter-cyclical programs and have the added advantage of reducing human misery and inequality. Republicans and Democrats have agreed in the past on the desirability of both actions.
- William K. Black: Kill the ‘Fiscal Cliff’ Instead of the Economy (huffingtonpost.com)
- Bill Black: Kill the “Fiscal Cliff” Instead of the Economy (nakedcapitalism.com)
- Kill the ‘Fiscal Cliff’ Instead of the Economy (readersupportednews.org)
- What Everyone Knows About Austerity (cafehayek.com)
- Let’s Celebrate the Failure of the July 2011 Great Betrayal (ritholtz.com)
- Why Jobs Should be Obama’s Top Priority — Not Suicidal Austerity (alternet.org)
- Bill Black: Let’s Celebrate the Failure of the July 2011 Great Betrayal (nakedcapitalism.com)
- Aaron Pacitti: Austerity and the Consolidation of Elite Power (huffingtonpost.com)
- Our Christmas Gift From Washington: Recession and Unemployment (forbes.com)
- Bill Black: Jobs Now – Make Obama’s Priority Reality and Expose the Lie of Lazy Laborers (nakedcapitalism.com)
SUNDAY, AUG 26, 2012
It’s become a national emergency, but where is our FDR?
Graphic shows unemployment statistics (Credit: AP)
This originally appeared on Next New Deal.
In the 1930s, the president and Congress responded to the economic crisis with immediate action. Why haven’t today’s policymakers done the same?
Sometimes I get bored sitting in Washington hearing certain people talk and talk about all that Government ought not to do— people who got all they wanted from Government back in the days when the financial institutions and the railroads were being bailed out in 1933, bailed out by the Government. It is refreshing to go out through the country and feel the common wisdom that the time to repair the roof is when the sun is shining.
They want the financial budget balanced. But they want the human budget balanced as well. – Franklin D. Roosevelt, October 1937
A recent study by the Pew Research Center has confirmed what millions of Americans have realized for some time now: that the middle class has endured its worst decade since World War II. With declining home values, falling wages, and skyrocketing higher education costs, the median wealth for the middle class fell by 28 percent over the past decade, while the wealth of higher income families rose slightly. The same sad story holds true for middle class incomes, as government data now shows that we have finally managed to break the half-century-long streak that saw inflation-adjusted family income rise in every decade between 1950 and 2000, but not in the decade ending in 2010. Thanks to these and other economic trends, the overall size of the American middle class has also shrunk, down to just 51 percent of the population as compared to 61 percent of the population four decades ago.
One might assume that these alarming statistics—and the fact that the U.S. unemployment rate has been above 8 percent for more than three years—would lead to something like a crisis atmosphere in Washington, a recognition that this is no ordinary economic downturn, but a great national emergency made all the more worrisome by the onset of the worst drought in more than 50 years. But instead of acting, members of the House and Senate have elected to go on their usual five-week summer recess, confirming in the minds of most Americans that the principal blame for their current troubles and for the decline of the middle class lies with Congress.
Roughly three-quarters of a century ago, in similar circumstances, the reactions of both the public and the government was exactly the opposite. From the day he assumed office, FDR identified the collapse of the U.S. economy as an unprecedented national emergency, not unlike the onset of war, that must be countered by “action and action now.” Indeed, his first move as president was to call Congress back into an “emergency session” that launched the most productive period in U.S. legislative history—15 major pieces of legislation in 100 days, including such “emergency” measures as the 1933 Banking Act, the Glass-Steagall Act, and the Truth in Securities Act, all of which helped provide the regulatory structure needed for the U.S. banking and financial sector to thrive for decades to come.
But FDR’s characterization of the economic crisis as an emergency did not end there. He would continue to describe the nation’s woes in the 1930s as a “national emergency” and would continue to demand the cooperation of Congress in meeting both the short-term and long-term challenges that the nation faced as it climbed its way out of the Great Depression. It was this spirit to act—in both parties—that gave us the major provisions of the New Deal and that laid the basis for that remarkable 50-year period of expansion of the middle class that may now have sadly come to an end.
Given the level of inactivity on Capitol Hill, it would appear that the steady and sharp decline in the size and economic wherewithal of the American middle class does not represent a crisis to the members of Congress. But for the millions of Americans out of work or underemployed, the millions of Americans who now face the very real prospect that they will not be able to attain the same level of economic prosperity as their parents, this is no garden-variety recession. It is a deep structural decline that may forever change the way they and their children lead their lives.
In short, we remain in the midst of a very real national emergency that demands the same sort of response taken by the president and Congress more than three-quarters of a century ago: “action and action now.” Until Congress recognizes, this, however, one suspects that little will change, except that the long, steady decline of the American middle class and American way of life will continue.
- Paul Ryan’s ‘Path to Prosperity’ Is Really a Bad Trip on the Road to Economic Ruin | Alternet (mbcalyn.com)
- Celebrate Social Security “birthday,” August 14, 2012 at FDR Library (timpanogos.wordpress.com)
- Harvey J. Kaye: Re-Re-elect FDR! Make 2012 the New 1936! (huffingtonpost.com)
- Social Security: Bait and Switch Politics (remnantshighway.wordpress.com)
- On Jobs, The US Congress, And You (ibtimes.com)
- Why Barack Obama Is No Franklin Roosevelt (reason.com)
- ‘We’re Spending More Than Ever and It Doesn’t Work’ (tarpon.wordpress.com)
- Obama’s Bain attacks recall FDR (salon.com)
- President Putin Informed Of U.S. Military “actively preparing” To Overthrow Barrack Obama Before November Elections! (politicalvelcraft.org)
- Paul Ryan’s ‘Path to Prosperity’ Is Really a Bad Trip on the Road to Economic Ruin (alternet.org)
Obama: Romney’s economic plan is return to Bush failures – The Hill – covering Congress, Politics, Political Campaigns and Capitol Hill | TheHill.com
Obama: Romney’s economic plan is return to Bush failures
LEESBURG, Va. – President Obama said the country would be “setting our sights low” and “settling for something less” if voters choose his opponent Mitt Romney– and Romney’s proposed economic plan– in November.
Speaking before a crowd of 3,000 in this Washington suburb, Obama decried Romney’s plan which he said would cut education spending, slash investment in science, voucherize Medicare–adding to the deficit— and ask the middle class to pay an extra $2,000 so “folks at the top can get another big tax break.”
“They will do exactly what they promised,” Obama said of Republicans. “But you know what it means is that, that vision to me means we’re setting our sights low. It means we’re settling for something else. It means that we’re no longer embracing the basic tenant that helped make this country great and that is that everybody can make it and everyone does their fair share, everybody gets a fair shot. Everybody is playing by the same set of rules.”
During his 25-minute speech, Obama–who has been to Virginia 39 times during his presidency– said the nation shouldn’t return to the policies of former President George W. Bush, which he said led to the worst economy since the Great Depression.
He attributed part of his win in 2008 to frustration from voters, who weren’t satisfied with Bush policies: “Let’s face it, part of the reason why we had so much energy in 2008 was because we understood we had seen a decade where that basic bargain wasn’t being met,” he said.
But he said the policies he has put in place during his administration would help continue to strengthen the middle class in his second term, should he be reelected.
“It’s given us a sense of what it means to move forward and not back,” he said.
At the same time, a day before the July jobs numbers are released, Obama acknowledged that there is some frustration that the economy under his administration isn’t growing fast enough.
“No one’s satisfied with the pace of growth,” he said “No one’s satisfied even with all the jobs we’ve created. We’ve got to create more.”
Obama is expected to address the jobs numbers at the White House on Friday.
- GOP lawmakers confident in Romney – The Hill – covering Congress, Politics, Political Campaigns and Capitol Hill | TheHill.com (mbcalyn.com)
- Runaway Spending: Obama Is Bush on Steroids | RealClearPolitics (cg68doc.newsvine.com)
- Congress breaks for 5 weeks, but much work undone (kansascity.com)
- Possible VP Rob Portman was ‘frustrated’ at Bush budget office (thehill.com)
- Jonathan Chait Hits One Out of the Park: Washington D.C. Masque of the Unemployed Edition (delong.typepad.com)
- This Video Proves Romney Knows His Whole Campaign Is a Lie (nymag.com)
- Congress breaks for 5 weeks, but much work undone (news.yahoo.com)
- Reich: Barack Obama, Mitt Romney and the 2012 anti-election (newsday.com)
- Congress breaks for 5 weeks‚ but much work undone (thehimalayantimes.com)
- Mitt Romney not indebted to Bush legacy (bostonherald.com)
The Need to Agree to Agree
Published: July 9, 2012
Taxes are supposed to be complicated and contentious. Yet, speaking from the White House on Monday, it took President Obama less than 15 minutes to make a strong and sensible case for letting the high-end Bush-era tax cuts expire at the end of 2012. Citing well-documented facts, he pointed out that tax cuts at the top have failed to promote economic growth and have blown a hole in the federal budget.
Under his plan, Americans who make more than $250,000 a year — the top 2 percent of taxpayers — would see their tax rates go back up next year to the levels from the Clinton years, while those making less than $250,000 — the remaining 98 percent — would have their tax cuts extended through 2013.
In calling for cooperation from Congress, Mr. Obama said that the point is to “agree to do what we agree on”: extend the middle-class tax cuts. As a matter of fairness and responsible policy making, he said, the majority of Americans, and the broader economy, should not be held hostage again to another debate over the merits of tax cuts for the wealthy.
Unfortunately, it is not a message Congressional Republicans want to hear, committed as they are to preserving tax cuts for the rich at all costs. It is not even what some Democratic leaders want to hear, including Nancy Pelosi, the House minority leader and Senator Charles Schumer of New York, both of whom voiced support on Monday for Mr. Obama’s approach but have advocated in the past for extending the tax cuts for households that earn up to $1 million a year, a level that would please wealthy campaign donors.
But it’s a message that needs to be sent, loud and clear, over and over. There will never be consensus for solving the nation’s budget problems without first ending the lavish tax breaks at the top. In the near term, letting the high-end tax cuts expire would raise much-needed revenue without harming the recovery because tax increases on high-income Americans do not cut into consumer spending nearly as much as middle-class taxes. The revenue that could be raised — about $850 billion over 10 years — would be a significant step toward reducing the deficit and financing programs to spur the economy.
Mr. Obama laid out the broad issues. Now he needs to drive these points home.
THE TAX INCREASES WOULD BE MANAGEABLE Reverting to Clinton-era tax rates for those making more than $250,000 annually would mean increases in the top rates to 36 percent and 39.6 percent from 33 percent and 35 percent currently. It would also mean raising the tax rate on investment income, which is highly concentrated among the wealthy, to 20 percent from 15 percent. No one is being bankrupted or punished. They are being asked to pay more after an extended period of super-low rates. The 15 percent rate on capital gains investment income, for example, is the lowest such rate since the Great Depression.
MILLION-DOLLAR EARNERS DON’T NEED A BREAK Extending the tax cuts to those earning $1 million a year would cost the government $366 billion in lost revenue over 10 years, compared with extending the tax cuts only to those making less than $250,000 a year. That amount would have to be made up by cutting federal spending in critical areas like Medicare, Medicaid, education and food safety.
SMALL BUSINESSES ARE SPARED Republicans argue that letting the high-end tax cuts expire will hit small businesses and impede hiring. That is nonsense, and based on an overly broad definition of “small business,” which counts any taxpayer who reports business income as a business owner, including lawyers and accountants working in partnerships, corporate executives who sit on other firms’ boards and shareholders in “S-corporations,” business organizations that can employ thousands of workers. Using a more reasonable definition of small business — for instance, having income and deductions of less than $10 million — a recent Treasury analysis found that only 2.5 percent of small-business owners would face higher taxes from the expiration of the Bush tax cuts. Of those who would be affected, most are unlikely to reduce hiring or investment because of ample deductions for business expenses.
The strength of Mr. Obama’s argument is unlikely to sway Republicans. But he’s right on fairness and the facts, and will, we hope, prevail in this debate.
- Obama makes his pitch for middle-class tax break (maddowblog.msnbc.msn.com)
- Gibbs: President “100% committed” to ending Bush tax cuts for rich – CBS News (cbsnews.com)
- Harry Reid Has the Votes to Extend the Tax Cuts for the Middle Class (slog.thestranger.com)
- Extending Middle Class Tax Cuts for 98% of Americans and 97% of Small Businesses (ilene.typepad.com)
- Who ‘Owns’ The Bush Tax Cuts? (wnyc.org)
- Scot Lehigh: The duel over tax breaks (bostonglobe.com)
- Every Single Media Outlet Is Misreporting Obama’s Tax Proposal (nymag.com)
- President Barack Obama asks Congress for limited extension of Bush tax cuts – MiamiHerald.com (miamiherald.com)
- One Chart That Shows What The Bush Tax Cut Battle Is All About (tpmdc.talkingpointsmemo.com)
- Obama to Congress: Extend Bush tax cuts for the middle class (washingtontimes.com)
In Economic Deluge, a World That Can’t Bail Together
By FLOYD NORRIS
Published: June 2, 2012
Less than four years ago, with the world’s financial system in danger of collapsing, major countries managed to come together on a coordinated course that averted a global depression.
Jock Fistick/Bloomberg News
Chancellor Angela Merkel of Germany has urged greater austerity.
Thierry Charlier/Agence France-Presse — Getty Images
Europe’s central bank president, Mario Draghi, has called for a common form of deposit insurance and regulation.
Central banks pumped vast amounts of cash into economies, and banks were bailed out, with vows that they would be subject to stronger regulation.
By early 2009, financial markets had bottomed out and begun strong recoveries. Economies were slower to follow; by last year, slow growth seemed to be the global pattern, spurring hope that the crisis had passed.
But within the last few weeks, much of that hope seems to have faded.
In Europe, the crisis has grown worse, not better, and the disputes among European leaders have intensified as much of the Continent appears to have drifted into a new recession. In China, growth remains robust by Western standards. But concern is rising over the possible end of a property boom that had been fueled in part by local government borrowing and spending.
In the United States, which had been an oasis of relative calm with a growing economy and rising employment, job growth in May, reported Friday, was a puny 69,000. To make the outlook even gloomier, earlier numbers were revised lower. That capped a series of three disappointing monthly reports.
Moreover, there seems to be little willingness — or perhaps lit-tle ability — for the major countries to act together again. Squabbles have grown, some countries are in fiscal distress, and others face daunting domestic problems. The European situation is the most pressing. Banks are under pressure in many countries, for a combination of reasons. They did not raise as much capital as they might have when markets were more buoyant last year. In some cases, they appear to have been slow to recognize their real estate loan losses.
But the most important factor may be that national governments are weak — in every way possible. There is no doubt that some countries could not afford to bail out their banks again; some, in fact, now rely on those same banks for loans to keep the governments functioning at a time when private investors are unsure about their creditworthiness. The president of the European Central Bank, Mario Draghi, suggested last week some type of common European deposit insurance and bank regulation, but there seems to be no consensus.
Nearly every major government in Europe has been thrown out by unhappy voters when an election rolled around, the latest being France. It is not a matter of left versus right. The only major leader to have been re-elected since 2008 is Chancellor Angela Merkel of Germany, but recent state elections there have been won by the opposing party, and even the German economy seems to be losing strength.
The most worrying electoral situation is in Greece, which seems to be mired in permanent recession and unable to comply with the rigid demands for austerity made by its European partners. With one election ending in deadlock among a variety of parties, it will try again on June 17. Many fear that the result could be a disorderly exit for Greece from the euro zone. Others think it could lead to the end of the euro altogether.
For governments that need to borrow money, this is either the best or the worst time ever. It is hard to believe just how low rates are for Germany and the United States. The yield on two-year United States Treasury notes is about one quarter of 1 percent. But comparable German notes this week were yielding one one-hundredth of a percent. At that rate, the government could borrow a million euros and pay 100 euros a year in interest.
But other countries have difficulty borrowing money at all, and pay far higher interest rates to get what money they can. It is not that anyone thinks the yields available on German and United States government bonds are attractive. It is that those bonds are deemed safe by fearful investors.
If throwing cash at the problem was the solution to the last crisis, now many deem that the cause of the current problems. Greece spent its way into its predicament while failing to collect the taxes it was owed and hiding the problem from the rest of Europe. But Spain was running budget surpluses before its own real estate bubble burst, leaving the government reeling. Yet all the troubled countries are being told — largely by Germany — to adhere to rigid austerity. With a common currency, it is hard to see how some of the countries can return to international competitiveness.
In the United States, the ease of borrowing has not made it politically easier to increase the pace of spending. Instead, there is the possibility of “Taxmageddon,” the threat that the unwillingness of politicians to compromise could lead to a combination of big automatic spending cuts and tax increases in 2013 that could devastate economic growth. All this is taking place in the midst of an election campaign that is widely expected to be the nastiest ever.
Moreover, the consensus that financial regulation should be strengthened and standardized has evaporated. In Europe and the United States, banks say that institutions across the Atlantic have unfair advantages, and regulators complain that the other continent has not taken the needed steps.
In the United States, a major push by the banks to weaken rules may or may not have been badly damaged by the multibillion-dollar trading loss suffered recently by JPMorgan Chase. But many in Congress, primarily but not exclusively Republicans, have gone back to the old belief that it was excessive government regulation that created the problem.
The widespread pessimism could dissipate as rapidly as it accumulated. Some surprisingly good economic news in the United States and China would help. More important would be for Europe’s leaders to reach agreement on a course of action that offered hope for recovery in the most stricken areas of the Continent while assuring that the common financial system would have the support of common institutions if needed. Europe has previously managed to cobble together something when disaster appeared to loom, and perhaps it could do so again.
Germany — the country that would have to pick up most of the bill to rescue its neighbors — could decide that not spending the money created greater dangers. The United States could find ways to help out despite fiscal pressures and Congressional hostility to foreign aid. A new consensus on common bank regulation could emerge. But, for now at least, the outlook is far darker than it seemed to be only a couple of months ago.
- In Economic Deluge, A World That’s Unable To Bail Together (mysanantonio.com)
- News Analysis: In Economic Deluge, a World That’s Unable to Bail Together (nytimes.com)
- As Soros Starts A Three Month Countdown To D(oom)-Day, Europe Plans A New Master Plan (zerohedge.com)
- A central-bank failure of epic proportions (economist.com)
- ECB may cut rates as eurozone crisis deepens (ekathimerini.com)
- Euro currency setup unsustainable, bank chief warns (ctv.ca)
- Eurozone is ‘unsustainable’ warns Mario Draghi (jhaines6.wordpress.com)
- Mario Draghi Provides the Right Analysis, But the Wrong Solution (txwclp.org)
- Is It (Finally) Crunch Time in Europe? (blogs.the-american-interest.com)
- The Emerging Markets Slowdown Trifecta (247wallst.com)
U. of C. MBA grad spurns job market for alternative energy startup
BY SHARON COHEN May 27, 2012 11:16PM
This May 2, 2012 photo shows Daniel Shani on the University of Chicago campus. In June 2012, at 25, Shani graduates with an MBA from the university’s Booth School of Business. Up next: a job heading his own company, Energy Intelligence LLC, an alternative energy startup based in Massachusetts. Many of his classmates will join high-powered financial, consulting and marketing firms. But he’ll be his own boss, trying to convert a bold idea into a successful venture. (AP Photo/M. Spencer Green)
Updated: May 28, 2012 2:13AM
It’s a time when hope collides with economic reality, when the relief of that last class and the thrill of holding that diploma give way to the next big step — finding a job.
For the Class of 2012, the optimism of graduation is clouded by the uncertain aftermath of the worst economic slide since the Depression.
Last year, graduates 24 and younger posted a 9.3 percent jobless rate; since then, there have been signs of progress. Unemployment averaged 7.2 percent during the first third of this year, compared with 9.1 percent in the same period in 2011. And one survey estimates that about 7 percent more new college grads will find work this year than a year ago.
But the job market is still tight and graduates — whether they’re embarking on a career from high school, college or in mid-life — are entering a work world where salaries have not rebounded since falling during the recession.
For thousands of new graduates making the big transition this spring, there are pressures to find jobs quickly, pay off loans and, in some cases, start a second career, all against the backdrop of the slow-healing economy.
A degree and debt
Now that Chad Larsen-Stauber has a teaching degree, the inevitable question races through his mind: What will come first — a job or the bill for the first installment on his hefty loans?
The 26-year-old who just received his master’s degree in education from the University of Illinois-Chicago knows that in three months, he’ll have to start paying off debt of about $100,000.
“This is going to be looming over my head the next 20 years,” Larsen-Stauber says. “You’ve borrowed all of this money and it just comes due all of a sudden. When you’re already going into a low-wage job and you know that a third of your salary is immediately going to be eaten up … that’s really frightening.”
But not unexpected.
Larsen-Stauber is working with loan companies on payment plans; about 75 percent of his debts are from grad school. It seems overwhelming, but he says, “there never has been a regret in my mind. I knew when I started this program, I was 100 percent sure. … If there was one job that I ever wanted, it was to be a teacher.”
Larsen-Stauber realized that three years ago when he received a bachelor’s degree in communication. On graduation day, his parents posed a question: “’If you had to work the rest of your life and you never had to worry about money, what would you do?’”
Larsen-Stauber moved back in with his parents in the western suburbs, became a teacher’s assistant for a year, working with autistic and Down syndrome students in a middle school. Then he enrolled at UIC for a graduate degree.
As a teacher, Larsen-Stauber expects his salary will put a crimp in his lifestyle. It’ll affect everything, from where he lives to his dreams of global travel. “The possibilities that seemed limitless at one point are very downsized,” he says. “In the end, it’s a small price to pay for what you want to do.”
He’s now finishing his student teaching, working with kids with learning and behavioral disabilities. By fall, he hopes to be a Chicago public school teacher.
“A lot of people are saying, ‘Take whatever job you can get. You can do anything for a year.’ …I’m going into this with an open mind. What I love to do is teach, and I will teach anywhere at this point.”
Taking a gamble
At 23, Daniel Shani launched his first business — an online professional networking site.
At 24, while in school, he was working on his second venture — an alternative outdoor advertising company.
In June, at 25, Shani graduates with an MBA from the University of Chicago Booth School of Business. Up next: a job heading his own company, Energy Intelligence LLC, an alternative energy startup based in Massachusetts.
Many of Shani’s classmates will join high-powered financial, consulting and marketing firms (93 percent of last year’s graduates had job offers within three months; the median starting salary was $107,000). But he’ll be his own boss, trying to convert a bold idea into a successful venture.
It’s a gamble, but he’s game.
“There’s probably a fine line between anxiety, confidence and craziness,” Shani says. “You absolutely need a very high tolerance for risk. I have given up amazing opportunities in terms of recruitment on campus. … [But] I’m more excited about building something from nothing.”
Shani already is talking with venture capitalists and corporations about financing and collaboration and has applied for two federal grants. Though the fragile economy could squeeze potential investors, he isn’t discouraged.
“I think now is a great time to start a business,” he says. “It’s so cheap today relative to any time in history to test an idea and put together a product.”
Energy Intelligence wants to embed devices in road surfaces, mostly busy streets and highways, that would capture some of the energy vehicles lose (through heat, friction and pressure on the pavement) when they slow down — for example, when they approach toll booths. That energy would be transformed into electricity and sent to the national power grid or directly to street lamps, toll booths, or illuminated signs, for example.
Shani has consulted with engineers and researchers on the technology and sought advice from the Argonne National Laboratory, which uses supercomputers to analyze traffic patterns and can test how the devices perform.
“I feel like I’m a problem solver,” he says. “Entrepreneurs first and foremost are looking to solve a problem. They’re much less drawn to the dream of glory and fame. It’s really not about the money. … I really would like to make a difference in the world.”
If he fails? There are many possibilities, he says.
But, he adds: “I can tell you where I won’t be — at a desk job following the same routine every day.”
Leaving the assembly line
In 15 years on a Chrysler line in Belvidere, near Rockford, Mike Szlamczynski never had reason to ponder a future with succotash, lobster bisque and fava beans.
Autos were his career, autos paid his bills. Then came the near collapse of Chrysler, the looming bankruptcy and a veteran assembly line worker facing middle age, anxiety and unnerving questions: “What happens if they close the doors? What will I do?”
Szlamczynski didn’t wait for an answer. He took a buyout, returned to college at age 41 and studied to be a chef. He wanted financial security, no more layoffs, no more fears of losing it all
“I was tired of worrying,” he says. “I had nothing to fall back on. If you have an education, that’s something they can’t take away from you. You have options. Before, I didn’t have any options.”
On May 12, Szlamczynski officially changed that. The man who dropped out of school 20 years ago after concentrating on fun more than work graduated from Blackhawk Technical College in Janesville, Wis., with an associate’s degree in culinary arts and a 3.8 average — “a huge accomplishment,” he says.
Most importantly, he left with a coveted commodity: a job as a cook at a casino-resort in New York state.
He had reservations about returning to the classroom.
“It was probably the scariest thing I ever had to do — to drive to the school the first day,” he says. “I’d been out of school for 20-something years. I didn’t know if I could do it. I thought there were going to be a lot of younger people out there, I’m going to feel way out of place. … But I said, ‘This is my last chance. This is my one shot. It’s do or die.’”
Szlamczynski found school transforming. “I talk more intelligently,” he says. “I think more intelligently. You just look at things differently. You just really appreciate things you didn’t know about before.”
Still, at 43, he’s naturally apprehensive.
“Can I do this? Am I cut out for this? … I’m really happy I do have a job and I don’t have to go searching. That’s a huge relief. It’s a whole new life,” he said. “And I’m following my dream.”
- U. of C. MBA grad spurns job market for alternative energy startup (suntimes.com)
- New College Graduates Fare Better In Job Market As Earlier Classes Struggle (mbcalyn.com)
- College Grads Shun Startup Jobs – and How to Hire Them Anyway (readwriteweb.com)
- Uptick in Job Market for New MBAs (insidehighered.com)
- Opinion: Congratulations, grad, you’re unemployed – Karin Agness – POLITICO.com (mbcalyn.com)
- 8 Ideal Jobs for M.B.A. Grads (usnews.com)
- Define Your MBA Goals Before Applying to Grad School (usnews.com)
- College Grads’ Jobs Expected to Improve (miami.cbslocal.com)
- 2012 college grads enter improving job market (bizjournals.com)
- Experience Rules in Today’s Job Market (danerwin.typepad.com)
Racist Comments By Gingrich Hurts GOP With Minority Voters
Newt Gingrich, a current candidate for President, is accused of being a racist by editorial pieces and various media outlets. Gingrich appears surprised by this assertion by the “liberal elite”, denying that he is racist in any regard. The facts tell a different story. The surprising aspect is not a GOP candidate is accused of being racist, but that more people aren’t calling him out for it. Rachel Maddow, a liberal commentator, provided a seven minute montage of Gingrich’s racist moments during the past decade. Juan Williams, a Faux News commentator, called Gingrich out for it, only to have Gingrich and the audience laugh the suggestion off.
Though, a GOP audience isn’t the best judge, having cheered Rick Perry’s execution record, a question regarding whether an American should be allowed to die because he did not possess health insurance posed to Ron Paul, and booed a gay soldier asking a question days after Don’t Ask, Don’t Tell was officially ended.
A quick look at Gingrich’s statements since 2007 shows a pattern of racism, whether intention or accidental.
1. In 2007, Gingrich stated Spanish was the “language of the ghetto”. He continued saying that America should have English as a national language. He finished by stating government documents, manuals, and ballots should not be printed in a foreign language.
2. In 2011, Gingrich accused President Obama of holding a “Kenyan, Anti-Colonial” worldview. This statement is completely nonsensical.
3. Gingrich calls President Obama the “greatest food stamp President in history”. While more people are on food stamps under President Obama than any other President, Obama has faced the longest unemployment and recession since the Great Depression. The food stamp program was created following the Great Depression to prevent Americans from starving during economic turmoil. Additionally, it was Newt Gingrich who reformed the system, making it easier for people to obtain and stay on food stamps than previously possible.
4. Gingrich says that unionized janitors should be replaced with children. He states that “certain people” lack a work ethic and are lazy. These are clearly stereotypes of the black community in America, with no basis of facts in American society or economic problems.
5. Gingrich tells an audience that black people should demand jobs, not food stamps. Forget the fact that most Americans on food stamps are white, and many were middle class working people until the recession hit. This plays on a previous misconception of Gingrich’s. He believes food stamps are used and abused by minorities.
6. 2007, Gingrich claims that being bilingual is a danger to American society. Studies have been conducted, showing multilingual people are more creative and use more of their brain than monolingual persons. I am multilingual, speaking French, English, German, and am currently learning Spanish from my neighbors. Most people globally speak at least two languages. It is a very American idea to demand people only speak English.
These examples show potential racism from Newt Gingrich. They show a pattern of distrust and discern for facts, while attacking people who are different. Add his positions on immigration, homosexuality, and liberals, and you have a candidate showing very racists and elitist trends.
Despite all this, Republicans still vote for him, pay him large fees to speak, and purchase his books. None of this helps the GOP to appear inclusive, particularly in a time when Hispanic voters are a fast growing segment of the population.
Statistically speaking, the GOP should be able to attract Hispanic voters. The majority of Hispanic Americans are deeply religious, with Catholicism being the main religion. The majority are anti-abortion, anti-gay, and pro-immigration reform. These statistics point to a voting population in line with the GOP party.
Candidates like Newt Gingrich continually push the Hispanic voters away with comments like these. These voters find sharp disagreements with Democrats, yet vote with the liberals because Democrats often work with Hispanics to improve conditions, rather than attack them.
The Republican party would be best served by working with Hispanics. Rep. Marco Rubio (R-FL) has attracted large groups of Hispanics to his campaign events, primarily because he works with their leaders. Rubio does this with full understanding of the Hispanic community. Gingrich and the GOP candidates could learn from Rubio’s example.
Of course, the more the GOP candidates close their minds and their party doors to minorities, the happier the Democrats are. Democrats cover a varied population, one reason the Democratic party is so splintered. If the GOP is serious about running America, they can’t continue to push away Hispanic Americans simply because they speak Spanish.
After all, a Hispanic vote counts the same in an election as a billionaire’s vote, and there are more Hispanics than there are billionaires and millionaires.
- Newt Gingrich Still Thinks Food Stamps Are Just An African-American Issue [Video] (hiphopwired.com)
- Gingrich’s “Uncomfortable Facts” about Food Stamps Hold Water (usnews.com)
- South Carolina debate: Can ‘janitor’ comments spark Newt Gingrich comeback? (csmonitor.com)
- Newt Gingrich faces tough questions about race, food-stamp comments (miamiherald.typepad.com)
- Newt Gingrich Knows His Audience and Plays Right Into Their Fears (crooksandliars.com)
- White House: ‘Crazy’ for Gingrich to Blame Obama for Food Stamp Use (blogs.wsj.com)
- Gingrich: I ‘Don’t See’ Why Calling ‘Food Stamps’ An African-American Issue Is Insulting (thinkprogress.org)
- On Race, Dog Whistles, and the Old Confederacy (theatlantic.com)
- Gingrich’s ‘food stamps’ answer becomes new South Carolina ad (thehill.com)
- South Carolina and Food Stamps (thedailybeast.com)
January 17, 2012
For God So Loved the 1 Percent …
IN recent weeks Mitt Romney has become the poster child for unchecked capitalism, a role he seems to embrace with relish. Concerns about economic equality, he told Matt Lauer of NBC, were really about class warfare.
“When you have a president encouraging the idea of dividing America based on the 99 percent versus 1 percent,” he said, “you have opened up a whole new wave of approach in this country which is entirely inconsistent with the concept of one nation under God.”
Mr. Romney was on to something, though perhaps not what he intended.
The concept of “one nation under God” has a noble lineage, originating in Abraham Lincoln’s hope at Gettysburg that “this nation, under God, shall not perish from the earth.” After Lincoln, however, the phrase disappeared from political discourse for decades. But it re-emerged in the mid-20th century, under a much different guise: corporate leaders and conservative clergymen deployed it to discredit Franklin D. Roosevelt’s New Deal.
During the Great Depression, the prestige of big business sank along with stock prices. Corporate leaders worked frantically to restore their public image and simultaneously roll back the “creeping socialism” of the welfare state. Notably, the American Liberty League, financed by corporations like DuPont and General Motors, made an aggressive case for capitalism. Most, however, dismissed its efforts as self-interested propaganda. (A Democratic Party official joked that the organization should have been called “the American Cellophane League” because “first, it’s a DuPont product and, second, you can see right through it.”)
Realizing that they needed to rely on others, these businessmen took a new tack: using generous financing to enlist sympathetic clergymen as their champions. After all, according to one tycoon, polls showed that, “of all the groups in America, ministers had more to do with molding public opinion” than any other.
The Rev. James W. Fifield, pastor of the elite First Congregational Church of Los Angeles, led the way in championing a new union of faith and free enterprise. “The blessings of capitalism come from God,” he wrote. “A system that provides so much for the common good and happiness must flourish under the favor of the Almighty.”
Christianity, in Mr. Fifield’s interpretation, closely resembled capitalism, as both were systems in which individuals rose or fell on their own. The welfare state, meanwhile, violated most of the Ten Commandments. It made a “false idol” of the federal government, encouraged Americans to covet their neighbors’ possessions, stole from the wealthy and, ultimately, bore false witness by promising what it could never deliver.
Throughout the 1930s and ’40s, Mr. Fifield and his allies advanced a new blend of conservative religion, economics and politics that one observer aptly anointed “Christian libertarianism.” Mr. Fifield distilled his ideology into a simple but powerful phrase — “freedom under God.” With ample support from corporate patrons and business lobbies like the United States Chamber of Commerce, his gospel of godly capitalism soon spread across the country through personal lectures, weekly radio broadcasts and a monthly magazine.
In 1951, the campaign culminated in a huge Fourth of July celebration of the theme. Former President Herbert C. Hoover and Gen. Douglas MacArthur headlined an organizing committee of conservative all-stars, including celebrities like Walt Disney and Ronald Reagan, but largely comprising business titans like Conrad Hilton, J. C. Penney, Harvey Firestone Jr. and J. Howard Pew.
In an extensive public relations campaign, they encouraged communities to commemorate Independence Day with “freedom under God” ceremonies, using full-page newspaper ads trumpeting the connection between faith and free enterprise. They also held a nationwide sermon contest on the theme, with clergymen competing for cash. Countless local events were promoted by a national “Freedom Under God” radio program, produced with the help of the filmmaker Cecil B. DeMille, hosted by Jimmy Stewart and broadcast on CBS.
Ultimately, these organizers believed that they had made a lasting impression. “The very words ‘freedom under God’ have added to the vocabulary of freedom a new term,” they boasted. Soon the entire nation would think of itself as “under God.” Indeed, in 1953, President Dwight D. Eisenhower presided over the first presidential prayer breakfast on a “government under God” theme and worked to promote public religiosity in a variety of ways. In 1954, as this “under-God consciousness” swept the nation, Congress formally added the phrase to the Pledge of Allegiance.
In the end, Mr. Romney is correct to claim that complaints about economic inequality are inconsistent with the concept of “one nation under God.” But that’s only because the “1 percent” of an earlier era intended it that way.
- For God So Loved the 1 Percent … (campaignstops.blogs.nytimes.com)
- The Fraud of the Tea Party – NYTimes.com (mbcalyn.com)
- Romney Says His Tax Rate Is Around 15 Percent – NYTimes.com (policyabcs.wordpress.com)
- South Carolina Voters Weigh Priorities – NYTimes.com (mbcalyn.com)
- Why Is Europe a Dirty Word? – NYTimes.com (wpvins.wordpress.com)
- Cold Pizza from Herm Cain: The 9-9-9 Tax Plan – NYTimes.com (mbcalyn.com)
- Huntsman Says He’s Quitting G.O.P. Race – NYTimes.com (policyabcs.wordpress.com)
- Iowa Caucuses May Be Unpredictable for Romney and Perry – NYTimes.com (policyabcs.wordpress.com)